In the first public step toward a General Assembly effort to curb house "flipping," two legislative subcommittees will hear tales from victims tomorrow evening at an East Baltimore hearing.
"We gotta stop it," said Vincent Quayle, head of St. Ambrose Housing Aid Center, one of several community groups trying to deal with the problem.
"Flipping" is a term applied to the purchase and quick resale of a house -- frequently on the same day -- at a huge markup.
The hearing, at 6 p.m. at the Virginia S. Baker Patterson Park Recreation Center, 2601 E. Baltimore St., was scheduled by two state delegates from Baltimore, Carolyn J. Krysiak, who heads the housing subcommittee of the Economic Matters Committee, and Samuel I. Rosenberg, chairman of the Health and Human Resources Subcommittee of the Appropriations Committee.
The hearing follows a report in The Sun about widespread flipping in Baltimore in the past four years. The newspaper examined more than 400 transactions since 1996 involving city houses, mostly in poor neighborhoods. The homes were purchased at low prices and sold quickly to first-time homeowners and rookie investors at two to 10 times the purchase price, often with little work done to improve shabby properties.
"It's overwhelming when you think of the numbers," Krysiak said yesterday. "We're talking hundreds and hundreds" of deals.
Properties in question
Since The Sun article appeared, the state Department of Assessments and Taxation has identified nearly 2,000 Baltimore properties that have been sold twice or more since Jan. 1, 1996, with the price at least doubling in one of the transactions. The department is trying to determine how many were illegitimate.
Krysiak and Rosenberg are looking to introduce legislation in the 2000 General Assembly session to curb flipping, though they haven't settled on specifics.
One possible bill, Krysiak said, would tighten regulation of appraisers, whose reports on the alleged value of houses are crucial to flipping. Without an appraisal that says a property is worth its sale price, mortgage companies will not finance the deal.
Appraisers do not have to be licensed by the state unless they appraise property that is being financed with a government-insured mortgage.
Most of the property flips examined by The Sun included loans issued by out-of-state mortgage companies that relied on local appraisers hired by local mortgage brokers.
Krysiak said a possible second bill would require disclosure to the buyer of a recent sale of the property, including the price. Still to be settled, she said, is the timing of the disclosure -- whether it should be made when a contract is signed or at another time -- and how recent a prior sale must be before it is disclosed to the new buyer.
She said an effort might be made to beef up the attorney general's Consumer Protection Division so it can attack the problem. An official of the division said last month that the agency was trying to figure out how to deal with flipping.
Ken Strong, executive director of the Southeast Community Organization, a community group in an area of the city where flipping has been prevalent, said that although the U.S. attorney and other federal agencies are investigating flipping, the attorney general has the power to issue "cease and desist" orders and require restitution to victims of consumer fraud.
"They haven't gotten focused on this yet," complained Strong, who said he plans to recommend at the hearing that a unit staffed by at least three attorneys and support staff be set up in the Consumer Protection Division to deal with flipping.
Pub Date: 9/21/99