Buyers of Home Accuse U.S. of Real Estate Fraud : Oxnard: The government reneges on a deal with a Port Hueneme couple. It says there’s a pre-existing loan on the property.

First-time home buyers Rich and Sherry Whites thought they had found their dream home last April.

It didn’t bother them that the previous owner of the modest three-bedroom tract house in Oxnard had been arrested on drug charges. They thought they were getting a good deal from the U.S. Department of Justice, which had seized the house and was selling it.

But their attempts to buy the home at 930 W. Kamala St. turned into a nightmare. “I offered money to buy the thing and they screwed me,” Rich Whites, a boat mechanic, said this week.

The couple signed a contract with federal officials in April to purchase the boarded-up house for $142,000. They obtained a loan, paid for inspections and began cleaning up the 2-foot-high weeds in the yard and pruning the overgrown pepper tree.

Then, two weeks ago, after several delays, the Port Hueneme couple were abruptly notified that the deal was off. Federal officials had discovered a $157,000 pre-existing loan on the property. They would no longer sell at the agreed-upon price.

“I’ve been subjected to a real estate fraud,” said an angry Whites, 33. “If I did this to some buyer, they would hang me.”

Since the deal fell through, Whites and his wife have been trying to untangle themselves from their contract and retrieve the money they’ve spent--a $2,600 deposit and another $2,800 in expenses.

Whites said he would never attempt to buy property from the government again. His loan officer, Russ Spencer, also said the experience soured him on handling similar transactions.

“They offered something for sale that they didn’t have the ability to sell,” said Spencer of Spencer Loans in Oxnard. “I’ve never seen this happen before.”

But Tim Miller, the deputy in charge of the seized assets division for the U.S. marshal’s office in Los Angeles, said it is not uncommon to run into financial snags. In this case, a “last-minute” loan was not noted prior to the court forfeiture of the property by the previous owner.

“We’ve had a bank come up with a mortgage that is valid after we’ve disposed of the property,” he said. His office deals with about 600 seized properties a year, he said.

Although the Whiteses said they had been stonewalled in their attempts to get back their money, Miller said Thursday when questioned by The Times that his office will reimburse them and Spencer for their expenses.

“We’re not here to hurt the public,” he said. He said the squelched deal was not the fault of the couple and that the government makes every effort to find existing liens and mortgages on properties before they are disposed.

He said the government couldn’t sell the house for the lower price and take a loss. “We’re mandated to not take a loss on these. We can’t just give something away.”

Under federal and state law, property can be seized from the owner if it has been used in the commission of a drug offense or if the profits from the sale of illegal drugs were used to buy the house, according to Ralph Lochridge, spokesman for the Justice Department’s Drug Enforcement Administration.

The West Kamala Street house was seized after its former owner was arrested in 1987 on drug charges and ultimately was sentenced to four years in prison. A federal judge awarded ownership to the government last November.

Rich and Sherry Whites, married two years, had been looking for a house for a year when they noticed in April that the stucco home was for sale.

“I told her we’ll get a house and have kids,” Rich Whites said. They offered $130,000, federal officials countered with $142,000, and they struck an agreement.

When the government required the couple to get a loan within 30 days, they frantically met the deadline.

“Then they (the government) started dragging their feet,” Rich Whites said. “But they didn’t tell us anything along the way. Being our first home, this was real frustrating.” When the deal fell through, he was frustrated in his attempts to get his money back. Phone calls went unreturned.

He is pleased that he at least will get his money back. That means the couple can proceed with the purchase of another house they have since found.

But the experience left Whites embittered. It was a classic case of the little people being trampled, said Whites, who earns $15 an hour. His wife is a grocery checker.

“We got such a deal on the house,” he said. “But now I look like a fool.”