Beware of Internet Real Estate Scams

FOCUS: INTERNET BUYING
Buyer beware


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Internet housing scams have attracted some from as far away as Hong Kong to buy homes here that need extensive repairs

By ANTHONY CARDINALE and PHIL FAIRBANKS
News Staff Reporters
4/6/2004




HARRY SCULL JR./Buffalo News
This is the kitchen of the Hobart Street house William Duthie of Scotland bought on eBay for $15,339.

William Duthie arrived in Buffalo last month, exhausted from his trip from Scotland but eager to see his latest bargain - a modest, three-bedroom house on Hobart Street.
One problem. When Duthie arrived, there was no record of his purchase.

Duthie, who lives in Glasgow, bought the house on eBay for $15,339. Or so he thought. Turns out someone else still owned the property.

"I've got a feeling this is the tip of the iceberg," he told The Buffalo News.

No question about that.

Real estate scams are nothing new, but city building inspectors say Internet-related scams are a new and burgeoning twist to an old problem.

"It's a huge nightmare here," said Lou Petrucci, the city's chief building inspector. "It's been like a land rush."

Buffalo's cheap real estate prices, among the lowest in the country, have made it a mecca for Internet buyers and sellers, Petrucci said.

Since the practice began about 18 months ago, city inspectors have run across hundreds of cases of out of towners who bought property over the Internet and got stuck with houses in need of extensive rehabilitation.

"We've got people from Israel, Singapore and Hong Kong," Petrucci said. "Just last week, we had a bunch of people from Hong Kong come in to pay the back taxes on their new properties."

For Duthie, the frustration may finally be ending. Late last week, documents were filed with the Erie County Clerk naming him as the buyer.

Duthie, 53, said he purchased the house, located near Clinton Street, on eBay with a fund transfer of $15,399. At the time, he considered it a wise investment.

He quickly changed his mind when he learned someone else still owned the house. After taking his complaint to Buffalo police and the FBI, he also learned he wasn't the first person to run into problems with an Internet sale in Buffalo.

Late last fall, a woman from England arrived here for her first look at her initial investment in the United States - a small house on Paderewski Drive. She bought it for the bargain basement price of $14,000.

What the woman found was the shell of a house, the inside stripped of plumbing and electrical wiring and a big hole in the roof. The house also had several code violations.

Fortunately for the buyer, she ran into a city official who offered to intervene on her behalf. With the city's help, she eventually got her money back from the seller.

Petrucci says many Internet sales involve "flipping" - the practice of buying a house and, without making repairs or improvements, quickly selling it at an inflated price.

"Someone will pay $500 for one of these properties and flip it a few weeks later for $6,000 or $7,000," he said.

Duthie, meanwhile, is trying to get satisfaction from Jesse Isaacs, the man who sold him the Hobart Street house.

Real estate records indicate Isaacs has sold at least a dozen low-priced homes in Buffalo from July 9 through Jan. 12 of this year. The sales prices ranged from $6,000 to $18,000.

"He sells a lot of property on eBay," said the buyer of one of his other homes, who moved in without any problems but asked to remain anonymous. "It's going to be hard for you to get a hold of him."

Records indicate Isaac's company is Fairfax Management of Garnerville, a small town in Rockland County.

"Isaac supposedly has sold five or six houses on eBay the past six weeks, but none has been logged on as a sale," Duthie said. "I'd say he's gotten a bit naughty."

Duthie said he started buying, fixing and selling old houses 18 months ago, after his pension collapsed with the stock market in the United Kingdom. He said investors have bought up all the inexpensive old homes in Scotland, so he started looking in France and Spain - and the United States.

"So cheap," he said of Buffalo's older housing stock. "So I came to see what the market's like."

Before flying to Buffalo, Duthie communicated with city officials about the neighborhood and the house on Hobart. One document he received indicated the house was foreclosed on by LaSalle National Bank in October of last year, and was last valued at $38,000. "The building inspectors told me it was half decent," Duthie said.

After arriving in Buffalo a week ago Friday - two days after the supposed closing date of the sale - Duthie e-mailed Isaacs and asked where things stood. Isaacs e-mailed back, saying he hadn't received the earlier e-mail about arriving in Buffalo so soon.

"He said he didn't want any trouble and that he'd get it sorted," Duthie said. "Well, what the hell is there to sort? The guy's got my money."

Duthie sent another e-mail to Isaacs last Wednesday. It read: "You know, Jesse, you've got the money. The FBI is telling me it's a federal crime that you (may) have committed. Come and see me now and sort this out. You've got 12 hours."

That same day, a man named Scott left a key to the vacant Hobart Street house at Duthie's hotel. The next day, Duthie went inside for a look.

"It wasn't in as good condition as Jesse said," he concluded. "I've seen worse, but I've seen better. You pays your money and you takes your chance."

The next day, Isaacs called The News and, in a voicemail message, said he wanted to talk to a reporter about "Bill Duthie and a property that I'm showing him." A day later, Duthie learned that documents supporting his purchase had finally been filed with the county.

For the first time, Duthie seems satisfied the house is his. He plans to spend three months fixing it up before returning to Scotland.

"I'm going to move in," he said Saturday, "and start renovating."

And believe it or not, he may buy even more property in the city.