Checking property and taxes: What you can find in appraisals, appeals, delinquents and liens
Fellows listen during a seminar session
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It should come as no surprise that rapidly growing markets attract more than their share of con men – the Internet had its dot-bombs, the energy business its Enron – but the action these days is in real estate.
Paul D’Ambrosio, investigations editor for the Asbury Park Press and Ron Nixon, computer-assisted reporting editor for the Minneapolis Star Tribune, gave journalists some of their tips and tricks during the panel discussion “Checking Property and Taxes.”
D’Ambrosio said that campaign contributions are one of the most common ways that money is used to influence real estate dealings, and that other real estate scams include:
- Bribery, the most tried and true method (and the hardest to catch).
- Insider trading, such as when friends on the planning board help their friends who work in construction.
- Flipping, which may involve using phony appraisals to inflate property values.
Land flipping is when someone sells a piece of property for many times its real value. This is most commonly done in low-income neighborhoods where it’s easy to find property that is undervalued. In this scam, sellers and appraisers work together to inflate the value of a home – an illegal practice of criminal collusion, D’Ambrosio said.
Nixon agreed that flipping happens more often in low-income areas, but warned that it also happens in high-income neighborhoods.
Developers use “straw buyers” to make the sale look legitimate, D’Ambrosio said, then take the money from the first house to get another. The crooks make their money from the volume of these transactions, he added, noting a company that flipped 60 houses in one small city.
One way to detect property flipping property is to look through county records, comparing transaction dates and prices and keeping an eye out for anything that has sold for more than 10 percent of the original purchase price shortly after it was bought, D’Ambrosio said. Sales within 30 days of purchase should be a real red flag. He also suggested looking for instances where the same company or buyers have purchased more than one property in the same area.
In his PowerPoint presentation, Nixon defined a number of real estate terms, such as quitclaim, which is often used to hide ownership and can make it harder to recognize flipping.
Nixon suggested that reporters regularly review tax collection records because you can often get a good story by looking at “who are the biggest tax delinquents and what is it costing the city.”
Tax records are also a good place to get background information on the players in the local real-estate scene, he said.
Nixon suggested reporters keep an eye out for zoning variances that enable business uses in residential areas and read the legal notices in the newspaper every day.
Nixon also warned that Nexus-Lexis is often outdated. “I usually go to the Web site of the city or county to find updated information,” he said.
D’Ambrosio suggested that reporters:
- Watch for sudden changes in zoning density, which make it easier for developers to overbuild in an area.
- Read financial disclosure forms, which politicians and government officials are required to fill out when they take office. These contain clues as to where officials and their families work as well, as their investments.
- Watch out for “midnight” zoning votes, because planning commissioners and other officials often wait until the public and journalists leave before they vote on the most controversial or questionable issues.
- Read divorce records for information on property ownership and other holdings which are revealed by former spouses.
- Review mortgage records to see if a developer gave a loan to a family member or give other clues about unethical or illegal financing.
- Examine liquor licenses, because the applications often require more detail than other permits and filings.
- Keep an eye on bankruptcy files because if someone is in financial trouble, they may be more susceptible to bribery or other illegal activities.
- Research lawsuits or other legal actions, because the depositions of former partners and others who testify often have lots to say.
It is easy to lose track of the bigger story when you’re going over records, D’Ambrosio warned. A good question to keep in mind as you’re following leads is, “What’s the harm?”
For example, he said, zoning changes made as favors by corrupt politicians can lead to:
- High-density housing
- Increased traffic congestion and parking problems
- Overcrowded schools
- Lower quality of life
“People love to talk about this stuff,” D’Ambrosio said. “They get very angry.”
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