Tuesday, October 02, 2007

Indiana AG Sues Investor For "Flipping Options" Without A Real Estate License

Indiana Attorney General Steve Carter has filed a lawsuit against Jeffrey L. Radabaugh for the unlicensed practice of real estate. Carter alleges that Radabaugh took nearly $800,000 in assignment fees (ie. "flipping profits") from the sales of real estate involving at least 32 transactions, according to a news release issued by the AG's office.

According to reports, Radabaugh, doing business as J.T. Real Estate Investments, LLC allegedly contracted with numerous property owners in the Fort Wayne, Indiana area for options to purchase their properties at set prices with the ability to sell the option to another if Radabaugh located a buyer. Radabaugh then found straw buyers who agreed to buy the properties for more than the option price, with Raddabaugh pocketing the difference. Allegedly, the prices paid by the buyers were in excess of the market value for the homes and the mortgages obtained to finance the purchases were based on inflated appraisals. In each case, Radabaugh never took title to the homes. He is alleged to have pocketed $797,826 from participating in the sales of at least 32 homes in the last year and a half.

Once the houses were sold to the straw buyers, they then reportedly sold the houses to Radabaugh on land contracts, and Radabaugh managed them as rentals.

Attorney General Carter's position (apparently) is that the "options to buy" negotiated with the original home owners were used as a mechanism (similar to a real estate agent "listing" agreement) to circumvent state law that requires a license for real estate brokering which neither Radabaugh nor J.T. Real Estate Investments, LLC hold. Radabaugh and J.T. Real Estate Investments have been ordered by the court from engaging in the unlawful sale of real estate while the lawsuit is pending.

In addition, the Fort Wayne Journal Gazette has reported:

  • In February, The Journal Gazette identified Radabaugh as the dealmaker behind the sale of more than 100 houses in which mortgage loans were dramatically higher than the sale price.

  • In August, home appraisers Richard Roberts and Jennifer Lyons agreed to voluntarily surrender their licenses for 90 days over allegedly inflated appraisals as part of Radabaugh’s deals. Carter’s office is seeking to remove their licenses permanently.

  • Twelve of Radabaugh’s investors are suing his limited liability company, J.T. Real Estate Investments, in federal court, alleging he owes them a combined $8 million.

  • Although the newspaper had found 10 investors and 124 houses involved, the attorney for the investors suing Radabaugh has said there may be as many as 30 investors and the number of houses involved may be as high as 200.
The Attorney General’s action is based on at least 32 of the transactions and, at least at this time, does not involve any allegation of mortgage fraud and is limited to the issue of selling real estate without a state license. Reportedly, most of the houses are in danger of foreclosure. For more, see:

posted by Home Equity Theft Reporter at 8:02 AM