Harried East New York homeowners seek ban on house flippers

March 2, 2020 Allison Dikanovic, THE CITY
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THE CITYWhen Mercedes Sandoz fell behind on mortgage payments, a lawyer she didn’t know called her personal phone offering to help — by buying her East New York home for cash.

The mother of five also got daily fliers and knocks on her door from lawyers and investors. That’s because she was on a public list as being at risk of foreclosure.

“I’ve lived in this neighborhood for 33 years, and in the last few years, I’ve felt like it’s a takeover,” said Sandoz, who bought her home in 2000 after years of renting in the area.

Now, she’s joined an effort to protect homeowners from harassment from real estate speculators by designating the neighborhood as Brooklyn’s only “cease-and-desist” zone — an area declared off-limits under state law.

Cease-and-desist protections would allow homeowners to opt into a list restricting would-be house flippers from contacting them — and hit violators with fines, criminal charges or loss of real estate licenses.

Local residents say the designation is badly needed in East New York: A 2018 Center for New York City Neighborhoods report that found investors were flipping more homes at higher rates and for higher profit margins in East New York than anywhere else in Brooklyn.

After a push by residents working with the Coalition for Community Advancement and state Sen. Julia Salazar’s office, the New York Department of State scheduled a public hearing on the cease-and-desist bid for March 5 at 5 p.m. at 127 Pennsylvania Ave.

‘I Don’t Answer’

The hearing marks a key step toward whether state officials find the “evidence of intense and repeated solicitations” needed to declare a cease-and-desist zone.

The Department of State gained the authority to grant neighborhoods cease-and-desist protections in 1989, but currently has only three designated zones in the city — all in suburban-style, largely white and Asian middle-class areas.

Two cover a swath of northeast Queens, including College Point, Whitestone, Bay Terrace and surrounding areas. The third covers the Country Club neighborhood in The Bronx.

A row of houses in East New York Photo: Allison Dikanovic/THE CITY

Alexa Sloan with the Coalition for Community Advancement, a band of residents, businesses and houses of worship advocating for East New York and Cypress Hills, said locals have been collecting evidence of solicitation for more than two years. They’ve amassed 540 surveys detailing their experiences.

One of the residents who has been organizing for cease-and-desist protections, Linda Ford, installed a camera outside her house because of frequent visits from would-be buyers offering cash.

“I keep the door locked, and I don’t answer,” said Ford, who inherited her home from her mother and has lived there for more than 50 years. “Sometimes the notes they leave are handwritten, like they’re from a friend.”

After offering sums of cash for far less than properties are worth, many of those investors quickly resell the houses for far higher sums. Rampant flipping can put real estate prices out of reach for local buyers while bumping up existing homeowners’ tax bills.

The median household income in East New York is less than $38,000, according to the most recently available Census estimates. Just one in four households own their own home, below the city average of one in three.

More than 87% of the 18,000 homeowners in East New York are black or Latino, according to the Center for New York City Neighborhoods, which promotes affordable homeownership.

“Homeownership is the key to black independent wealth and freedom,” said Paul Muhammad, a longtime homeowner and East New York community advocate. “This kind of destabilization from speculation is an attack upon our wealth.”

“These homeowners have been anchors of stability and affordability in the neighborhood for so long,” Sloan said. “It’s kind of like the wild, wild west — people coming in and buying up these homes for profit.”

Meanwhile in Albany…

While the Department of State process is underway in East New York, lawmakers in Albany are working on a bill that would make all of Brooklyn a cease-and-desist zone for five years. The bill, sponsored by state Sen. Kevin Parker and co-sponsored by Salazar, is in committee.

“We have to try, from every which way, to figure out how to keep our community here,” said Jessica Franco, Salazar’s director of community affairs.

State Sen. Julia Salazar (D-Brooklyn) Photo: Ben Fractenberg/THE CITY

Advocates also are looking to discourage flipping. They are pushing for an increase in the real estate transfer tax, which would make it more expensive to re-sell a property within two years of purchasing it.

Versions of these “flip tax” bills are in committee in both the Senate, sponsored by Salazar, and in the Assembly, backed by fellow East New York representative Assemblymember Erik Dilan.

“The idea behind the flip tax is that it would serve as a deterrent to this kind of activity,” said Ivy Perez, senior policy analyst at the Center for New York City Neighborhoods.

A Home-Flipping Hotbed

Home-flipping used to be more common in central Brooklyn neighborhoods like Bedford Stuyvesant, but Zillow now describes the market temperature there as “cool,” with a median home value of $965,298, following years of price run-ups.

The median home value in East New York is $486,863 — and Zillow deems the market “very hot.”

The Center for New York City Neighborhoods found real estate speculators sold homes at prices up to 50% higher than similar non-flip sales in East New York. From 2016 to 2017 buyers purchased and quickly resold 246 homes, representing 490 residential units, according to the center.

“The investors hold onto the home for as little as six to nine months, not even a year before they sell it again,” Perez said. “These aren’t substantial rehabs. They’re just new appliances and new paint jobs.”

Have you been harassed by people trying to purchase your home? Do you receive fliers about selling your home or notices suggesting you should leave your home? Are you worried about losing your home? THE CITY wants to hear from you. Share your story or send any fliers or notices your receive to Allison Dikanovic at 262-497-5927 or [email protected].

Remo Foss, an IT professional and real estate investor, purchased the home next door to Sandoz for $476,580 in July, using the name Sunny Estate LLC. Now it’s listed on Zillow for $889,000.

Foss said he owns rental properties in Bedford Stuyvesant and Crown Heights, but this was the first time he purchased a home to resell and his first time investing in East New York. He said he looked for a house already owned by a bank and didn’t approach homeowners individually.

“I think that’s the way to go for flippers,” he said of door-to-door solicitation. “The hard part is locating the property that has enough margins for you to profit from.”

Even homeowners who don’t sell have to deal with the consequences as property values on their blocks swell thanks to speculators.

“If this house next door goes for almost a million dollars, my property taxes are going to be very expensive, and I might lose my home,” said Sandoz, who staved off foreclosure by refinancing her home after getting advice from the Cypress Hills Local Development Corporation.

“This community is one of the last strongholds of black and Latinx homeownership in the city, and a lot of these families have owned their homes for decades and generations,” Sloan said. “There’s a lot at stake.”

This story was originally published by THE CITY, an independent, nonprofit news organization dedicated to hard-hitting reporting that serves the people of New York.

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