A federal initiative fails for one Aspinwall property
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As an active real estate investor, Paul Buncher makes money looking for good deals on property he can either rent for steady cash flow or flip to another buyer for a profit.
In March last year, Mr. Buncher found a three-bedroom, single-family house in Aspinwall that had all the elements of a great investment property, yet he promised to live there instead.
He had no other option.
The house at 224 2nd St. was a foreclosure property owned by mortgage giant Freddie Mac, and at the time Mr. Buncher bought it for $55,000, investors were not allowed to make bids. It was offered through a federal housing initiative meant to benefit owner-occupants who plan to buy the homes and live there for at least one year.
Eight months later, Mr. Buncher resold the house to another real estate investor for $92,500 -- nearly a 60 percent profit -- without ever moving in.
The First Look Initiative -- run by HomeSteps, the Freddie Mac real estate sales unit -- was announced in September 2010 to "stabilize communities and foster affordable homeownership opportunities by giving homebuyers 15 days to buy a HomeSteps home as their primary residence without investor competition."
"The purpose is to give owners who want to occupy the homes a first look at our inventory before cash-rich investors swoop in and get bargain prices," said Brad German, a spokesman for Freddie Mac. "Someone who misrepresents their intentions creates a problematic situation. It is an abuse of our intentions through the First Look Initiative."
The intentions in the Aspinwall case aren't entirely clear.
Authorities at Freddie Mac may have given Mr. Buncher permission to sell the house without having to move in because of a change in his personal circumstances. The case is now being reviewed by investigators at the federal agency, Mr. German said.
Mr. Buncher declined to comment on the matter, but his wife, Cristina Borrero, said her husband had every intention of moving into the home when he bought it.
Ms. Borrero, a Coldwell Banker agent who acted as Mr. Buncher's real estate agent in the transaction, also signed the Affidavit of Owner-Occupancy required by Freddie Mac. She signed as a Realtor, confirming her client's intentions.
Ms. Borrero said Mr. Buncher initially planned to sell his 3,200-square-foot home in Fox Chapel and move into the 2,400-square-foot Aspinwall house. After making the purchase, he changed his mind.
And she had a lot to do with that.
At the time that she represented Mr. Buncher as an agent in the Freddie Mac transaction, the couple were not married. They were not even dating, she said, although they had dated briefly about five or six years ago when she first began acting as Mr. Buncher's agent in commercial real estate deals.
"The house he lived in was too big, and he was going to sell it," Ms. Borrero said. But, "In the interim, we got married.
"We understood the rules. I didn't want to live in the [Aspinwall] house. I have two children, and it just did not suit our needs."
County records show Mr. Buncher bought the three-bedroom home in which he lives on West Waldheim Road in Fox Chapel for $375,000 in April 2004.
Zillow records show he listed the house for sale in August 2009 for $850,000 but removed the listing three months later in November. There is no record of Mr. Buncher's Fox Chapel house being listed for sale last year either before or after he bought the Aspinwall house.
While Mr. Buncher's family name is associated with commercial real estate throughout the Pittsburgh region, his personal real estate assets include his home; his business, Arsenal Bowling Lanes in Lawrenceville; and rental real estate property.
Ms. Borrero, 45, said she was dating another man who lives in the state of California when she helped Mr. Buncher buy the Aspinwall house under the First Look Initiative, which bars investors during a homes's initial 15 days of listing.
Her relationship with Mr. Buncher at that time was strictly professional, she said.
Then, around May or the end of April 2011, Ms. Borrero said, Mr. Buncher proclaimed his love for her and asked her to marry him.
"Six weeks before the marriage, he met my kids for the first time -- [two girls ages 11 and 16]," she said.
Ms. Borrero said there was no engagement ring and no formal wedding invitations. The couple eloped to Sharpsburg and were married June 3 in the magistrate's office. His parents, her parents and her two children were the only attendees.
"I'm very spontaneous like that," she said.
After the wedding, Mr. Buncher wanted to sell the Aspinwall house rather than move in. But he knew a sale might create a legal problem for him and an ethical violation for his new wife, so he hired an attorney to get permission for the sale from Freddie Mac.
"I called Freddie Mac and spoke to people involved in the deal initially, and they gave [Mr. Buncher] the authority to sell," said Pete Thompson, a partner at the Lauer & Thompson law firm in Sewickley, who represented the couple.
"There are times when plans change, and Freddie Mac understood that," Mr. Thompson said. "His circumstances changed."
The national housing crisis that began to unfold in 2007 created an avalanche of foreclosed houses that ultimately fell back into the hands of Freddie Mac, the federal agency that provides residential mortgage capital to lenders.
At the end of the third quarter of 2011, Freddie Mac had 59,615 homes in foreclosure nationwide. Those homes are placed back on the market through Freddie Mac's HomeSteps, which helps homebuyers find a bank-owned property and offers some assistance with the purchase.
Housing officials expected the First Look Initiative to stimulate homeownership among lower-income people. The idea was to stabilize communities and set the stage for appreciating home prices.
Mr. German said 70 percent of Freddie Mac's inventory of foreclosed homes are sold to people who live in them.
"The 70/30 split refers to our HomeSteps sales nationwide and not sales under First Look, which is targeted to owner-occupants," Mr. German said. "Nationally, the other 30 percent of the sales are to investors and nonprofit organizations."
He said Freddie Mac does not have the resources to "monitor absolutely every sale" to make sure people buying homes through the First Look Initiative are living in the homes, but the agency will fully investigate every fraud allegation.
Suspicious activity can be reported toll-free to Freddie Mac at 1-800-4FRAUD8 or to Neighborhood Legal Services Association in Allegheny County at 1-866-761-6572.
There are civil and criminal penalties for misusing the federal housing initiative, Mr. German said, adding that "there is a broader penalty to the market that shouldn't be overlooked.
"Program abuses invariably make it that much easier to justify new rules and potentially onerous new processes to protect ourselves and taxpayers from the risk of potential frauds."
Homebuyers looking to buy foreclosed property through the First Look Initiative can contact their selling agent or the listing broker with questions about the eligibility of a home. The information also will be included on the Multiple Listing Service used by real estate professionals.
"Our mission is to foster homeownership opportunities. We think this initiative is good for the community and supportive of our mission," Mr. German said.
Mr. Buncher relisted the Aspinwall property that he bought for $55,000 in late November for $119,000. Another investment company, Synergy Capital Inc., bought the property on Dec. 2 for $92,500 after only five days on the market. The new investor is preparing the house for sale again.
Scott Hastings, a partner at Synergy Capital, said the company is completely renovating the house, which is located on a quiet, well-kept street. When the job is complete, the partners plan to relist the property for sale between $260,000 and $290,000 -- more than five times what Freddie Mac sold it to Mr. Buncher for last March.
"We try to price at the market," Mr. German of Freddie Mac said. "Our homes are priced to sell in 120 days. Currently, on average, the homes are selling for 95 percent of current market value.
"The last thing we want to do is accept offers far below value and drive down prices when we often hold other properties in the community."
First Published January 15, 2012 12:00 am