Something For Nothing Home Deals

By Elizabeth Razzi
Sunday, August 5, 2007

There's a home-buying deal out there that's more than too good to be true. It's too good to talk about in public.

At least the people running the deal don't want to talk about it, certainly not for publication in the newspaper.

Here's the pitch: There is an invitation-only group of homeowners who have signed up as partners with an organization called Metro Dream Homes, which has offices in the District. Members buy a house, sometimes for more than the asking price and without a down payment. A condition of the sale is that the seller agree to give back 10 to 15 percent of the sales price to the buyer, who in turn pays it into the coffers of Metro Dream Homes. (What does the seller get? A sale, which can be hard to come by these days.)

Metro Dream Homes says it will invest that cash in various businesses, including automated teller machines, video advertising and other Web-based ventures that are under the umbrella of its parent group, Metropolitan Grapevine, headquartered in Laurel. Then, according to Metro Dream Homes, the profit from these businesses goes to fund the monthly mortgage payments for the homeowners, on an accelerated schedule that pays off the house in five to seven years. The company also says it will make sizable contributions to charity. After five to seven years of payment-free living, the homeowner is supposed to sell or refinance the house, with the homeowner and Metro Dream Homes sharing the equity.

What a deal! You buy a house, maybe with nothing down, take out a mortgage big enough to cover your $50,000 to $70,000 payment to Metro Dream Homes and then live payment-free for five to seven years. You've paid nothing. And after a few years, you and Metro Dream Homes split the equity and you live happily ever after.

Hundreds of people locally, with a heavy concentration in Prince George's County, are already having their mortgages paid through this setup, according to a June solicitation letter from the Dream Homes organization that said there are more than 700 homes in the program. One participant I spoke with after a meeting said he was having his mortgage payments paid on three investment properties. Some people who already own their homes are refinancing to get the 10 to 15 percent of home value that's needed to enroll and to get their mortgages paid on their behalf every month.

Judging from the inquiries I have received from readers, plenty more people are considering getting involved in this deal, despite deep concern that it could be too good to be true, or perhaps in some way illegal. Among the skeptical but tempted is a group of builders in the Fredericksburg area looking at the program as a way to get rid of unsold houses.

It's only logical to question how these mortgages get a green light from appraisers and loan underwriters.

The large infusions of cash up front raise the question of whether the Metro Dream Homes/Metropolitan Grapevine setup could turn out to be a version of the old Ponzi scheme, in which the payoffs to current insiders depend on the recruitment of ever more participants, each with cash. When recruiting fails to grow fast enough to pay earlier participants, a Ponzi scheme collapses, with the most-recent recruits losing their shirts. Is that $70,000 in cash from a new partner really invested in ATMs, or is it being used to pay off the mortgages of partners who got in on the deal earlier? And if it all should collapse, will there be a torrent of homes, bought with oversize mortgages, unleashed on the market? Executives of Metropolitan Grapevine did not return multiple phone calls over several weeks.

Kathie Connelly, executive director for the Maryland Real Estate Commission, said she has received a lot of inquiries from real estate agents asking if it's okay for them to represent sellers who get an offer from Dream Homes. "I tell them to recommend to clients that they seek legal counsel and have the documents reviewed before signing anything."

I went to a regularly scheduled Dream Homes presentation at a downtown District hotel, hoping to learn more about "an opportunity that you do not want to walk away from!!!" as company executives state on their business cards.

As a writer for this newspaper, I was asked to leave by the executive marketing director, Renee McIlwain. She threw in a "how did you find out about us?" for good measure. She said the only way to be welcomed at the meetings is to be invited by someone who already belongs to the organization. Numerous phone calls to McIlwain and to Isaac J. Smith, president of Metropolitan Grapevine, and Andy Williams, chief executive of Metropolitan Grapevine, were not returned. Clearly, this is an opportunity they would prefer I walk away from.

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