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University District residents are being warned about real-estate scams in which first-time home buyers are lured into purchasing overpriced houses at up to three times their value.

The warnings came during a districtwide block club meeting last week arranged by University Council Member Betty Jean Grant at Kensington-Bailey Neighborhood Housing Services.

Grant warned residents that Suriel Development has purchased more than two dozen houses at low prices, made minimal cosmetic improvements and sold them for inflated prices. The practice is called "flipping."

Local housing activist Richard Kern gave residents a list of two dozen houses he said Suriel Development bought and sold in the past year on LaSalle, Lisbon, Rounds, Dartmouth, Phyllis, Roosevelt and other nearby streets.

"Average markup was $41,465 per house," Kern said, quoting his newsletter, Housing Watch. "Estimated profits exceed $20,000 per house."

Francine Dennis, a resident who was on Kern's list, said she bought a house at 308 Lisbon for $59,900. Kern's list indicates the home had been purchased just three months earlier for $22,000.

Dennis said a representative of the seller refused to take her money for closing costs, telling her, "It's a charity-type thing" for first-time home buyers. Later, she said, she showed the house to an independent appraiser, who set its value at about $40,000.

Florine Harwell, also on Kern's list, told residents that she bought a house at 483 Lisbon for $59,900 and didn't have to make a down payment or pay closing costs. She, too, was told this favor was "from a charity," she said. The home had been bought for $22,000 less than two months earlier.

According to Kern, Suriel and several other real estate outfits buy run-down houses cheaply in the city, often from the U.S. Department of Housing & Urban Development, and sell them at inflated prices to buyers who they know may not be able to make the monthly mortgage payments. Upon default, the house often falls back into the hands of the company, which sells it again, he said.

Kern said Suriel Development is linked to Charles and William King, who were ordered in U.S. District Court last month to pay $273,717 to the government and serve six months' home confinement and three years' probation for operating a housing scam in the city. While "flipping" isn't illegal, the Kings pleaded guilty to fraudulently giving down-payment money to five buyers who needed to qualify for federally insured mortgages.

Charles King, who identified himself as a project supervisor for Suriel, denied the latest allegations made against the company.

"The repairs are not rudimentary and not just cosmetic," he said Friday, , adding that the houses are "fully warranted" and that Suriel stands behind that warranty.

He said that all appraisals done on the properties are "100 percent legitimate appraisals done by a third party chosen by the bank." He also said that there are "perhaps a dozen or more charities available" to help buyers purchase properties.

During Thursday night's meeting, Kern told residents that disreputable realty firms often throw in "perks" to rush a first-time buyer into closing a home purchase, such as:

Paying the buyer's attorney fees, usually by having their own lawyer represent both parties.

Paying the buyer's closing costs.

Giving the buyer cash to pay off credit cards in order to qualify for a mortgage.

Some firms work with a dishonest appraiser to justify a high mortgage on the property, Kern said, and will

even meet the bank's mortgage limit by talking the buyer into taking a 30-year mortgage at a higher interest rate than normal.

A default on the mortgage, Kern added, hurts the buyer's chances for getting a future mortgage and also hurts the neighborhood when the city increases the assessment on that house based on the inflated price that was paid.

Grant suggested that block clubs do similar research in City Hall and inform residents of the dangers in the local housing market.

News Staff Reporter John F. Bonfatti contributed to this report.


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