The real estate market is notorious for being fickle. It’s always fluctuating and never stays the same for long. Trends are constantly evolving. For example, reflective blinds didn’t used to be popular, but they’re quickly gaining popularity because of the fact that they can reduce heat gain by around 45% when completely closed and lowered on a sunny window.
Home staging is also on the rise. Five or 10 years ago, not many people even knew what home staging was. But, a 2013 study showed that staged homes were sold in 22 days, compared to the average market time of 125 days for homes that were not staged.
Despite all of the changing trends in the unpredictable real estate world, there’s one risk that remains a constant: fraud. This is especially unfortunate for a Minneapolis couple who thought they were buying their dream house, but ended up becoming victims of an unimaginable scam.
John Kozlik and his partner purchased a newly-renovated home in Minneapolis last year, and they thought it had everything on their wish list: four bedrooms, three bathrooms, a fenced-in yard, and ready for immediate move-in.
“Yeah this is definitely the house we want to make an offer on,” Kozlik remembered thinking.
To seal the deal, Kozlik and his partner offered a whopping $10,000 more than the asking price. But seven months later, the home’s appraisal plummeted from $360,000 to $120,000.
“It’s the worst thing you can imagine happening when you buy a house. That’s what it is,” said Kozlik.
The couple had no choice but to rip up a third of their finished space when, just a few days after moving in, they witnessed a minor rainstorm making its way into their basement.
“There’s a huge crack right here right through the egress window that they added…on every side of the drywall in here it was black mold. We didn’t even realize how big the problem was at that time,” he said.
According to the EPA (Environmental Protection Agency), 100% of all types of mold have the potential to cause some health effects. These can be minor to severe and even cause death in some rare cases. That’s why the couple starting wearing masks after they found even more black mold on every side of the house. The home also had hidden cracks and tree roots on the basement cinder block behind the new drywall. They even had to keep the mold-laden areas separated with plastic from the rest of the house.
Not long after that, Kozlik learned that none of the proper permits were pulled for any of the plumbing or electrical work that had been done on the home.
“They did all this work, added this bathroom and there was no permits pulled for this bathroom whatsoever,” he said.
Kozlik and his partner purchased the home from a couple who said that they lived there and had done all the renovations themselves. The couple had teamed up with two other business partners and started a company of their own, called Ace of Spades, LLC, and sold the home to Kozlik.
However, just one day after the water problems were discovered, Ace of Spades, LLC had been completely dissolved — all within one week of the final sale. Kozlik knew that there was no easy way out, and that he had been taken for a ride by money-hungry scammers.
“It was clear that we had been tricked,” Kozlik said.
One of the men in question is Joe Werb, who has a long history of fraudulent actions. In 2004, he was charged with making more than $1 million by selling counterfeit sunglasses on the Internet. And most recently, he faced charges last year for his involvement in a multi-million dollar cell phone trafficking ring.
Werb was eventually convicted of recruiting homeless people to purchase smartphones that had been shipped overseas and sold on the streets for thousands. He went to prison for that crime after he flipped the house.
“I trusted the system,” said Kozlik.
Because of the lack of paperwork to point out any potential issues, a home inspector didn’t find anything serious before the sale was finalized, and the seller’s form of disclosure failed to mention all the work that had already been done.
“In Minnesota, you have to disclose anything you know will be affecting the life and enjoyability of a property,” said Nicholas Montgomery, owner of Advice Homes Real Estate.
For now, Kozlik is in the middle of a lengthy arbitration process, where a professional in the industry is reviewing his case to see if fraud occurred.
“We don’t know how long it will take,” Kozlik replied when asked how long it might take to figure this out.