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January 10, 2007
Mysteriously High Price on Grand Avenue
Here's a stumper right in our own back yard. According to Property Shark, the brownstoner at 354 Grand Avenue sold in December for a whopping $1.9 million. Even if this were one of the larger-scale brownstones on the next block this price would seem quite high. But this is a 13-footer across from a row of newish row houses lacking the charm that the neighborhood is known for. If accurate, there must be some development twist to the purchase. As far as we can tell though, the property is not contiguous with any larger lots or buildings. It also falls just outside the Clinton Hill Historic District line. Any theories?
GMAP P*Shark
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Comments
What's amazing is that he took an ARM for $1,520,000 from Washington Mutual, plus an additional mortgage from them for $188,100. Acris indicates that these mortgages are only for this property. Either there are other factors or its fraud. Interesting that the mortgage is from a Washington Mutual based in South Carolina.
Posted by: Anonymous at January 10, 2007 12:41 PM
my guess--mortgage fraud?
Posted by: Anonymous at January 10, 2007 12:43 PM
Is this the same house that was listed by Fillmore for some time, owned by two sisters?
If so, it is one narrow house.
Posted by: Anonymous at January 10, 2007 12:47 PM
What do you mean by mortgage fraud?
Could the Prop Shark records be wrong?
This part of Grand will likely be covered by landmark district extension for Clinton Hill.
Posted by: lp at January 10, 2007 12:50 PM
It seems that posts are hanging for some reason. You press "post" and it looks like nothing is happening, so you do it again. This is the reason for all of the multiple posts you're seeing here today.
Posted by: Anonymous at January 10, 2007 12:52 PM
It's Called Fraud!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
Dumbasses!!!!!!!!!!!!!!!!!!!!
Posted by: What@theferk.com at January 10, 2007 1:13 PM
Maybe pshark is wrong. It happens all the time.
Posted by: Anonymous at January 10, 2007 1:24 PM
So the scenario described by Putnam Denizen is a scam that fraudulent buyers perpetrate, so that the buyer's 500K mortgage (in the example) is repaid by the "straw buyer", leaving the fraudulent buyer with cash in an account...?
Would seem like a difficult ruse to pull off and not be easily caught.
Posted by: lp at January 10, 2007 1:32 PM
pshark is not wrong. Deed can be found on Acris clearly stating the 1.9 price. Info on the financing, as mentioned above, is also there.
Posted by: Anonymous at January 10, 2007 1:33 PM
congratulations B'stoner. looks like your house is now worth $3M!
Posted by: Anonymous at January 10, 2007 1:38 PM
I'd be interested in watching this one unfold. I'm willing to bet that this one will end up in Foreclosure, as this is almost certainly a fraudulent case.
read this article and you'll see what's been happening.
http://www.mortgagefraud.org/journal/2006/12/12/two-men-charged-in-brooklyn-real-estate-investment-fraud.html
Posted by: NewStoner at January 10, 2007 1:43 PM
This kind of duel-loan thing is not unheard-of. My last purchase in Manhattan--one for which I foolishly did not attend the closing--was financed this way, to my manifest shock. The sleazeball broker got us about 70% of the money via the regular mortgage, then signed us up for some kind of second mortgage for the remainder. Don't think there is anything illegal about it, but what do I know. I do know I will never skip another closing...
Posted by: Bob999 at January 10, 2007 2:09 PM
Funny, I feel like I have been noticing this too. I have looked at several houses that were purchased just moth earlier for a fraction of the price they are asking (at least according to property shark). But when I dig deep down I find that giant mortgagees have been taken out on the places in the interim.
For instance, one place was purchase in September for $1M, they started marketing the house in October for $1.6M. The house is inhabitable and a mortgage was taken out on the house for $1.4M. I started to wonder who would lend $$ for this house? And then I realized if a crooked Mortgage broker and appraiser and seller were in on this they could point to the documented mortgage amount as proof that the house is worth at least $1.4 to the potential buyer.
Maybe I am just another paranoid New Yorker!
Posted by: Anonymous at January 10, 2007 2:15 PM
I think people are spinning all different sorts of theories here. Bob999, sounds like you bought a place with a first and second mortage (probably had a HELOC for the second) to avoid fees. Pretty standard, though I'm surprised you wouldn't know the details of the financing of a property you are goig to buy, even if you give someone a power of attorney to take care of the closing. Maybe I'm missing something here.
Who knows what's up here...
Posted by: lp at January 10, 2007 2:19 PM
It isn't the two mortgages that is fishy. It is the 1.9 million sale price, and the fact that they were able to get over 1.7 million in financing for this property. No competent/ethical appraiser would come in anywhere near this purchase price.
Posted by: Anonymous at January 10, 2007 2:25 PM
If borrowed 90% on 1st mortgage - if lender allowed it - you would be paying a MortgageInsurancePremium -about another .5% often until you reached 80% equity.
By taking out a smaller HELOC avoiding that mortgage ins. premium.
Posted by: Anonymous at January 10, 2007 2:35 PM
Wow, this does sound like a fraud. A seller has a buyer he knows buy his place for a wildly inflated price that the buyer gets a gigantic mortgage for. The seller gets the entire 1.9 million in cash for the property. The buyer defaults on mortgage. Bank now owns property worth many hundreds of thousands (if not a million) dollars less than the mortgage.
Of course, the seller has to reimburse the buyer for the $200,000 or so downpayment, but since the seller probably originally gave the buyer that money in the first place (if not more for his trouble), it's not a problem.
Who appraised this house at way beyond market value in the first place? If indeed other houses are selling for significantly less in the area (are they)?
Posted by: Anonymous at January 10, 2007 2:37 PM
Thanks Anon 2.37, that is a clearer description of a potential fraud scenario. Hmmm.
Posted by: lp at January 10, 2007 2:57 PM
Thanks Anon 2.37, that is a clearer description of a potential fraud scenario. Hmmm.
Posted by: lp at January 10, 2007 3:00 PM
Two-family at 356 Grand sold for $720,000 in october, same size. Around the block at 83 Downing,a 20' wide two-family sold for $1,175,000 in October.
Posted by: Anonymous at January 10, 2007 3:14 PM
maybe it's really nice inside
ha ha
Posted by: mikros at January 10, 2007 3:23 PM
Even "nice inside" doesn't warrant that kind of price for a property in that location. It's probably close to $1MM over what it's really worth.
Anon @ 2:37 described it perfectly. That's what has been happening. A couple brokers in Brooklyn were recently arrested. SEC went after them. And a similiar situation in Albany.
Posted by: Come On! at January 10, 2007 3:40 PM
Here is just one example of the kinds of mortgage frauds that have been perpetuated in Brownstone Brooklyn recently. Errol Lewis in the Daily news also reported on on a similar ring that usually ended the story by burning down the house and running off with the insurance money, leaving the bank and the neighborhood with a burnt out shell. That is what happened to the beautiful 4 story brownstone across the street from me, exactly one year ago.
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New York AG Spitzer files suit against alleged mortgage fraud ring
Posted on Wednesday, November 29, 2006 at 03:24PM by The Editor - Ian Shuter in Broker, Appraiser and/or False Appraisal(s), Closing Agent/Attorney, Court Cases, Flipping, New York | Comments Off | Print
In the following press release New York State Attorney General Eliot Spitzer today (November 29, 2006) announced that he has filed a lawsuit alleging that a group of real estate sellers, mortgage brokers, attorneys, and appraisers pursued a fraudulent real estate flipping scheme targeting minority neighborhoods in Brooklyn. In addition, the Attorney General announced that he has entered into consent decrees with some of the defendants that will provide substantial monetary relief to victims and stringent oversight of future real estate activities by the settling defendants.
According to the lawsuit, defendants Isaac Katz and Yoel Silberstein devised a scheme in which they purchased distressed properties in the Brooklyn neighborhoods of Crown Heights, Bedford-Stuyvesant, East Flatbush, East New York and Bushwick, and then enlisted the services of a front-man, mortgage brokers, and real estate lawyers to dupe purchasers and lending institutions in order to obtain significant resale profits.
The lawsuit alleges that defendant Amenophis Alleyne found prospective minority buyers with excellent credit to purchase the properties. The minority buyers, many of whom were Alleyne’s family and friends, allegedly were told that the properties were “investment opportunities” that could be purchased with no money down. They were also assured that rental income they would receive from prospective tenants would more than cover any mortgage payments.
According to the complaint, the mortgage brokers, defendants Theodore Welz and Shaya Saks, induced banks into issuing loans for the properties by preparing loan applications that misrepresented the borrowers’ income and assets and falsely stated that the borrowers were making significant down payments. According to the lawsuit, the banks were also provided with false appraisals, prepared by real estate appraisers including defendants Jeffery Richardson and Erik Johnson, that significantly inflated the values of the properties.
Defendants Benzion Frankel, Rephoel Weitzner, Devon Clarke, and Joseph Treff, the real estate attorneys who represented the lenders, the buyers and the sellers at the closings, prepared loan documents and public filings (including deeds and real estate transfer tax records) that allegedly misrepresented the actual sales prices of the properties.
Companies mentioned in the complaint as owned or controlled by some of the defendants are:
Johnson and Rose Appraisal Services
440 Cleveland Realty
865 Belmont Realty Corporation
According to the lawsuit, defendants Katz and Silberstein reaped substantial profits from their fraudulent scheme, which was carried out dozens of times between 2002 and early this year. In one case identified in the suit, they purchased a property for $205,000 and sold it later the same day for $370,000. The buyers, the lawsuit alleges, were unaware that their “no money down” deals were being accomplished only by hiding the true nature of the transactions from their lenders. As a result, many buyers were saddled with large, high-interest-rate mortgages they could not afford. Some allegedly ended up in default and foreclosure, ruining their once-excellent credit. The lawsuit further alleges that the scheme artificially inflated market prices of homes in the affected neighborhoods as appraisers, sellers, real estate brokers and others seeking to value properties in those areas relied on the false sales prices reported in deeds and other public records.
“The perpetrators of this scam promised minority home buyers an opportunity to climb the economic ladder,” Spitzer said. “In reality, the defendants profited handsomely while their victims saw their financial security impaired or even ruined. By imposing significant monetary penalties on the participants in the scheme, we hope to send the message that fraudulent and discriminatory real estate deals will not be tolerated in the State of New York.”
The Attorney General has entered into consent decrees resolving the lawsuit against defendants Katz, Silberstein, Welz and Saks. The decrees require:
• payment of nearly $1.8 million in restitution and penalties
• a detailed accounting of the real estate transactions conducted by the mortgage fraud ring
• extensive monitoring of future real estate activities by defendants Katz and Silberstein
• significant restrictions on mortgage brokering activities by defendants Welz and Saks.
The funds remitted pursuant to the decrees will be used to compensate victims of the scheme who file complaints with the Attorney General. Any remaining funds will be retained by the State as penalties.
The lawsuit will proceed against defendant Alleyne as well as defendants Clarke, the lawyer for the buyers at the closings; Frankel and Weitzner, lawyers for the defrauded banks; Treff, the lawyer for defendants Katz and Silberstein; and Richardson and Johnson, the appraisers.
This case is being handled by Assistant Attorneys General Brian J. Kreiswirth, Beth S. Frank, and Brian J. Schmidt under the supervision of Natalie R. Williams, Chief of the Civil Rights Bureau
Posted by: ameraleed at January 10, 2007 4:21 PM
That's the article from the link posted above!
Posted by: Come On at January 10, 2007 4:43 PM
I'm'sure there is something wrong with this transaction and 13 feet is really small, but is about time for some of you to take a tour and get a clue about smaller houses, i own a brownstone in CH and 16.7 wide, the entrance on the parlor doesn't have the staircase in front of you as you get in but a very welcoming hallway of about 10ft then it opens up to a grand foyer about 15'with, a left sided staircase, a front room with a giagantic window about 5' by 10' the back is an open room 23' by 15.5'with a huge bay window to the garden 13 ' ceiling in this floor the upstair since is not a 20' wide and has a central/side staircase is a completely open space of 15.5' by 45' 13'......
I actually bought this house because it was narrower than the 20 footer but a much better original layout the sunlight goes between the front to the back and viceversa since is all open, not a bad thing for the usually dark brownstones, anyway.
Posted by: Anonymous at January 10, 2007 4:49 PM
someone should report this to the appropriate people. that house should not have been more then 899K! i am a broker and i price these houses all of the time. i am also a brownstone owner and if that sold for that amount then mine is definitely work $3M too. should we sell brownstoner?
Posted by: Anonymous at January 10, 2007 7:26 PM
Anon at 4.49, no one is bashing narrow houses, lol. Yes, central staircases, in more narrow rowhouses can leave rooms that are comparably wide to a wider brownstone. Plus, I don't think brownstones are dark. I've rented and lived in three (and finally own one) and they all have had great light all day through the enormous windows. My current place faces north south so we get tons of sunlight all year, more on the north side (the front) in the winter, more on the south side, the back in the summer.
Posted by: lp at January 10, 2007 7:29 PM
could it be a construction loan? the mortgage covers the sale price and loan to renovate the building?
Posted by: Anonymous at January 10, 2007 9:02 PM
I'm new at this but how can you guess the purchase price from the ACRIS records?
Posted by: Anonymous at January 10, 2007 9:08 PM
Anonymous 9:02 pm: I don't think any legit bank will give you a "construction loan" to renovate a building that is way beyond the value of the building. If 7:26pm is right, someone got a mortgage for one million dollars MORE than the value of the building. What kind of lending practice is that? There's a reason banks make you buy mortgage insurance if your mortgage is less than 80% of the value -- because it's risky if you default -- the bank can't get it's money back by selling the property.
I hope someone does report this.
Posted by: Anonymous at January 10, 2007 10:00 PM
Correction above: I mean banks make you buy mortgage insurance if your mortgage is MORE than 80% of the value.
Posted by: Anonymous at January 10, 2007 10:03 PM
A rundown house on our block recently showed up in Property Shark and Zillow as selling WAY above its value, but now it's gone. Weird
Posted by: carrie at January 10, 2007 10:19 PM
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