Double Check Those Listing Prices!

[Pamela Crowley (Florida)]

DOUBLE CHECK THOSE LISTING PRICES!

http://www.tbo.com/news/metro/MGBXTU3SKTE.html

A RAPID RISE
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By SHANNON BEHNKEN The Tampa Tribune

Published: Oct 22, 2006

ST. PETERSBURG - A year ago, Dawn L. Molen quit her job as a commercial loan officer and set out to become a real estate agent.

The 26-year-old got her license and quickly landed a job at Charles Rutenberg Realty in St. Petersburg.

With three months' experience, the agent who had never listed a home closed her first sale Jan. 27 in a working-class neighborhood. Her buyer paid $45,000 more than the asking price. It stunned her peers.

From then on, Molen brought in contracts by the stack.

Over the next eight months, the agent found buyers for 35 more homes, most of them clustered in St. Petersburg and Pinellas Park. At a time when real estate agents would have been happy to close two sales a month, Molen found buyers willing to consistently pay $50,000 to $70,000 more than the original price, according to documents obtained by The Tampa Tribune. Collectively, the homes sold for at least $2 million more than originally listed.

Her boss thought she was a rising star.

But there was something he said he didn't know: Some of the money wasn't going to the sellers. It was going to a third party with ties to Molen, sometimes without the knowledge of the lenders or the sellers. Federal and state laws require full disclosure to lenders detailing where the money goes.

By late September, real estate professionals noticed the unusual trend. One appraiser alerted a top official at a state board that regulates his industry, and a broker who worked with Molen asked the FBI to check it out.

By then, Molen's fortune had changed. She had been fired by two brokers who had become suspicious and she started a search for a new boss - one who could help her with a new stack of 18 deals.

The Tribune's research of Molen's deals reveals:

•Settlement documents that do not disclose the seller's net price or do not indicate who received the difference between that figure and the inflated price.

•In two cases, different settlement documents were created: one went to the lender and one was filed with Molen's broker. In one instance, the form filed with the broker showed a $120,000 "payoff," but the document received by the lender did not. Misrepresenting where the money is going on closing documents is a federal or state offense, depending on the financial institution involved.

•Most listing agents inflated the asking price at Molen's request in the Multiple Listing Service, a database used by real estate agents. The change is a necessary step to get lenders to approve a bigger loan.

•Most of the homes sold for $250,000 to $260,000, and the same appraiser was used for most of the homes. In at least four cases, the appraiser valued them at or near the inflated price in neighborhoods in which homes should be worth much less, other appraisers said.

•Nearly all of Molen's buyers are from Indiana and belong to an investment group led by two men from Indiana and their Clearwater-based companies.

•The difference between the higher price and what the seller received was listed as an "assignment fee," similar to a finder's fee, for the companies in most cases.

Molen's deals have several similarities to cases that have surfaced recently across the nation, some of which have resulted in investigations or prosecution for illegal activity.

As the torrid real estate market has cooled nationwide, more industry professionals may take chances to make a deal, experts say. Lenders say they are bracing for a fallout in which buyers ultimately default on their mortgages.

Although Evans, Molen and Malcom set up the deals, it took other professionals and willing sellers to complete them. Investors, listing agents and sellers agreed to their part in the transactions, even though they said they weren't aware of all the details.

"When you make your money based on real estate sales, it's tempting to do whatever you have to do to make sure you keep making sales," said Pollock, the mortgage investigator.

Lee Farkas, chairman of Ocala-based Taylor, Bean & Whitaker Mortgage Corp., said his institution funded four of Molen's deals. He was surprised to discover the assignment fees and did not realize the property had sold for more than it was originally listed.

"There's no way we would do a loan structured like that," said Farkas, who plans to look more closely at Molen's deals.

More than a dozen sellers and listing agents interviewed by the Tribune said they felt uneasy about the transactions but went along after employees at the title company assured them they were legal and not unusual.

"As long as I got my $180,000, I didn't care what they were doing," said John Dieumegarde, whose home at 4935 42nd Place N. in St. Petersburg sold for a recorded sales price of $251,000. "Hell if I know what they did with the money."

One listing agent sold two homes to the group. Jennifer Gay of Shirley International Realty in St. Petersburg said her primary responsibility was to represent the sellers and get the price they wanted.

"These are the first two deals I've encountered that were structured this way," Gay said. "It was unusual, but my sellers were happy."

One of her sellers, a widow who needed to make a deal fast so she could purchase a low-maintenance condo, was thrilled with the $180,000 price she received. The recorded sales price was $65,000 more.

Appraisals Checked
Before a lending institution agrees to fund a residential real estate deal, it typically requires a professional appraisal to ensure the house is worth the sales price.

The Tribune reviewed paperwork from four appraisals that was provided to one of the lending institutions. In each case, the property appraised within a few thousand dollars of the recorded sales price.

Now, other appraisers are stumbling across Molen's deals as they search for comparable home sales to help determine the value of nearby properties.

On paper, the sales appreciation is astonishing, said Doug Nail, an appraiser with Tampa Bay Appraisal Co.

"This is not a $250,000 neighborhood," Nail said, referring to one in St. Petersburg.

Nail evaluated one of Molen's sales, at 5244 46th Ave N., for the Tribune, without relying on recent sales represented by Molen. He estimated the house's value at about $145,000. One of Molen's buyers paid $250,000 for the house in September.

Frank Gregoire, a Pinellas County appraiser and chairman of the Florida Real Estate Appraisal Board, said he has been getting phone calls about Molen's sales in recent weeks. Appraisers are unsure how to evaluate property because the inflated sales are skewing their appraisals, he said.

"A competent appraiser would say, 'What in tarnation is going on?'" he said, "particularly in the market we have right now."

While Molen was employed by the two real estate brokers, she quietly worked as a mortgage broker, operating a branch office out of her $450,000 south Tampa condo.

The letters in TLW Mortgage Lending Inc.'s name stands for The Lord's Work, and principal owner Michelle Darby believed in Molen. She said the agent arrived in early 2006 highly recommended by other professionals.

Some real estate agents work as mortgage brokers and the practice is not considered unethical as long it's disclosed to clients and the agent's employer. Darby knew Molen was working both jobs, but Sweetin did not. He said he would have reviewed her files more closely if he had known.

As mortgage broker, Molen communicated with at least one commercial lender on four of her deals. She provided financial statements and other documentation the lender required.

Word of Molen's deals is spreading throughout Bay area real estate circles, prompting local appraisers such as Caryn Blauser to conduct her own property searches.

She was astonished by what she found. Molen's sales are not isolated. She has found many local homes selling for substantially more than the original price.

"There's some weird stuff going on," Blauser said. "The buyers may chalk it up to creative financing, but we may soon see a lot of mortgage foreclosures because everyone wanted to make a quick buck."

TRIBUNE INVESTIGATION
Findings:

•Thirty-six homes, mostly in working-class Pinellas County neighborhoods, sold for an average of $60,000 above the asking price.

•The sellers received near or below the original asking price.

•The rest of the money - at least $2 million collectively - was paid to investor groups involved in the deals.

•In two cases, two sets of settlement documents were created: one for the broker that shows a "payoff" and one for the lender that does not. Federal and state laws prohibit misrepresenting where the money goes in closing documents.

DO YOUR RESEARCH DUE DILIGENCE!!!

DO NOT USE SALES LIKE THESE AS COMPS!!!!!

 

[Brockway]

Thanks for sharing, Pam. I see more fuzzy deals these days. I recently turned down an assignment where the seller was the realtor and the purchase price was $21,000 over the list price. After doing my research I called the MB and asked her to make sure I have all of the addenda. She said I did so I told her that I am very familiar with this house and the neighborhood and that there were no sales to support the higher price. I jokingly told her there must be a car included in the offer somewhere. I will forward that address to you if it finally shows up as pending in the MLS. The last time I looked it was still active so my guess is that our local skippy was on vacation.

 

[Workbox]

I think, even the most skilled appraisers can get duped in the charade game that these characters create. Thanks Pam.

 

[Pamela Crowley (Florida)]

I've spent the last few years refusing to use what are obviously fraudulently inflated sales - plus turning them in to my local Realtors Board and MLS and regulators. Yup, that has harmed my appraisal business. Maybe, just maybe, now that more are actually interested in doing something about these frauds, it will turn around for the honest appraiser - AND real estate agents and mortgage brokers, etc.

It's a nice dream anyway...

 

[Lobo Fan]

We had somebody loading up land/home deals in the MLS like they were resales in order to use them as comps on other land/home deals. Look at 25th and 26th streets in Rio Rancho for Otis and Caterina. Mostly in 2004 and 2005. Plam Harbor was buying half acre lots in the blow sand for $1000-$1500 bucks, plopping $60K MH's on them and selling them for $120-$130K. I guess because they were already on-site they were considered resales even though they were new and never lived in.

A lot of people pulled some high dollar refis based on these comps. I am getting REO orders out there and they are coming in around $60K. I guess there are scams everywhere. If it walks like a duck and talks like a duck, then maybe it is time for duck soup.

 

[Chris Colston]

Did Frank really say "tarnation"?

Interesting connection between Indiana in this article and the Countrywide law suit. Next Florida Quality Council meeting (Nov. 17) should be interesting. I'm sure this will be coming up for discussion.

 

[Terrel L. Shields]

even the most skilled appraisers can get duped in the charade game that these characters create

That's the problem and without looking at the whole market, an appraiser might be tempted to search the MLS by $ using the offer or listing price and locate only the overpriced properties. Due diligence is going to be a huge issue and I do sincerely believe that a lot of folks can get snagged while hurrying or being a little lazy. Not just skippies.

 

[Francois K. Gregoire]

Did Frank really say "tarnation"?

Interesting connection between Indiana in this article and the Countrywide law suit. Next Florida Quality Council meeting (Nov. 17) should be interesting. I'm sure this will be coming up for discussion.

It's part of my repertoire when talking with reporters. From experience, I've learned they are generally unwilling to print my day-to-day vocabulary.

BTW, there is no excuse for any appraiser overlooking the details in these deals. The orginal listed prices were plainly stated in the MLS.

 

[Pamela Crowley (Florida)]

BTW, there is no excuse for any appraiser overlooking the details in these deals.

Absolutely!!!!!

Except, I hear there are some MLS systems out there that do not provide the listing history / changes as others do. Still, if one or some sales stick out, that is NOT the 'new benchmark' of the values in that area as so many like to erroneously like to think!!!!! As appraisers, we are mandated to verify the sales we use, depending on the new Scope of Work details and the report format used. When dealing with the Fannie forms, you had better be very familiar with the preprinted Certifications and the Fannie Mae Guidelines and do the necessary verfications.

I wonder how ATM Corp with their new "8 hour after inspection turn time" mandate will defend themselves when it comes to appraisers doing this due diligence verifications???

Better yet, how will the appraisers not doing enough verification defend themselves?????

 

[OCApp]

"Lee Farkas, chairman of Ocala-based Taylor, Bean & Whitaker Mortgage Corp., said his institution funded four of Molen's deals. He was surprised to discover the assignment fees and did not realize the property had sold for more than it was originally listed."

guess this mortgage company (and most others as well) never heard of doing a review appraisal b4 funding the loan.