Sandra Barkley listened hopefully to the United Homes promotion: "We make dreams come true." And she nodded when the sales team convinced her she had the means to buy a home.
A single mother making $49,000 a year at the New York City Housing Authority, Barkley became in 2003 the first member of her family to buy a home. But in buying she became trapped. The two mortgages she needed to purchase her home in Brooklyn's Bedford-Stuyvesant section consumed 70 percent of her income. Soon she defaulted.
Photo by Mark Peterson/Redux
In June, Barkley and six New York residents were collectively awarded more than $1 million in a case involving "property flipping" in which United Homes, working with lenders, lawyers and appraisers, bought and then sold overpriced homes whose serious flaws were masked by superficial repairs.
"At first, I was really depressed and overwhelmed by what had happened," Barkley, now 55, said. "But the great thing is that, now, other people won't experience the same problem."
After a U.S. district court trial earlier this year, a jury concluded that United Homes of Briarwood, N.Y., its owner, Yaron Hershco, and two mortgage lenders had engaged in fraudulent activity.
South Brooklyn Legal Services surveyed 60 properties that were sold by United Homes in 2002 and 2003 and found a familiar pattern: United owned them for only a few months, made a few repairs and raised the purchase price an average of $160,000 per property. For her part, Barkley still lives in the Bedford-Stuyvesant home and is still trying to fix plumbing and electrical problems that came with the house.
United Homes' counsel Robert Johnson said he intends to appeal the decision and "hopes the court of appeals will see things our way." He added, "I do not think the jury acted properly in awarding damages to the plaintiffs because there were no damages."
Jean Constantine-Davis, senior attorney with AARP Foundation Litigation, disagreed. The case shows how easily lenders, lawyers, appraisers and developers who do not have buyers' best interests at heart can harm home owners, including older Americans, she said. "It is crucial that older Americans have strong protections against fraudulent or unfair practices that increase the risk of losing their homes."
What it means to you: Because homes are often the primary asset for older Americans, it is particularly important that they guard against fraudulent or unfair practices that increase the risk of losing a home. When purchasing a home, seek independent advice. Make sure the inspector, the realtor and the appraiser don't work with the seller.
Also of interest: Does home owners insurance cover that? >>
Emily Sachar is a journalist and author based in Brooklyn, N.Y.