The Anne Arundel County house was billed as new in the real estate industry's sales listing service.

When the young couple, William and Pauline Jacob, decided to buy it in 1988, their real estate agent presented the purchase offer on a form stamped "new construction."

But nearly three years later, one fact is clear: The modern-looking, three-bedroom home nestled in the trees in the small town of Crownsville is actually 60 to 75 years old. It looked new, at least to untrained eyes, because it had been extensively remodeled.

Aside from that fact, there is little else now on which the six parties to the subsequent tangled and acrimonious legal battle agree.

The real estate agent who held the listing for the property and the previous owners, Richard and Jennie Lund of Annapolis, who renovated the house, say the buyers knew the house had been rebuilt on an old foundation and frame.

The Jacobs, however, say they didn't know, weren't told and didn't ask about its age because they had seen in writing that the house was new. The Jacobs claim there are substantial defects in the property, partly hidden by the renovation, that may cost as much as $70,000 to repair.

Various inspectors and repair services have indicated the problems may include dry rot under the carpet, floors that aren't level, inadequate insulation, inadequate support for the fireplace hearth, a stairway that is too narrow and inadequate support for the exterior decks.

For both the Jacobs and the Lunds, the 1988 transaction has turned into a legal quagmire that has lasted more than two years and left both families facing potential financial ruin.

"It was the perfect house," said Pauline Jacob, detailing the thousands of dollars of expenses they have faced and income they have lost since they bought it. "It turned out to be the perfect nightmare."

The Lunds express equally strong sentiments about the situation.

"It's gotten so far out of hand I can't believe it," said Richard Lund, a retired employee of the Justice Department's Bureau of Prisons who has had to mortgage his home to pay his legal fees. "Thus far, we've paid $20,000 out of our pocket. This is killing us."

The story had its start in 1987, when Lund, a retiree without a contracting license who had previously done some home-renovation projects, purchased a partially completed house and began renovating it as a real estate investment. It needed a lot of work, having been originally built several decades ago, probably sometime in the 1920s.

In June 1987, Lund received a county building permit to make improvements to the property, including installing a new roof, bathroom, kitchen, siding and insulation and renovating the second floor. By January 1988, much of the work was completed and the Lunds put the property up for sale, listing it through real estate agent Jeannette Twomey of Hoffman Real Estate of Crownsville.

The project was a renovation, so no county occupancy permit was required, as is needed in new construction. However, the final inspection was never satisfactorily completed, as required by law, according to Robert J. Brown, Anne Arundel County's inspection services administrator.

New complications were introduced in January 1987, amid a frenzied and fast-paced real estate market, when Twomey decided to list the house as new in the multiple listing service (MLS), the real estate industry's sales listing tool.

Twomey said she chose to call the house new because of the limited number of age-of-property options offered in the MLS system's computer programming and because the house had been so thoroughly renovated.

Calling a renovated older house "new" is customary practice in "the industry in general," said Twomey's broker and employer, Mary Hoffman. "It's not technically accurate, but it's done."

In court testimony, Hoffman named at least two other Anne Arundel homes, those at 937 North Forest Trail and 169 Edge Way, that were similarly described as new houses by other local real estate companies after undergoing extensive renovations.

Spokesmen for the industry, however, disagreed that calling a renovated house new is a common or accepted practice.

"New homes have very specific definitions," said Bill Young, director of consumer affairs for the National Association of Home Builders. "It would be like putting a new engine in a used car and saying it was a new car. It's still a used car."

A spokesman for the National Association of Realtors also said that a house is always considered used even if someone only lived in it for 10 days or if it were fully renovated.

Another oddity about the MLS listing for the Lund house was that it specified that the seller was seeking a "noncontingent" offer, which, among other things, can prevent a prospective buyer from requesting a satisfactory home inspection or having their attorney review the paperwork.

The Lunds said they followed Twomey's direction in accepting the characterization of the house as new in the multiple listing service. They also eventually signed the purchase offer stamped with the words "new construction," as did Twomey, the Jacobs and their real estate agent, Charles Hardin, then of Coldwell Banker. The contract was prepared by Hardin.

The Lunds have since counter-sued Hoffman and Coldwell Banker, saying that the real estate companies should pay any damages if the Jacobs win the case.

"We got caught in the middle," said Jennie Lund, who assisted her husband in managing the renovation work on the house. "We paid our Realtors $7,000 to be sure the paperwork was right. That's why we paid them. It's a lot of money."

But the sales paperwork is only part of the story, according to the Lunds and Twomey. In court testimony, they said that the Jacobs, who had previously lived nearby, knew the house was rebuilt. They said they told the couple repeatedly that the house had been rehabilitated, and about the extent of the work that had been done on it.

"We never went out to deceive anybody," Richard Lund said. "We always said we were rehabbing it."

In addition, Hoffman, Twomey and Lund said, there were clues that should have been clear to the Jacobs. In particular, a survey of the home site indicated long-standing property lines and a septic system was described as being three years old, which would be inconsistent for a new home.

In Lund's view, the ultimate problem is that the Jacobs overextended themselves to buy a house they could barely afford and are now looking to blame others for their financial woes. Among the Jacobs' problems is the fact they bought the house with a negative amortization loan, in which their mortgage payments were low initially but have been rising every year since while their equity in the house has been dwindling.

For the Jacobs, the story began unfolding in early 1988. Pauline was pregnant, and their house had grown too small for their growing family. They listed it for sale with Hardin of Coldwell Banker and began looking for another house to buy.

One night in early February, Pauline Jacob saw a for-sale sign in the neighborhood and asked Hardin to investigate. He called them back, saying that the MLS noted it was a new house, the Jacobs recalled.

They rushed to see the house, decided it was the house of their dreams and made an offer on it almost immediately, the Jacobs recalled, agreeing to pay the full $152,500 price to be sure they would get it. It was a difficult financial stretch for them on his salary as a D.C. police officer and his wife's as a home day-care provider, but they believed they would be able to handle it on the two incomes, Jacob said.

In retrospect, William Jacob said, they were perhaps naive not to ask more questions, and he acknowledges they knew little about construction and real estate practices.

"I've never owned a new home," William Jacob said. "I've lived in an apartment {almost} all my life. This was a dream for me."

He also said that he and his wife believed they were being represented by a real estate agent who was protecting their interests. In fact, however, a real estate agent who takes a buyer around to look at houses legally represents the seller of the new property, unless they have a written agreement to the contrary.

"I just left it up to him," William Jacob said. "He's the real estate man."

The Jacobs say they learned the bad news about the property's age from several different sources. Most shocking, however, was when they learned that the state day-care licensing agency would not give Pauline a license for the new house until the county fire marshal judged it safe. But the fire marshal wouldn't judge it safe until the final building inspection was completed -- and it had never been completed.

Lacking a license, Pauline Jacob has been unable to advertise for new clients or operate a licensed day-care center as she did in her former home, which has cost the family substantial amounts of would-be income, she said.

Even worse, according to her husband, is that they don't know how substantial the structural problems may be. He said he has received repair cost estimates ranging from $7,000 to $70,000.

The Lunds say they wanted to make the necessary repairs, but Jacob has blocked them from entering his house to do the work. William Jacob said he is willing to admit a repairman but only if he can get a written guarantee that the work will be done correctly.

At one point, county officials initiated efforts to require Lund to make the necessary repairs, but have backed off pending a resolution of the complicated and emotional dispute.

"This is one of the most bizarre cases I've ever seen," said county official Brown.