Waterfront Homes Sold At Inflated Prices

By SHANNON BEHNKEN The Tampa Tribune

Published: Nov 21, 2006

A waterfront Mediterranean-style home on Treasure Island sat on the market for more than a year listed at $1.1 million. Finally, an offer came along the sellers couldn't refuse: Someone wanted to pay $1.4 million.

But there was an unusual stipulation: $300,000 of the purchase price would go back to the buyers or to third parties, the listing agent said.

It took three appraisers, all hired by the buyers, before one came back with an appraisal for $1.4 million. Relieved to finally sell the house, the owners went along with the deal.

"I was very leery of the whole transaction and a little surprised that it closed," said the seller's real estate agent, Jim Bates of ERA Compass Real Estate LLC. "I remember chuckling at the closing that this was the first time I've seen a buyer walk out with more cash than the seller."

This deal and eight other waterfront homes in exclusive neighborhoods in Pinellas County sold in 2005 and 2006 for a combined $1.6 million more than the asking prices. They were completed by some of the same real estate professionals now being investigated by state and federal officials for similar transactions.

Listing agents on four of the million-dollar deals say their clients were paid hundreds of thousands less than the recorded sales price.

Such home deals, uniquely structured so someone else gets cash back at closing, are sweeping the nation. The trend worries lenders, some who say they've unknowingly approved loans for inflated prices, and have since discovered they're on the hook for mortgages worth more than the home. Industry experts say there are hundreds of problem mortgages yet to surface.

In October, The Tampa Tribune uncovered 36 questionable transactions handled by Ocean Title & Abstract in Tampa during an eight-month period in 2006. The properties sold for an average of $50,000 to $60,000 more than the original list price. The difference between what the sellers received and the recorded sales price went to two local companies as an "assignment fee."

In two of the deals, separate closing documents were created. The lender's copy omitted the large "payoffs." Misrepresenting where the money goes on federal housing documents is illegal.

The Tribune's review of the deals showed the sales involved the same Tampa real estate agent - Dawn L. Molen - and buyers in a group of investors led by Chad R. Evans and Chris Y. Malcom of Clearwater. In some cases, documents show their companies received large assignment fees.

Investors Buy Homes

The Tribune has since reviewed other properties purchased by Evans and Malcom's investors and found nearly two dozen more homes bought at inflated prices, including the nine waterfront residences in Pinellas. None of those sales involved Molen.

It is unclear what was disclosed to lenders on these deals, but interviews with some involved in the transaction and a settlement document show the structure of the waterfront sales appears similar to the 36 transactions the Tribune reported last month.

Bates, the listing agent on the Treasure Island home, said his client was told the extra $300,000 would be used for "extensive remodeling." Evans and a woman identified as his girlfriend toured the home several times before closing, he said, and Evans described himself as an investor who assigned contracts to other investors.

Chris Malcom presented the offer as the buyer's agent. The buyer and lender changed several times before the deal closed. Malcom's brother, Jeremy, ended up purchasing the 3,299-square-foot home.

Bates said the final appraiser on the $1.4 million deal was Ricardo Pride of Tampa. He was listed on documents as the appraiser in many of the transactions the Tribune detailed in its October report.

Price said in October that he stands behind his appraisals, but would not discuss details of the transactions.

Bates' transaction was handled by Linsky & Reiber Real Estate and Title Services in south Tampa.

Malcom sold the home nine months later to an acquaintance for $1.8 million. Ocean Title handled that transaction.

J.T. Pelt, company president and chief executive for Linsky & Reiber, said his agency didn't do anything wrong, and if lenders missed the details it's because they didn't pay enough attention.

"In retrospect, maybe I should have done more due diligence," Pelt said. "But I'm not the closing police. We document everything on the [settlement document.] I'm under the assumption that the closing department looks at all of the documents."

Molly Boston, managing director for Ocean Title, did not return calls. Evans and Malcom could not be reached for comment.

Companies Receive Difference

Most of the million-dollar homes are in and around the exclusive Island Estate neighborhood in Clearwater Beach and were purchased as early as February 2005. The buyers, documents show, are relatives and acquaintances of Malcom. Malcom made some of the purchases, acting as power of attorney for the buyers, according to county records.

Listing agents on four of the deals told the Tribune that one of Evans' or Malcom's combined 13 companies received the difference between the seller's price and the recorded sales price and that they insisted on choosing the title company, a decision typically reserved for the seller.

All but two had original closings with Ocean Title.

One of those, a home at 316 First Ave. S. in Tierra Verde, sold for $2 million, again to Malcom's brother. Lee Williford, with Tierra Verde Realty, represented the seller and said his client received less than the $1.7 million listed price.

"I've never had a transaction done like that," Williford said, noting that the seller's real estate attorney signed off on the deal. "I was worried."

Ocean Title was effectively shut down earlier this month when its sole underwriter, Stewart Title Guaranty Co., terminated its business arrangement, citing ongoing investigations by the FBI and four state regulatory agencies.

After the Tribune's story in October, Linsky & Reiber's underwriter, Fidelity National, combed through their closing files and told the company to cease title work with Molen and the investors.

Agency Continues Relationship

The agency, however, continues to do business with Malcom and Evans. It owns a property management company, Templar Realty and Investment, and leases homes for the men's investors. Templar no longer manages property for Molen.

"They're good about doing what needs to be done to the homes, maintenance wise," Pelt said.

One of the first million-dollar homes that involved the investor group was purchased by Chris Malcom through power of attorney in his father Donald's name.

The home at 5920 Balao Way N. in St. Petersburg sold for $875,000 - $50,000 more than the list price. The buyer took out a $650,000 mortgage. Eight months later, he refinanced with Washington Mutual for $1.4 million. Three months after that, he took out a $310,000 home equity loan with Citibank. Linsky & Reiber handled both the original mortgage and the refinance.

Common Agent For 7 Homes

Another common thread among the waterfront homes, according to documents: Martin Donovan, a real estate agent who said he knows Malcom and Evans "socially." He works for Joanne Hiller & Associates and appears as the buyer's agent, listing agent, buyer or seller on all but two of the nine waterfront homes reviewed by the Tribune.

He said during a telephone interview that he doesn't recall why prices were increased or who received the extra money. "I never dealt with the title work," Donovan said.

One home Donovan purchased in Clearwater sold for $1.4 million. The listing agent, Fred Rushing of ACR Elite Group, said the original buyer couldn't get financing for the home. At the last minute, he said, Donovan stepped in.

The settlement document filed with Rushing's broker shows a $258,000 "payoff." It does not disclose who received the money

The broker, Jim Sweetin, also at one time employed Molen, the real estate agent being investigated by state regulators and the FBI. He fired her after she walked in one day in late September with 18 inflated sales contracts with Evans and Malcom's investors.

"It's a lot of money," Sweetin said of the Clearwater property. "No doubt, it's excessive. I just don't know what to make of it."

Reporter Shannon Behnken can be reached at (813) 259-7804.