Story URL: http://news.medill.northwestern.edu/chicago/news.aspx?id=207877
Story Retrieval Date: 5/25/2013 5:16:04 AM CST
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Ariel Ramchandani/MEDILL
The property at 4547 S. Oakenwald Ave. on Chicago's South Side, has a troubled past.
Does this look like a $5 million home to you?
by Ariel Ramchandani
Aug 09, 2012
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Ariel Ramchandani/MEDILL
Although a succession of buyers took out steep mortgages on the property, none of them repaired the crumbling facade.
Timelin
April 2002: Joanna Olszynska buys the house at a bank sale for $205,500.April 2004: Martin Lagundino buys the house for $780,000, borrowing almost the whole price of the home.
January 2005: Lagundino sells to Paul Brown for $1.25 million. Brown borrows more than the price of the house.
2006: According to her affidavit, Lynette Hart moves into the house.
July 2007: Brown sells the house to Steve Davajon for $1.6 million.
April 2008: Bank files foreclosure suit against Davajon. Davajon has simultaneous other suits filed against him.
August 2009: House is foreclosed and repossessed by ING Bank.
November 2009: Lynette Hart files a mechanics lien for $4 million.
September 2010: Sure Realty Real Estate Investment files a $5 million lien against Davajon.
October 2011: Chicago fines the bank $500 for poor maintenance of the property.
January 2012: City issues a letter designating the house as within a landmark district.
West says he chose the area because “It’s family oriented.” He has three children and they need space. With this in mind, he is eying properties to buy. He is interested in one further down the block, 4547 S. Oakenwald Ave.
From the outside it seems like good value. The house was foreclosed on and the price is dropping almost weekly—it’s now listed for $279,000. It is in a designated landmark district. If you overlook the ominous, neon green ‘no trespassing’ sign in the window, and the pile of crumbling stonework stacked by the side door, it looks pretty nice inside, hardwood floors and moldings.
But legally, it’s a mess. The house has a troubled past and behind the crumbling façade is a money pit, a cover for possibly fraudulent dealings and a series of sales, mortgages and liens for millions of dollars.
The last seemingly above-board sale of the property happened 10 years ago in 2002 when Joanna Olszynska bought the house for $205,500 at a bank auction.
Then Olsynska flipped the house in February 2004 to Martin Lagundino for $780,000, making a phenomenal profit. Even for a revved-up real estate market and a neighborhood in transition it was an unusual deal: Zillow estimates the average value of a North Kenwood home in 2004 was $269,000.
Olsynska, now 45 and a registered real estate broker, also is a real estate speculator. She has participated in almost 60 real estate transactions. Four out of five of the real estate development companies that she has been associated with have been involuntary dissolved by the State of Illinois.
When Lagundino bought the Oakenwald home he took out two hefty mortgages: one for $150,000, and the other for $600,000 from People’s Choice Home Loan Inc., for a total of $750,000. He borrowed more than 95 percent of the selling price of the house.
Lagundino flirted with foreclosure and then sold the house quickly in January 2005, less than a year later, to Paul Brown, for $1.25 million. Even approaching the height of the market, the prices for the nicer properties in the area, especially those needing work, only crept up to about $800,000. According to Zillow, the estimated average sales price in the area back then was $330,000.
The Hinsdale house that Lagundino bought next after 4547 S. Oakenwald was foreclosed on in 2009, and he has numerous tax and credit card liens against him. He filed for Chapter 7 personal bankruptcy in 2011. The case was dismissed. Lagundino, now 45, is listed as the president and CEO of Presidential Investment and Construction LLC.
Brown, the man he sold his Oakenwald house to, took out a mortgage larger than the sales price: He borrowed $1.25 million and then another $875,000 from the Bank of New York. Then later, after a foreclosure suit was filed, Brown borrowed another $375,000 from Kornerstone Realty Group of Arlington Heights.
Brown might have been planning to develop the property and repair the façade and the historical detailing. But neighbor David Yunis, who moved to Oakenwald in 2002, says the house was never properly restored at any point. Yunis, whose house overlooks 4547, said, “They did a lousy job fixing it all up, a poor quality job.”
According to the Chicago Department of Buildings website, the most recent permit for rehabilitation work on the house was issued in 2002.
Brown and Olsynska, the owner back in 2002, appear together on a number of other housing transactions. In one instance Brown bought a condominium building in Wicker Park from Olsynska in 2004, which was then foreclosed on in 2008. In another case Brown bought a condominium from Olsynska on the Near North Side for $549,000 in 2004. Brown sold it the next year for $960,000, almost double the price.
Brown had his tax bills addressed to 4547 S. Oakenwald during the years that he lived there, indicating he was using it as his residence.
After Brown, the transactions only become more outsized. In July 2007, Brown sold the house to Steve Davajon for $1.6 million. Davajon took out two mortgages for the purchase, an adjustable-rate mortgage for $962,000 from ING and another mortgage for $350,000 from National City Bank.
In the spring of 2008, ING filed a foreclosure suit against Davajon, and in August of the next year, the property was deeded to ING Bank.
But Davajon’s problems didn’t end with foreclosure. In November 2009, when the bank was already in possession of the house, Lynette Hart filed an affidavit saying that she had been living in the house since 2006, and she and Davajon had an oral rent-to-own agreement on the property continued over from the last owner. The agreement included a clause saying that all repairs she did on the house would be deducted from the final price.
Oral agreements are usually not enforceable, unless the renter can somehow prove they put money down towards the eventual price of sale. “Clearly the person who prepared this document did so without the advice of an attorney, possibly as an attempt to assert a claim in the case to which she was not a party,” said Elizabeth Joyce, an attorney in New Jersey who used to work in real estate, after she had examined the document.
The same week Hart filed a mechanics lien against the property for $4 million. Yunis said he thought the tenant living next door had been evicted a few years ago.
The following year in September 2010, Sure Reality Real Estate Investment filed a $5 million ‘common law lien’ against Davajon. Sure Realty Real Estate Investment is not a registered corporation in Illinois, their only contact information is a P.O box and a blank Facebook page.
Attorney Joyce said the lien reads like “a brief—a litigation document attempting to persuade a judge to make a ruling. I have never seen legal arguments in a recordable lien document.” She went on to say, “the arguments are garbled…and read like a layperson’s mistaken idea of what a legal argument should sound like.” Liens are usually statutory, not common. Joyce had never heard of a common law lien.
The month before, in August 2011, Davajon filed a lien against Sure Realty Real Estate Investment, indicating a prior connection to the company.
Records from the Cook County Recorder of Deeds show that Davajon has a pattern of strange real estate transactions. A buyer, Gotsia Pavlov, purchased a property at 1905 Glen Oak Drive in Glenview in 2005 for 326,250 and sold the house to Davajon in March 2007 for $995,000. He took out mortgages for $796,000 and $199,000, totaling the exact cost of the house. The house was foreclosed upon the following year.
Davajon repeated the pattern with a house at 3216 Lindenwood Lane, also in Glenview. A buyer bought the house in 2006 for $385,000 and sold it to Davajon for $1.2 million in May 2007. Davajon took out a $1.14 million mortgage for this house. This house was also foreclosed within a year.
“Someone used my name in a fraud deal,” said Davajon, now 56, when questioned in late June about the Oakenwald house. He would not say whether he was a developer or not. “Try me again in 30 days,” he said, indicating that he was not ready to talk about the matter yet.
The web might extend to Davajon. For example, the woman who sold him 1905 Glen Oak Dr., Gostsia Pavlov, has a similar pattern in her real estate transactions. A buyer purchased a house in Glenview in 2004 for $350,000, and in 2007 sold the house to Pavlov for more than three times that, $1.25 million.
Davajon filed for Chapter 7 bankruptcy in 2011. He also has multiple tax liens filed against him. An exhibit of his bankruptcy case is a prior lawsuit connecting him with real estate fraud in relation to a property he owned in California.
Thomas McNulty, a mortgage expert and real estate attorney at Neal Gerber & Eisenberg in Chicago, said that the pattern of buying, inflating the value and selling “could indicate a pattern of fraud which flourished under the real estate bubble and the bad lending practices of banks.”
He explained that the “scheme would be to keep inflating the price of the house by colluding with others to enter a contract at a crazy price…obtain an appraisal from someone in collusion with you, and close the ‘sale’ and take the money. Kind of a Ponzi scheme as you keep doing it over and over.”
The loser is, “the banks,” said McNulty, who “wind up on the short end, of course, with a bankruptcy filed by the borrower and collateral not nearly worth the loans.”
These transactions require the cooperation of an appraiser, retained by the lending bank. “Back then some appraisers were reckless or lazy or corrupt and could be persuaded to produce report at a designated amount,” McNulty said.
In the meantime, neighbors still consider Oakenwald prime real estate. “We loved this neighborhood. We eyed it and said ‘That’s where we want to live’” said Geri Redd, who moved in recently across the street.
Even Yunis, who is not as excited about the neighborhood as his young neighbors, is staying on Oakenwald because of his wife’s job at the University of Chicago. “It’s the same as anywhere else,” he said.
