Whole­sal­ing tac­tics

Se­niors with below-mar­ket of­fers

Baltimore Sun Sunday - - REAL ESTATE - By Wil­loughby Mar­i­ano

AT­LANTA — Deb­bie McGauley con­sid­ered mov­ing from the house she loved to be­come the ath­ome care­giver for her 80-year-old un­cle. Its hall­ways were too nar­row for an am­bu­lance stretcher, which the bedrid­den man would surely need in the years to come.

When a friendly in­vestor of­fered to buy it for $95,000, she signed a form think­ing that she was agree­ing to con­tinue dis­cus­sions, she said. In fact, she had agreed to sell the home for some $25,000 less than what she could have got­ten through a real es­tate bro­ker, ac­cord­ing to her at­tor­ney and other es­ti­mates.

McGauley, 60, had lived in the west At­lanta home for 22 years and owned it free and clear. It is where four gen­er­a­tions of her fam­ily had gath­ered for Thanks­giv­ing din­ner, and her mother danced all night long on her last Christ­mas alive. The home was her fam­ily’s refuge and an in­ex­pen­sive place to live in a re­gion where af­ford­abil­ity is grow­ing scarce.

“If they were go­ing to take it, they weren’t go­ing to take it with­out a fight,” said McGauley, who is dis­abled. She lives on So­cial Se­cu­rity pay­ments of about $1,040 a month, ac­cord­ing to court records.

A grow­ing num­ber of home­own­ers, of­ten se­niors, are be­ing coaxed by real es­tate in­vestors into sell­ing their homes for far less than what they’re worth.

Th­ese in­vestors, of­ten known as whole­salers, have blan­keted parts of the city with “We Buy Houses” signs, leaflets, mail­ers and cold calls, search­ing for houses that are not on the mar­ket. They con­vince home­own­ers to sell at a dis­count, then re­sell them — of­ten on the same day — for at least thou­sands of dol­lars more. They do so with­out mak­ing a sin­gle up­grade.

Ex­perts warn that whole­salers and other in­vestors are strip­ping long­time res­i­dents of tens of thou­sands of dol­lars in hard-earned wealth. Home­own­ers too of­ten sell with­out know­ing the real value of their home, and re­al­ize too late that they can­not af­ford a new place to live with cash from the deal.

The im­pacts can reach across gen­er­a­tions, ex­perts warn. A house is of­ten a fam­ily’s most valu­able as­set, es­pe­cially among African Amer­i­cans, research shows. The profit from a sale can send a grand­child to col­lege, or help the next gen­er­a­tion put down pay­ments on their own homes.

Ja­cob Navi­aux, a rep­re­sen­ta­tive for SMQ Prop­er­ties LLC, the in­vest­ment com­pany that of­fered to buy McGauley’s house, said he treated her fairly and fol­lowed the law dur­ing her sale. Some whole­salers may de­serve crit­i­cism for their tac­tics, but he ex­plained his deal with McGauley care­fully. “She breached her con­tact on her house,” Navi­aux said. “Sell­ers can’t just choose one day to back out of a sale.”

Tough tac­tics

Whole­sal­ing is le­gal in many cases and can pro­vide a use­ful ser­vice. In­vestors of­fer cash deals and fast clos­ings. In­dus­try-savvy home­own­ers who are will­ing to take a fi­nan­cial hit can use them to un­load a prop­erty quickly.

But in rapidly gen­tri­fy­ing neigh­bor­hoods, where homes pur­chased for less than $20,000 30 years ago are now worth $200,000 or more, res­i­dents com­plain whole­salers are us­ing hard­ball tac­tics to make money off of in­ex­pe­ri­enced sell­ers.

The bar­rage of so­lic­i­ta­tions has got­ten so bad that At­lanta Le­gal Aid So­ci­ety hands out cards to se­niors to post on their doors that say, “No So­lic­it­ing. This House Is Not For Sale.”

In some neigh­bor­hoods, whole­salers have turned the real es­tate mar­ket into the Wild West. Sem­i­nars tout whole­sal­ing to in­ex­pe­ri­enced in­vestors as a way to en­ter real es­tate with­out a li­cense or cash re­serves. Cour­ses teach how to coax an un­will­ing buyer into sell­ing. Some whole­salers mar­ket prop­er­ties for sale well be­fore they own them, at­tor­neys and real es­tate agents fa­mil­iar with their prac­tices said.

In some cases, whole­salers re­port houses they’re in­ter­ested in pur­chas­ing to au­thor­i­ties for code vi­o­la­tions, said Lisa Flow­ers, ex­ec­u­tive di­rec­tor of the home re­pair non­profit HouseProud At­lanta, which serves low-in­come se­niors, vet­er­ans and dis­abled peo­ple. A se­nior who can’t af­ford to make city-re­quired re­pairs may de­cide to sell un­der fi­nan­cial strain.

In one case re­ferred to At­lanta Le­gal Aid, in­vestors gained the trust of a home­owner near the boom­ing West­side Belt­line by bring­ing over meals and of­fer­ing to pick up her pre­scrip­tions, said Robin An­drade, a Real­tor

who tried to help the se­nior find a new home af­ter the sale.

“They gained her trust and took her house out from un­der­neath her,” An­drade said.

The se­nior, who de­clined to be in­ter­viewed, sold her house to an in­vest­ment com­pany for $95,000 on July 30, records show. It resold that same day to an­other in­vestor for $130,000.

The se­nior failed to find a new place be­fore de­mo­li­tion day. In­vestors streamed the de­mo­li­tion on In­sta­gram with her lamps and other fur­ni­ture still in­side.

Not for sale

McGauley said she found SMQ Prop­er­ties as she mulled sell­ing. She signed a con­tract in April 2018 af­ter Navi­aux made a 20-minute visit to her home, she said.

McGauley said he did not send her a copy of the con­tract im­me­di­ately af­ter she signed as he promised. Navi­aux said emails show he did, and their text mes­sages show that she un­der­stood she sold her home.

Soon af­ter, McGauley found a nurs­ing home for her bedrid­den un­cle and de­cided to stay. SMQ filed suit against her in Ful­ton County Su­pe­rior Court and later asked for $35,000 in dam­ages.

With the help of Le­gal Aid, McGauley filed bank­ruptcy and halted the sale of her home. But she must pay SMQ $8,000 over about three years as part of a set­tle­ment agree­ment.

On a re­cent af­ter­noon, bar­be­cue grills and other cook­ing tools sat at the ready in McGauley’s back­yard, in prepa­ra­tion for a feast. McGauley, a mother of seven, has so many chil­dren, grand­chil­dren and other rel­a­tives that they can no longer fit in the 1,175square-foot ranch.

Whole­salers con­tinue to send mail­ers and make cold calls.

“I tell them no. It’s not for sale,” McGauley said.

The home will stay in the fam­ily.

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