8 Brooklyn homeowners win fraud case against United Homes
http://therealdeal.com/newyork/articles/39391
Commenter David Bryant gets it right:
"This was a very good decision that was hard earned. SBLS deserves great kudos for having brought this to culmination. No, this is not the business of real estate or capitalism. There is a fine line between profit and swindle BUT THERE IS A LINE. The law presupposes that there is a "arms length" negotiation between parties. When you run a "one stop shop" it is a scheme to remove all the entities that would provide that "arms length". If the seller controls the appraiser, inspector, title company, lender, lender's broker, etc. all the entities that might warn the homeowner of the swindle are removed from the equation."
Comments
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I am not sure how I feel about this
Whatever happened to caveat emptor, buyer's due diligence etc
The company bought a place for $153K and sold it for $350K or whatever. Isn't that public info?
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I brought houses from flippers before and its way more than what these guys pay for and they didn't even bother to fix it I always had to gut reno it. should I sue ? lol no off course not. people know what they are getting into. Sounds just like buyers remorse.
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The court listened to those arguments, but still sided with the plaintiffs.
Perhaps it will be overturned on appeal.
....I like the viewpoint that they crossed the line by being a one stop shop, but agree that such lines are very hard to define.
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Cool The Kid said:
I am not sure how I feel about thisWhatever happened to caveat emptor, buyer's due diligence etc
The company bought a place for $153K and sold it for $350K or whatever. Isn't that public info?
In this country we have laws that protect people from predatory practices, and when we don't, resolutions like this are sometimes required.
We all know that things are far more complicated than people irresponsibly borrowing beyond their means from innocent little lenders.
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its both sides fault, come on doesn't make the buyers less guilty lol. they know what they were getting into.
The problem with the country is no body wants to take responsibility, reminds me of the recently suit where that drunk gets run over by the train and loses limbs and the stupid jury in nyc rewards him $6 million dollars cause they believe the conductor didn't stop in time. what a waste of time and money.
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Boygabriel said:
In this country we have laws that protect people from predatory practices, and when we don't, resolutions like this are sometimes required.We all know that things are far more complicated than people irresponsibly borrowing beyond their means from innocent little lenders.
I'm not speaking generally, there were and are a lot of shitty lenders/brokers and this organization seems to be no exception
But in this instance, the situation could have easily been avoided if the lady has just checked to see what the last person who bought the house paid for it. The law is the law yadda yadda but this doesn't seem to be a case that warranted civil action. There are plenty of instances in which people were actually defrauded... this doesn't seem like one of them.
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When the house was bought out of foreclosure that's what the last borrower owed, not necessarily what the house was worth. It may have been worth more. In any event, if he screwed over other buyers that's a different story. But they have to prove that the appraisals were inflated. A million doesn't sound like a lot of money to divide between eight borrowers.
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I don't believe the issue was the price that the flipper/developer/Seller paid for it. Heck, if I managed to buy a house in foreclosure for $200K, then sell it for $400 as is, more power to me.
The issue, and basis of this case, was that the mortgage lender, appraiser, lawyer foisted upon the Buyers, and any other entity involved in the transaction were all in some way linked to the Seller. The "one stop shop" thing.
The obvious problem with this setup is that every single individual or group involved in the transaction, with the exception of the Buyer, are all only looking out for only the Seller's best interest. Its like there's an open court session in progress, and it is discovered that both the defendant's and the plaintiff's attorneys work for the plaintiff. That defendant is screwed.
As whynot said in the original post, there is a line that I believe they crossed.
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^^^This. You can do all the homework you want, but if everyone in the transaction is lying and telling the same story as the seller, there is no way to avoid the fraud. I'd guarantee the one thing all of these 8 purchasers had in common was that this was their first home purchase. When you don't know what questions to ask, it is very easy to be tricked into going along with things, especially for people who inherently trust professionals to perform their jobs.
When I was shopping for a home I can't tell you how many people tried to pull scams, including sellers who tried to steer me into particular FHA programs even though I was prepared to put down a reasonable down payment, brokers who helpfully offered to "bring their guys in to strip all this old crap" out of a house and complete a gut renovation, people who tried to pass off cheap, shoddy repairs as quality renovations, etc. There were definitely sharks out there looking for easy marks. Its nice to see that someone was made an example of.
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Too bad the judgment only works out to $125,000 per plaintiff. I can't imagine that makes for the amount each of them likely got fleeced.
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Although it doesn't help the 8 plaintiffs out a lot, I think the precedence this case sets may be more effective than its immediate effect.
The win may encourage more consumer protection groups to take on this cause, and clarify when a firm is crossing the line.
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A scam setup was like this was done in Asbury Park, NJ about 15 years ago. These guys flipped about 100 houses with phony buyers and mortgages that they knew would end up going bad. Nearly all of the houses went into foreclosure, the tax base dried up and the city lost about half the money for their budget. The lawyers, appraisers and sellers all went to the pokey but in the end it didn't help the people who were the unlucky suckers. Hopefully at least these settlements will.
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PragmaticGuy-
Because the buyers and mortgages were phony in that case, it sounds as if FHA (or some other bank entity) was the victim.I wonder what criteria the law requires appraisers to use?
Appraisals seem like they are pretty easy to manipulate.
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Not sure about the criteria that applies to appraisers, specifically appraisers of homes being purchased by FHA loans, but in my experience, neither are they.
My wife and I are currently (but will likely soon not be) in contract on a brownstone. Our lender, Wells Fargo, dispatched an appraiser a while back. The report came back with two issues that the appraiser claimed would cause our FHA-backed loan to be denied: there were no appliances in one of the two kitchens, and there was no railing on the basement stairs. This was all detailed in a 50-odd page report. My Wells rep did some research on his own and determined that the appliance thing was nonsense, and I gained access to the house from the current owners one afternoon and put a simple 2x4 bannister in myself.
Then the appraiser came back and afterwards issued an additional 2-3 page report confirming that the bannister had been installed and the house was good to go. Of course, that second report cost me the exact same amount as the first report. Go figure.
Anyway, a little off-topic, but I guess my point was that, given that appliance thing we dealt with, I think that different appraisers have different ways of interpreting their criteria for passing a house. And I think that, more often than not, the criteria they use is determined by what will allow them to fail the house, therefore guaranteeing a second inspection (at double the price!)
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Damn that is shitty.
I still think there should be some standardized appraisal protocol, which would only allow for exceptions borne out of unique circumstance (i.e. homes on historic blocks, really expensive homes, etc)
It would kind of be a pain to inventory every detail about every home, but the onus and benefit would be to everyone involved.
The only shaky point is where to make the baseline... especially now
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at the end of the day appraisal would always be subjective work. my building which cost us tons of money to renovate etc. they appraise it for very little money. I was looking for a refi and than when i saw the ammount nm lol.
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AW, as you are aware, a low appraisal will help you out on taxes.
If one wants a low appraisal: One can find it.
If one wants a high appraisal: One can find it
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i just wanted max money to refi building. now days can't find anyone to refi for commercial buildings anyway. yes i know
lower taxes is very good lol. -
While buying a home will never be a "risk free" proposition and appraisals are always going to be subjective, it is the collusion of all the players involved that got United Homes in trouble.
Such collusion is very difficult to prove, and (as a result) I suspect it happens frequently.
...it is all about where we choose to draw the line.
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