Sonoran City News

Southwest 1031 Exchange - A Victim's Story

Wayne and Greta Albritton are the type of people you wish were member's of your family. They own dogs. They worked hard in the Las Vegas entertainment industry, owned bars and restaurants, performed in shows, bought a cabin for investment, and eventually decided to move to Palm Springs, CA. A great life and a relaxing retirement on the horizon.

If you call performing in the Palm Springs Follies retirement.

The Albrittons decided to sell their cabin in Nevada and purchase an investment property closer to their Palm Springs home. All was well. They closed on the sale of the Cabin in early December, identified a replacement property and were scheduled to close on the replacement purchase January 26, 2007.

Little did they know using Southwest 1031 Exchange would possibly destroy their retirement dreams.

As January 26 approached, Southwest 1031 Exchange was contacted by the title company and by the Albrittons in an attempt to determine when the $433,000 from the sale of their cabin would be wired to the title company in Palm Springs. Eventually on January 26, Wayne reached Don McGhan and was assured he was walking across the street to the bank and taking care of it immediately. This was 11:00 a.m. that Friday morning. Don McGhan faxed a copy of the wire transfer to the Albrittons. Wayne and Greta left for work.

Later that afternoon at 2:27 p.m., Don McGhan left a message on their answering machine.  He said there was a screw up with the coordination of the wire transfer and it would happen the next Monday morning and not to get other people involved.

Wayne and Greta are not stupid. They knew something was wrong. The drove to Las Vegas and went to Southwest 1031 that Monday morning to get to the bottom of the situation. No one was able to tell them what was going on or what to do so they went across the street to the bank.

Silver State Bank was the bank where Southwest 1031 conducted business. Wayne asked for the manager and showed her the 'receipt' for the wire transfer. He was told they could not help them. Frustrated, eventually Wayne and Greta left. They returned to Southwest 1031 and made no headroom there.

Today, the Albritton's don't know what happened to their money. They had to cancel the purchase contract in Palm Springs and face tax implications on the $433,000. They don't know how this is going to end or if they will ever see their retirement nest egg again.

This is what I know...I've seen the 'receipt' for the wire transfer. It is not a receipt but a print of an input screen at the bank. Did Don McGhan have access to the secure wire transfer functions at the bank? Did someone at the bank assist him in creating this false document? I can only hope one of the investigators involved in this asks these questions.

Many people were damaged in this. Their dreams now seem lost forever. They deserve help and they deserve answers. If you have any information or would like to share your story, please contact me.

First Fridays - Artlink Downtown Phoenix

First Fridays (artlink inc.)runs from 6pm till 10pm on the first Friday of each month. Start at the Phoenix Public Library (Central and McDowell) where you can grab a brochure which includes the shuttles and member galleries. Free shuttle buses are available and take about 20 minutes to make the entire route.

Print this map so you can plan your evening ahead of time (there is too much to do and see in one evening.

If you can't make it Friday, Art Detour takes place March 3&4. Art Detour hours are 10am - 6pm on Saturday the 3rd and 12 noon - 6pm on Sunday the 4th. Widely reported to be the largest, most well attended art event of its kind in the country.

Great Arizona Foreclosure Question

Last night I received a call from a young man who is facing foreclosure. The foreclosure sale is this week. He asked a great question so I thought I would share.

The caller wants to know if he has to be moved out of his home before the sale. If you have received a Notice of Trustee's Sale or Notice of Default, the trustee should be named in the document. You will want to attempt to contact the trustee to get their specific instructions.

There is not a simple, quick answer to this. If the home is sold at auction to an investor, the investor might be interested in allowing the homeowner to stay in the home and rent from the new owner. This can be a great situation for the investor because they already have a tenant in place.

If the home is offered at auction and no one buys it, it becomes Real Estate Owned (REO). REO's are bank owned properties. Typically the bank will contract a local real estate agent who specializes in REO properties to sell the home. If this is this is the case, the homeowner will be expected to vacate the property.

Either way, the foreclosed on homeowner should expect to have to move and should plan accordingly. The new owner should send a Notice to Vacate and then file a Forcible Entry and Detainer action in court to have the court order you to move out. You will need to appear in court on the date specified. At the hearing the judge orders that the "writ will issue" which typically is 5 days after the hearing in which you must vacate the premises. If you have not moved out by that date, the sheriff will remove you from the premises

More information on what to do if you are facing foreclosure.

Arrow 1031 Exchange - Southwest 1031 Exchange Update

New update on the Southwest Exchange Corp, Arrow 1031 Exchange and Qualified Exchange Services situation.

For those victimized by Arrow 1031 Exchange, the Idaho Department of Finance asks you to contact them at 208-332-8080, toll-free at 1-888-346-3378, or visit the website at www.finance.idaho.gov (I have yet to be successful reaching this website so you might just want to call).

It is in the best interests of all victims to contact the proper state authorities to be sure they are aware of your situation. I'm going to go out on a limb and assume the record keeping at all three of these companies might be full of holes. Do not take it for granted that the receiver or the courts are aware of your situation.

Today I was contacted by a real estate agent who thinks that maybe his client used Southwest Exchange. The frightening words of that sentence were 'thinks' and 'maybe'. This is a good time for me to remind all of you that real estate agents do not have to have any special education or experience in a 1031 exchange to facilitate one. So don't rely on your agent to take care of you. I'm not trying to bash all real estate agents (I am one if you didn't already know) but we, as an industry, are woefully undereducated and given a lot of freedom to tread in waters that maybe we shouldn't.

Historic Phoenix Home Tours - Coronado

The 20th Annual Coronado Home Tour will take place on Sunday, March 4th from 10 a.m. to 4 p.m. The tour begins and ends at Coronado Park, the heart of Coronado. Built between 1920 and 1940, architectural styles include Bungalow, Tudor, Spanish Revival, and Ranch.

Tickets are available at a pre-sale price of $12.75 or $15 day of tour.

Coronado Park is located at Palm Lane between 12th and 13th Streets, just north of McDowell, in Phoenix.

Mortgage Fraud and Prison

My favorite living example of what not to do in real estate, Casey Serin, will have two of his properties go to foreclosure auction today. Oddly he seems fairly excited about it at his iamfacingforeclosure.com blog. He is hoping to video tape it. He also believes he will not and does not deserve to serve time for his crimes because he has blogged about it and that should be punishment enough. Silly silly boy.

Federal judges sentenced 46-year-old John Wagner to three years and a month in prison. They sentenced 38-year-old Frankie Lamont Howard to two years in prison. Their crimes? Mortgage fraud. Wagner and Howard were involved a scheme that obtained more than $4 million in fraudulent mortgage loans on houses in Indianapolis.

Howard purchased properties for market value in low-income neighborhoods in Indianapolis. He then recruited buyers who purchased the properties at a greatly inflated value. Howard helped the buyers obtain financing through a mortgage broker whom he knew would cooperate. Howard assisted in creating the false documentation and applications to obtain financing. Howard arranged for inflated appraisals to substantiate the inflated purchase price. After closing, Howard paid cash to the buyer as a 'kickback'.

Basically he lied, his buddies lied, now they are going to jail. Of course a lot of people were damaged in the process. Casey, are you listening?

Phoenix Real Estate Market Statistics February 19-25

This is residential only. Derived from the Arizona Multiple Listing Service. It should give a good snapshot of what is happening in the market.

These are the statistics for 19 February through 25 February, 2007

Total Active Properties: 46513

Active - 2887 Properties Found
	Square Feet	Beds	Baths	List Price	Sale Price	Cumulative DOM
Min	1	0	0	$ 12,900	$0	0
Avg	2026	3	2.27	$ 415,229	$0	3
Max	9500	22	8	$11,900,000	$0	7
Expired - 401 Properties Found
	Square Feet	Beds	Baths	List Price	Sale Price	Cumulative DOM
Min	0	0	0	$ 33,399	$0	0
Avg	2016	3	2.22	$ 374,212	$0	163
Max	5400	6	4.5	$ 2,275,000	$0	727
Sold - 1070 Properties Found
	Square Feet	Beds	Baths	List Price	Sale Price	Cumulative DOM
Min	519	1	1	$ 55,000	$980	0
Avg	1824	3	2.16	$ 324,770	$ 313,603	112
Max	6025	7	6	$ 3,000,000	$ 2,775,000	779
Cancelled - 946 Properties Found
	Square Feet	Beds	Baths	List Price	Sale Price	Cumulative DOM
Min	0	0	0	$ 1,100	$0	0
Avg	2143	3	2.38	$ 427,793	$0	129
Max	9241	7	9	$14,500,000	$0	820

Don K. McGhan, Southwest 1031 Exchange, MediCor

What do breast implants and tax-deferred exchanges have to do with each other? Apparently the infamous Donald K. McGhan might have the answer to that question.

Why would a man who has spent most of his life making breast implants decide to purchase three 1031 Exchange Qualified Intermediaries?

The MediCor website is currently being updated so I had to resort to Google Cache to research some of this.

From the MediCor Company History Page:

"Donald K. McGhan. Mr. McGhan is a founder of MediCor and has served as its chairman from its inception. Previously, Mr. McGhan was a founder and director of Medical Device Alliance, Inc., where he served as its chairman from its inception in 1996. Prior to that, Mr. McGhan was a founder and director of Miravant Medical Technologies, Inc., which was originally named PDT, Inc. Mr. McGhan was also a founder, chairman and president of Inamed Corporation from 1984 to 1998, founder, chairman and chief executive officer of McGhan NuSil Corporation, which was acquired by Union Carbide Corporation in 1990, and a founder, president and chairman of Immulok, Inc., which was acquired by Ortho Diagnostics Systems, Inc., a subsidiary of Johnson & Johnson in 1983."

On January 24, 2007 MediCor announced Don McGhan had resigned from the Board of Directors.

On February 6, 2007 David Keys, former chief executive officer of Southwest Exchange, resigned from Silver State's board of director. He was announced to board Jan 29.

Here is a press release I found from May 1, 2006:

BOISE, ID — May 1, 2006 — Arrow 1031 Exchange announced today that it had recently partnered with Nevada based Southwest Exchange Corporation to provide processing services for Arrow’s exchange transactions. This partnership will permit Boise based Arrow 1031 Exchange to expand their services along with providing increased financial strength to their customers. For example, each exchange transaction will now be protected by a Fidelity Bond in the amount of $20,000,000 and an Errors and Omissions policy of $1,000,000. Arrow 1031 will continue to maintain its depository relationships with local Idaho based financial institutions.

The strategic partnership of these two independent 1031 exchange companies has created a powerhouse of expertise in the field. Betty Kincaid, who founded Southwest Exchange Corporation in 1990, is a recognized exchange expert who worked with the Nevada legislature to craft legislation protecting clients using a Nevada registered intermediary. Betty is also the past President of the Women’s Council of Realtors. Kimberly Trent, President of Arrow 1031 Exchange, has been in the Real Estate industry for 18 years and has been in Boise, Idaho specializing in 1031 tax deferred exchanges since 1994. Vice President Christy Milliren has been in Boise’s real estate industry for 13 years and specializing in 1031 tax deferred exchanges since 1999. Both Kim and Christy (and a number of Southwest Exchange employees) have been awarded the designation of CES, or Certified Exchange Specialist, offered by the Federation of Exchange Accommodators, the professional trade association for qualified intermediaries. Southwest Exchange’s President and CEO, David Keys, is a CPA, Certified Management Accountant (CMA), Certified in Financial Management (CFM) and a Certified Valuation Analyst (CVA). Southwest’s CFO, Dean Koch, is a CPA and CVA. In addition, Southwest has two full time attorneys on staff. Kim and Christy are assisted in the Boise Arrow 1031 Exchange office by Laura Anderson, Marketing and Sales Representative.

As more investors use real estate investment as a wealth building tool, Arrow 1031 looks forward to continuing to provide the Idaho community with outstanding 1031 tax deferred exchange services. Kim, Christy, and the entire staff will continue to operate as the Arrow 1031 Exchange that you have grown to trust and respect. For more information about Arrow 1031 Exchange visit the Arrow 1031 online website www.arrow1031.com or call (208) 322-1031. Or for more information about Southwest Exchange Corporation, visit SEC online at www.SouthwestExchange.com or call 800.827.9150

Here is another press release:

"Southwest 1031 Exchange™ has two new affiliates!

BOISE, ID – Arrow 1031 Exchange announced on May 1 , 2006 that they have partnered with Nevada based Southwest 1031 Exchange™ to provide processing services for Arrow’s exchange transactions. This partnership will permit Boise based Arrow 1031 Exchange to expand their services along with providing increased financial strength to their customers. For example, each exchange transaction will now be protected by a Fidelity Bond in the amount of $50,000,000 and an Errors and Omissions policy of $1,000,000. Arrow 1031 will continue to maintain its depository relationships with local Idaho financial institutions.

SANTA BARBARA, CA – QES, Qualified Exchange Sevices, announced on October 20, 2006 that they partnered with Nevada based Southwest 1031 Exchange™ to provide processing services for QES’s exchange transactions. This partnership will permit Santa Barbara based QES to expand their services along with providing increased financial strength to their customers. For example, each exchange transaction will now be protected by a Fidelity Bond in the amount of $50,000,000 and an Errors and Omissions policy of $1,000,000. QES will continue to maintain its depository relationships with local California financial institutions.

The strategic partnership of these three independent 1031 exchange companies has created a powerhouse of expertise in the field. Southwest 1031 Exchange™ executives are Albert “Dee” Conton Jr., President who is a Nevada Realtor and native Nevadan. Dean Koch, COO/CFO is a CPA and CVA. Robert Noggle, Executive Vice President of Marketing and Education is a JD and CES and L. Gean Mundt, Vice President of Sales is a CES.

Arrow 1031 Exchange executives Kimberly Trent, President has been in the real estate industry for 18 years and has been in Boise, Idaho specializing in 1031 tax deferred exchanges since 1994 and is a CES. Christy Milliren, Vice President has been in Boise’s real estate industry for 13 years and specializing in 1031 tax deferred exchanges since 1999 and is a CES.

QES, Qualified Exchange Services, executives Kyleen Dawson, President has been in the real estate industry for 14 years and is a CES and Megan Amsler, Vice President has 7 years in the real estate industry and is a CES. The Santa Barbara office specializes in facilitating 1031 tax deferred, reverse and improvement exchanges.

Robert, Gean, Christy, Kim, Kyleen and Megan have been awarded the designation of CES, Certified Exchange Specialists which the Federation of Exchange Accommodators, the professional trade association for qualified intermediaries, awards this designation once you have had three years experience and pass the CES test.

As more investors use real estate investment as a wealth building tool, Southwest 1031 Exchange™, looks forward to continuing to provide outstanding 1031 tax deferred exchange services nationwide. "

Why would the 'Grandfather of the breast implant' buy three 1031 Exchange Qualified Intermediaries? For reference, Donald McGhan was fined by the SEC in March 2000 for fraud. More to come....

How to select an agent - For Investors

Back in December I posted on what a real estate investor should look for when selecting an agent. A bit of shameless self-promotion...I was interviewed for Personal Real Estate Investor Magazine. This month they have a feature article this month on "How to Find the Best Buy-Side Agent". You can pick it up at your local bookstore or magazine rack. The article gives a great overview of questions you should ask when selecting an agent and the type of experience you should look for.

Phoenix Skyline Pictures

New photos of the Phoenix skyline taken Friday, 23 February. It was a cold and rainy day by Phoenix standards. The progress of The Summit at Copper Square can be seen as well as the new Sheraton.