In the Fall 2012 edition of its Real Estate Bulletin, the California Department of Real Estate (DRE) writes of an agent who lost his license as a result of extorting a pittance of a kickback from an unwilling buyer in a short sale. The agent, unsatisfied with the 7% gross commission limit agreed to in his listing agreements, created an addendum which remained undisclosed to the sellers and their lenders; just the buyers, the purpose of which was to extract an additional 1% payable to his Nevada corporation for “negotiating” the short sale.
Click here to read the published article by the DRE, which does not name the Realtor®.
Inquiring minds, of course, wanted to know who the Realtor® was who pleaded guilty to two counts of grand theft: one count for each buyer he defrauded in two home short sales, a novel form of short sale fraud. So, without further delay, here are the details and a link at the bottom to the administrative Accusation filed on October 5, 2010 against the now-formerly licensed real estate agent:
In October 2008, real estate agent Matthew Wayne Stewart took a listing agreement from Eric and Julie Harvey on behalf of his brokerage Dance Hall Investors to sell their home located in Auburn, California. As the current value of their homes was insufficient to cover the $578,574.24 owed by the Harveys on both of their loans as well as property taxes owed, it was necessary to obtain the permission of J.P. Morgan Chase Bank in order to conduct a short sale.
On May 4, 2009, buyers Tom and Leslie Daley submitted an offer to purchase the Harvey’s property for $665,000 through their agent John Renwick. The offer was accepted by the sellers, but on May 22, Stewart submitted a “S S Buyer Fee Agreement,” which, according to the Accusation, was done with the “approval or ratification” of Wayne Thomas Hall, the designated broker for Dance Hall Investors. This Fee Agreement required the buyers to accept a 3% “seller’s credit” to the buyers, which would then be paid to Pardus Ventures, Inc., a Las Vegas corporation owned by Matthew Wayne Stewart for the purposes of paying Pardus for “negotiating” the short sale with the lender. The Daleys were told that their offer would not be submitted to Chase if they did not sign the “S S Buyer Fee Agreement,” which they subsequently did in order to purchase the home. They Harveys were never told or made aware of this ex-post document and that Stewart’s compensation would exceed the maximum 7% called for in the listing agreement they had executed with him seven months prior.
Having successfully closed one fraudulent short sale, Stewart repeated his scheme in May 2009. This time the sellers were identified as “Morrow” and their property was located in Folsom, California. Stewart not only represented the Morrows, he was a dual agent acting for the buyer named Sadiq Mohuiddin and the lenders were Aurora (1st lien) and Bank of America (2nd lien). As with the Auburn property, the buyer was presented with a “S S Buyer Fee Agreement,” which he was told was not negotiable if he wanted to purchase the property. The Morrows, like the Harveys, were unaware of this document and that their agent would “earn” fees greater than the 7% indicated in their listing agreement with him through his employing brokerage Riverside Corporation and its designated officer Rory Lee Hoelker.
Key to each Cause of Action articulated in the Accusation was that Pardus Ventures and Matthew Wayne Stewart were one and the same, a fact which Stewart never to disclosed to the buyers to each transaction.
Matthew Wayne Stewart pleaded guilty on August 18, 2012 to two counts of grand theft and one count of conspiracy to commit grand theft. His sentence was to spend 90 days in jail (that’s all for short sale fraud?), pay restitution of $25,000 (what, no penalty?), surrender his license and be placed on formal probation for three years following his 90 day sentence.
On October 12, 2011, Dance Hall Investors, Inc. and Wayne Thomas Hall signed a stipulation that both would accept 60 day suspensions for their roles in this case.
On March 27, 2012, the real estate licenses for both Riverside Corporation and Rory Lee Hoelker were changed to restricted status, also by stipulation. Click here to read the associated filings.
Click here for a link to the Accusation on the DRE’s website.