Homebuyer beware

September 05, 2005

THE EUPHORIA over Baltimore home sales is understandable for a city often on the defensive. But the boom could come with a price that might be overlooked in this robust housing market.

The Sun's Jamie Smith Hopkins reported recently that two out of three Baltimore houses sold in the first half of this year were bought by investors. The trend would bode well for Baltimore if the increased activity could be counted on to increase homeownership and strengthen neighborhoods with more owner-occupied units. But no such guarantee exists, and past illegal practices that afflicted Baltimore's housing market argue for vigilance. Housing advocates, community organizations, consumers and city officials should be mindful of the past when considering housing sales today.

It wasn't that long ago that purveyors of illegal predatory lending practices victimized Baltimore neighborhoods and their residents. Speculators bought houses that needed considerable work, gave them a cosmetic face-lift and sold them to unsuspecting buyers at enormous profit. Shoddy work left the homeowners with repair bills they couldn't pay and mortgage payments they couldn't meet. Foreclosures increased drastically, leaving families without homes and often in debt. Unscrupulous appraisers were used to deceive consumers and lenders.

FOR THE RECORD - An editorial in the Sept. 5 editions of The Sun incorrectly stated the number of potential home buyers served by city programs over three years. The figure is 1,779. The Sun regrets the error.

The worst offenders were prosecuted, and laws were tightened. But the basic lessons learned in the "flipping" scandal of the late 1990s are worth restating:

Enroll in a homebuyers counseling program offered by any of two dozen nonprofit groups and housing centers in Baltimore.

Get a housing inspection.

Hire a lawyer to review a sales contract, loan agreement and other documents to screen for overcharges and unnecessary payments.

Buyers should be wary of risky mortgage offerings, given the promotion of "interest only" loans. The old adage, "If it sounds too good to be true, it probably is," surely applies here. Some refinancing proposals can leave homeowners with bills they didn't anticipate -- and can't pay -- if the refinancing doesn't provide for taxes and insurance.

In the wake of the flipping scandals, Baltimore housing officials have incorporated some protections for new homebuyers -- such as mandatory housing clinics -- in programs they administer, but the programs have served only about 700 people in the past three years.

The best advice may in fact be the oldest: caveat emptor -- may the buyer beware.

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