Some people lose money on real estate because they know nothing about it, others because they know too much.
An example of the first group would be New Yorkers who purchased Hamptons homes from a former taxi business operator named Michael O’Sullivan, who had bought them in foreclosure but failed to pay off the delinquent mortgages.
In some cases, a lender would later force a foreclosure auction, leading to a nightmare scenario in which the winning bidder knocks on the door and tells the unfortunate residents that he is now the rightful owner.
Newsday just published an extensive piece about O’Sullivan and his pathetic buyers, many of whom were Latino immigrants and spent six figures on renovations before discovering they had been misled.
The article began with a woman who put down $75,000 toward a $475,000 purchase of an East Hampton home, spent $100,000 making it habitable and then discovered an outstanding mortgage of $619,500.
In a traditional home purchase, the buyer obtains title insurance from a company that guarantees the title is clear. Buyers also typically hire a real estate lawyer to go over the contract, which in O’Sullivan’s deals was often filled with red flags.
A basic internet search for “How to buy a home” would quickly spell this out for anyone new to the process. O’Sullivan’s customers could have avoided disaster by Googling “how to buy a home in foreclosure.”
I don’t mean to blame the victims. Many spoke little or no English. Several said they trusted O’Sullivan, who called his company Hamptons Dream Properties, because they were referred to him by Lourdes Alban, a Spanish-speaking real estate agent.
Alban later left Saunders & Associates for Nest Seekers International in Bridgehampton. Nest Seekers’ Geoff Gifkins told Newsday it is “reviewing the situation and gathering the facts before we rush to judgment.”
One question the brokerage should ask Alban: Would you buy a home from O’Sullivan without doing a title search?
Alban told reporter Jonathan LaMantia, a former colleague of mine, that she “did not work with [O’Sullivan] at all.” That is not the same as saying she never referred potential homebuyers to him.
The second type of duped real estate investor is someone who thinks he knows what he’s doing but doesn’t, such as people who funded ventures through the crowdfunding site Yieldstreet. Another journalist I worked with, Hiten Samtani, quoted one burned investor in his newsletter, The Promote:
“There isn’t a day that goes by without me saying, ‘I can’t believe what happened,’ Justin Klish, who invested $300K in the Flow project via Yieldstreet, told CNBC. “I consider myself moderately financially savvy, and I got duped by this company.”
A truly savvy investor would assume that people raising money on crowdfunding platforms probably could not get traditional financing because their ventures were problematic.
A lot of venture capitalists have put money into crowdfunding platforms — that is, into the platforms themselves. I would like to know how many of these VCs have also invested in the risky schemes raising money on these same platforms. I bet it’s a very short list.
What we’re thinking about: Are problems such as neglected repairs, uncollected maintenance fees, self-dealing and financial malfeasance more likely to occur at HDFC (permanently affordable) co-ops or at traditional co-ops? Send your thoughts to eengquist@therealdeal.com.
A thing we’ve learned: Google Maps sometimes pins the wrong location for an address, but will correct mistakes if users report them. I discovered this upon checking Google’s photo of 960 Franklin Avenue in Brooklyn, which was once a spice factory, then an empty lot and now is a condo construction site. It was never an apartment building with a fire escape, which is what Google Maps showed. That building turned out to be on Washington Avenue, on the other side of the block. Here’s the corrected version:
Elsewhere…
— Contenders for the three downstate casino licenses are nearing the end of the road, with the next hurdle being community advisory committees, Gothamist reported. These committees hold immense power to advance or sink bids.
— Mayor Eric Adams is once again suing the Campaign Finance Board over its denying him millions of dollars in public matching funds, according to The City. This is his second suit. His first was dismissed in May by a judge who upheld the board’s concerns over the integrity of Adams’ fundraising.
— Given Andrew Cuomo’s means-testing housing proposal last week, following Zohran Mamdani’s pledge to freeze the rent of rent-stabilized units, City & State broke down New York City housing units by type. According to the New York City Housing and Vacancy Survey, of the 3,705,000 units counted, market-rate led the stock with 1,119,000. Coming in a close second were rent-stabilized units with 960,700. — Quinn Waller
Closing time
Residential: The top residential deal recorded Tuesday was $7.25 million for a 2,829-square-foot condominium unit at The Belnord, 225 West 86th Street on the Upper West Side. Corcoran’s Kirsten Jordan had the listing.
Commercial: The top commercial deal recorded was $205 million for the 129,231-square-foot office building at 510 West 22nd Street in Chelsea. The Real Deal reported in May on Vornado Realty Trust’s sale to MKF Group.
New to the Market: The highest price for a residential property hitting the market was $27 million for a 12,270-square-foot house at 247 Central Park West on the Upper West Side.
Breaking Ground: The largest new building project filed was for a proposed 19,865-square-foot, 34-unit residential property at 1537 Vyse Avenue in Crotona Park East. Leandro Dickson filed the permit on behalf of Gedalya Feldman.
— Matthew Elo