House buyout deals too good to be true

• Article
• Comments ()
• Click-2-Listen
• Videos

By

Signs hanging on trees or light posts in the Washington area touting "We Buy Homes -- Fast Cash" can hide a dangerous truth.

Investors offering quick money for less than the value of a house or condominium sometimes leave homeowners with a bad deal, housing regulators say.

"They do it under the guise of helping you out of foreclosure," said Joe Rooney, Maryland's deputy commissioner of financial regulation.

Although the investors, sometimes called "foreclosure specialists," have always been around, the decline in the housing industry and rising foreclosure rates are helping them thrive.

Foreclosures rose 35 percent nationwide in the first three months of 2007 compared with a year earlier, according to RealtyTrac.com, an online foreclosure tracking organization.

The investors buy houses at discounts and then "flip" them by selling them quickly at a higher price.

Government regulators license mortgage lenders but can do little about buyers and sellers other than to prosecute fraud.

"If your house is worth $200,000 and they offer you $180,000, they're allowed to do that," Mr. Rooney said. "This is America."

Typically, the sellers are low-income homeowners who recently suffered a financial collapse.

"It tends to be a lost job, a medical condition or a lot of times a divorce," said Mike Burnette, spokesman for Housing Opportunities Made Equal, a nonprofit housing advocacy group in Richmond. "Everything they have is in their home, and they just don't have a lot of cash to bail themselves out."