ALBANY — State officials are seeking to shut out of New York a real estate investment firm they say has been deceiving and swindling home buyers. One of the homes the firm is currently offering for sale is in Schenectady.
New York Attorney General Letitia James and Superintendent of Financial Services Linda Lacewell on Thursday filed suit in federal court seeking to block South Carolina-based Vision Property Management from continuing its operations in New York.
They allege that Vision has specialized in buying severely degraded houses and selling them at substantial markup without fixing or even disclosing problems such as mold, asbestos, rot, roof leaks and furnace malfunctions.
Further, they allege, Vision is operating an illegal, deceptive and unlicensed mortgage lending business offering disguised predatory subprime loans and illegal finance-leased hybrid deals.
It has engaged in about 150 transactions in New York state since 2011, they said in a news release.
Vision on its website calls itself the nation’s “largest provider of affordable lease-to-own property opportunities.” As of Thursday, it listed 17 houses for sale in New York state, most with asking prices under $40,000 for cash buyers. The most expensive of them was a duplex at 712 Windsor Terrace in Schenectady in the Eastern Avenue corridor. Cash price: $52,900.
The New York Times reported Thursday that the state investigation followed a series of Times articles about seller-financing of rundown homes in rent-to-own leases and similar arrangements experiencing a resurgence after the financial crisis a decade ago. National firms began acquiring cheap foreclosed homes in the wake of the crisis, the Times said, including thousands from Fannie Mae, the federal mortgage finance firm. Fannie Mae later agreed to stop selling to Vision and similar firms.
Vision’s attorney did not return a request Thursday by the Times for comment on the New York lawsuit.
The 74-page complaint filed by James and Lacewell on Thursday in federal court in Manhattan lays the allegations out in extensive detail with color photos of mold and rot and multiple transaction histories.
Vision generally deals in homes that have been vacant for an extended period and require significant repairs to bring them up to code and make them fit for human habitation, the lawsuit alleges, but the company is not in the business of repairing them, just selling them as-is for the buyer to repair.
However, the company’s financial practices are the heart of the lawsuit, and the first example given is an unidentified house in Schenectady.
A typical contract-for-deed deal would carry a stated interest rate of 7% to 10% and stretch 20 or 30 years, court papers says.
The April 2013 deal in Schenectady involved a house Vision acquired for $8,767 and sold six months later for $37,000, with the buyer agreeing to a $1,000 down payment and 240 monthly payments over the next 20 years at a stated 8.48% interest rate.
The listed cash price was $18,000, but when the buyer opted to finance through Vision, the company added a second financing charge called a time-price differential. The $312-per-month payment worked out to a total of 21.73%, not the 8.48% disclosed in the deal.
“As alleged in the complaint, Vision swindled vulnerable New Yorkers who wanted nothing more than the American dream of homeownership but instead got distressed properties with unsafe, squalid conditions and high-interest, predatory loans,” Lacewell said in a news release.
James said: “These deceptive and abusive practices have trapped New Yorkers in mold-infested, dilapidated homes, and wrongfully placed the onus on consumers to pay the price.”
The lawsuit names as defendants Vision Property Management, its co-founder Alex Szkaradek, and multiple limited liability corporations associated with Vision and its founders.
The lawsuit seeks to prohibit the defendants from entering any new or amended contracts with any person for any property in New York, and from taking any enforcement actions such as eviction or foreclosure.
It also seeks to have the court:
- Block the defendants from engaging in the practices alleged in the suit;
- Stop them from unlicensed mortgage activity in New York;
- Bar them from any form of property rental or leasing in New York;
- Block collection of any payments from a New Yorker on any of the defendants’ seller-financed mortgages;
- Compel restitution and/or damages to consumers in amount to be determined at trial, plus up to quadruple reimbursement of their payments to Vision;
- Order active contracts rescinded at consumer request;
- Order forfeiture of all principal and interest paid;
- Freeze Vision’s assets to cover restitution to consumers;
- Order defendants to pay a civil penalty; and
- Award to the state the costs it incurs in the proceeding.