Updated 5/29/08 — 9:04 a.m. PT
Corrected 8/6/08 — 2:44 p.m. ET
Corrected 9/18/08 – 9:35 p.m. ET

The American dream of homeownership and the promise of legitimate real estate investment opportunities has long been under siege by a growing army of con artists, wannabe real estate professionals, and ill-informed homeowners and investors who honestly believe in the credentials of some so-called real estate professionals (real estate professionals, mind you, who regularly take no hostages—including banks—when they commit their bad acts).

Wannabe real estate professionals and opportunists like them are chipping away at the very foundation of homeownership and honest investment wealth in America. Their actions have fleeced honest homeowners and investors out of billions of dollars, artificially inflated housing prices and property taxes, made homes less accessible to honest citizens, and continue to drive homes into foreclosure at alarming rates.

Recently, a FlippingFrenzy.com reader from California contacted me to share her family’s allegations and suspicions about a potentially fraudulent real estate investment scheme that she believes involves a bank employee, an investment company, a rehab operation, and a so-called real estate management firm, all in Atlanta, Georgia. After participating in an expensive real estate investment seminar offered by the Trump organization, Dianne and Rob Alexander decided to take what they learned and invest in what they thought was a reasonable and honest out-of-state real estate investment. What they allegedly encountered is a different story.

In their own words (reprinted with Dianne and Rob Alexander’s permission):

Back in January of 2007, my husband Rob and I invested about $6,000 - $8,000 into Trump Real Estate Training. We decided that we wanted to be educated and become real estate investors. We attended two three-day weekends (six days total) of intensive training from the Trump organization on how to find, buy, rehab, and sell foreclosures. Trump’s trainers stressed the importance of having a whole team in place–from a banker you can trust to a skilled rehab team.

After doing some initial research, Rob and I decided that we wanted to make our first purchase in the Atlanta, Georgia area because the foreclosure properties there are so much less expensive than those in California where we live. Rob and I visited Atlanta in March of 2007 to see what was available. While we were there, we met Greg Patten from Omni National Bank - Atlanta to apply for a hard money loan in order to make our first purchase. We met in Greg Patten’s office and filled out an application. He took a copy of our driver’s licenses and social security cards. He ran our credit and approved us on the spot. (While in his presence, Greg discussed how Omni National Bank had been burned many times in 2006 by out of state investors and how he was reluctant to do business with non-Georgia resident investors again. However, my credit score was 809, so Greg said he would take a chance with us.)

(Greg Patten of Omni National Bank)

Greg Patten told us there would be a 15% down payment required on the first two homes we buy. Then, once we get “in and out of two deals with no problems” (Gregg’s words, not ours), we would no longer need a down payment.

After we returned home to California, we used the Internet to research specific homes available for purchase. We contacted Greg Patten by phone and showed him one home that we were interested in purchasing (on Dunning Street in Atlanta). It was a duplex that was built in 1965, and had an asking price of $115,000. The comps in that area of town were showing similar homes selling for around $170,000, and with a new sports stadium nearby, Dunning Street seemed like the perfect investment.

When we discussed the opportunity further with Greg Patten, he told us that Omni National Bank - Atlanta would only fund deals with out of state investors who went through someone named Delroy Davy (of DNK Investment Group), because Davy—according to Patten–was in and out of 17 deals with Patten/Omni National Bank without a single problem. Patton explained to us that Delroy Davy only bought and sold newer homes, which he said meant they never needed much rehab work. He also said that Davy had his own experienced and exclusive rehab team comprised of master carpenters from Romania. That was the first time that we heard of Delroy Davy or his rehab crew.

Editor’s note: Omni National Bank has informed Flipping Frenzy that although Omni does require a local presence before it will loan to out of state investors, it does not require any investor to work with Delroy Davy or other contractors specifically.

(Delroy Davy of DNK Investment Group/(c)2006 JiMiFLiX!)

I contacted Mr. Davy via email, and he immediately started sending us homes to look at as possible investment properties. (Note: As a result of Greg Patten’s demand that we work through Delroy Davy, we decided against purchasing the Dunning Street property). Davy’s assistant, someone named Dee Bryant, sent us pictures and comparables for several of Delroy’s recommended homes. He said they were all new homes, built after the year 2000, so they would not need much rehab. Compared to the homes Rob and I saw when we were in Atlanta on our own (including the Dunning Street property), Delroy’s recommended homes were perfect. They were newer and just as his assistant said, they did not require much work.

Based on Delroy’s information and Greg Patten’s instance on using Delroy, we decided to buy two homes from Davy: 1059 Garibaldi St. and 940 Eugenia Place, both in Atlanta.

(1059 Garibaldi St.)

At this point we convinced my cousin and her husband, John and Cheryl Beech, who were about to attend the same Trump workshop we went to back in January, not to attend the Trump training (which cost around $6,000); we instead told them that we had a real estate investment program that was awesome and well worth their time and money. We also talked another friend of ours, Rick Matthew, into considering investing with Delroy Davy.

Interestingly, when we talked to Delroy Davy about others wanting to buy homes from him as investment properties, he said he charged $15,000 one time to do business with anyone else. He said that the $15k would include airfare and a two-night hotel stay to fly the prospective investors to Atlanta to see his homes, meet with Greg Patten at Omni National Bank, and to get approved for loans. This was a one-time initiation fee, according to Davy (the new investors would never have to pay this fee again for any other homes they bought). Even more interesting, Delroy said he would split that fee with my husband and I just for finding these new investors. After we took the airfare and hotel stay out of the proceeds, we split $6,500 with Delroy.

Greg Patten and Omni National Bank - Atlanta approved the new investors for loans and even managed the appraisals (the appraisals yielded values of over $250,000 per home). Based on these appraisals, we all bought investment properties from Delroy Davy.

Rob and I flew out separately to meet with Delroy, pay our down payments amounting to $23,000, open Omni National Bank checking accounts, and sign closing documents. John Beech and Rick Matthews did the same. We each spent the weekend at a nearby hotel, and we all met with Delroy Davy and his partner Charles Bonney for two solid days. Davy and Bonny showed each of us several of Davy’s personal high-end homes (most were under construction at the time), then we went to see our homes. Davy and Bonney explained that the same crews who were building Delroy Davy’s $2 million personal homes were also doing the rehab on our homes. Delroy said he had his “A Team” working on these homes and his “B Team” working on our smaller properties, but he called his “A Team” down when he needed them. Rob and I felt like our rehab team was solid. Delroy Davy’s own homes were absolutely amazing, like dream mansions.

(Delroy Davy’s home in Atlanta / (c)2006 JiMiFLiX!)

On my trip, Delroy Davy took me to Bank of America to open a home equity line of credit (HELOC) since there was “so much equity” in the Garibaldi Street home. Mr. Davy said that he was taking 30% of my HELOC for finding me this home.

At Bank of America we met with Tamir Morris who did a desktop appraisal of our new investment home and said it had a high value of $404,000, and that I would easily be able to get a HELOC for $200,000. I was not comfortable giving Mr. Davy 30% of $200,000 so I said I wanted only $100,000.

Delroy Davy sat there and showed me the numbers right at Tamir Morris’ desk. He showed me what my loan payment would be once I refied through Bank of America. With the 1st and the HELOC, I should easily be able to find a renter who could cover both these loans. Delroy Davy told me I would receive $1,200 from Section 8 renters and might even have some positive cash flow each month. He said that I should never have to make a payment to Omni National Bank because it would be refied before the first payment was due.

The HELOC closed within the month without a problem. Money was deposited directly into my Bank of America account, and I approved the bank to give Delroy Davy his money.

Our refi was started with Leshia Jackson of Bank of America (whom I never actually met in person). We spoke by phone and she told me what she needed from Rob and myself, which I immediately sent from my home in California to a processing office in Jacksonville, Florida. Ms. Jackson confirmed by phone that she had everything she needed and that I should be closing soon. Then I waited, and waited, and waited some more. I called Leshia Jackson at Bank of America several times, but for some unknown reason at the time, she would not take my calls, nor would she return any of my many initial messages. I spoke with her once after that, when she apologized for not contacting me sooner, stating that she was on vacation and that things were just about finished on my refi.

I never heard from Leshia Jackson at Bank of America again.

I called Bank of America’s service center in Jacksonville a month later and was told our refi was declined due to the value of the home being too low. In stark contrast to what Delroy Davy told me in the presence of Tamir Morris at Bank of America, neither of the investment properties was eligible for refi due to value.

OK, so we had the repair work for these homes built into the loans through Omni National Bank. Delroy Davy and his repair team did all the rehab work. Once he completed the work, Greg Patten from Omni National Bank needed to sign off that all the repairs were in fact complete and correct, and then he could release payment for the rehab work to Delroy.

As a side note, Greg Patten admitted to us that he never actually checks to make sure that the appliances, electricity, air conditioning unit, or any of the lights actually work. In fact, the power to the properties in question was not even on turned on when he did his walkthrough! He only checks to make sure that appliances are in the structures. As it turns out, many of the appliances, water heaters, air conditioning and wiring have been faulty in several of our properties. Our friend, Rick Matthew (one of the other people we convinced to invest) has receipts showing that all of his appliances have been replaced in his two houses. As of today, we learned that there is absolutely no electricity running to the AC unit in one house!

I believe I even have photos of John and Cheryl Beech’s home (purchased from Delroy Davy also) with sleek black appliances, yet the tenant living there says the appliances are white and most do not work properly. I just happened to take pictures of the house so I could show my cousin how beautiful it was. This proves to us that Delroy Davy places new appliances in his home to show to and impress potential buyers, then switches them out once we had approved them.

My husband and I have called Greg Patten about the fact that he and Omni National Bank signed of on work that was not done, not completed, or done improperly. He has never assumed responsibility for any of this, and Rick Matthew has paid for his own investment property repairs out of pocket. Greg Patten actually said that he contacted the tenant in John and Cheryl Beech’s investment property to ask about the appliances and he told us that the tenant indicated that everything was fine. That tenant, however, tells us that she never told anyone that everything was fine, because in fact, it is not fine.

Next up: We signed lease agreements with a Delroy Davy-controlled property management entity called “Sedona Realty Group” to find renters for our investment homes. Sedona did all the work with Section 8 to get tenants placed in three of the investment properties. They sent us signed leasing agreements from our prospective tenants stating the two of the properties were getting $1,200 per month. Long story short, that was not true!

Our tenant–the one in the Garibaldi Street property–said she never agreed to pay $1,200 per month. My husband and I are receiving $758.00 per month through Section 8 and John Beech receives around $799, I believe. Delroy Davy went to the Section 8 office and completed paperwork on these properties as the owner of our investment homes. I believe his wife–Keesha Davy–may have even been listed as the owner on one of the homes.

(Keesha Davy (on left) / (c)2006 JiMiFLiX!!)

Once we ended our management agreements with Davy’s Sedona Realty Group, we found all this out. We all had to complete change of ownership papers with the Atlanta Housing Authority and send them HUDs to prove that we were owners and that they should be sending the monthly rent payments directly to us. I filed a complaint against Delroy Davy with the Section 8 office in Atlanta.

That’s our story in a nutshell. I hope that reading this helps others avoid a similar situation.

~ Dianne Alexander

Thank you, Dianne, for sharing your story. I know it’s not easy re-living these events. I assure you that at least one other person will come across your account of what happened to you and your friends and family, and whether they leave a comment here on the blog or not, your story will have inspired them to either not do business with the people mentioned in your story, or, like you said, think twice about entering into a similar situation themselves.

In the meantime, there is a lot of ground to cover here, so let’s get started. To summarize:

• Delroy Davy, Keesha Davy, Charles Boney and others run a real estate company in Atlanta, Georgia, called DNK Investment Group.
• Davy matches investors with investment properties for a $15,000 sign-up fee. Davy will split the fee for referrals given to him.
• Delroy Davy has a relationship with Omni National Bank - Atlanta and Omni Atlanta loan officer Greg Patten.
• Omni National Bank - Atlanta will only work with out-of-state investors if they go through Davy to find properties.
• The appraised value of Alexander’s home–per Omni at the time hard money was loaned–was $250,000.
• Delroy Davy took Dianne Alexander to Bank of America and Tamir Morris to secure a HELOC (home equity loan) on one of her properties. At this time, Bank of America’s desktop appraisal set the house’s value at $404,000. Dianne Alexander was told she could take out up to $200,000. Delroy Davy told Dianne Alexander that he would take 30% of whatever equity they drew out as a finder’s fee.
• Dianne Alexander took out $100,000 of the “equity.” Bank of America transferred $30,000 to Delroy Davy.
• Bank of America (BOA) was to refinance property to wrap the hard money loan (Omni) and the HELOC loan (BOA) into a single mortgage loan with BOA. This was never done and the house never qualified. The reason given by BOA’s refinance loan officer was that there was not enough value in the home to refinance it (i.e., loan to value ratio was too high).
• The Alexander’s escrowed the rehab money with Omni National Bank (Greg Patten). Greg Patten was to sign off on all repairs before releasing monies to contractors. Delroy Davy and his repair team were the “contractors” used on the rehab. (Editor’s Note: Omni National Bank has informed Flipping Frenzy that all necessary inspections were done, and that it has the records and certifications of those inspections.) Nonetheless, according to Diane Alexander, rehab monies were released by Patten to Delroy Davy, without proper inspections. Again, according to Diane Alexander, appliances were faulty and there was no power to parts of the house. She also claims many appliances had to be replaced at additional cost to investors. (Editor’s Note: Omni Bank also informed Flipping Frenzy that it does not know if inspections were done as they should have been done.)
• Several of the investment properties were rented “Section 8” through Davy’s Sedona Realty Group. The lease agreements sent to the Alexander’s by Sedona reflected $1,200 monthly rent. These agreements were signed by prospective tenants; the true rent was less than $800.
• Finally, Delroy Davy held himself out as owner of the units to the Section 8 office (Atlanta Housing Authority) and registered as such with them. The Alexander’s had to provide closing statements and proof of ownership to have the Atlanta Housing Authority send the rent monies to them instead of Delroy Davy or Davy’s associates or one of his companies.

Analysis

1. Unlicensed REALTOR®: In Georgia, according to the Georgia Real Estate Commission, in order to promote and sell real estate, you must have a real estate license. According to the Georgia Real Estate Commission’s “Find a Real Estate Agent” searchable online database (free to the public, by the way), no one named Delroy Davy has ever held a Georgia Real Estate Commission Certification of Licensure. To be safe, we ran a similar search on Davy’s wife, Keesha Davy, who is described on Davy’s real estate investment firm website as the “dynamic self-starter” President of Sedona Realty, and “the backbone” of Davy’s DNK Investment Group. Here too, we found no record of Mrs. Davy ever having held a Georgia Real Estate Commission Certification of Licensure (which is odd, because on the same website, Keesha Davy is hailed for her real estate sales prowess while working in another Atlanta real estate firm–EDJ Realty–where she is positioned as having joined the “Millionaire Club” after only a few months on the job… I wonder what EDJ Realty owner, DeShawn Snow, would say about having had an unlicensed REALTOR® in her firm’s prestigious Millionaire Club?)

   Now its quite possible that Keesha Davy’s maiden name is Keesha Legrand, which the Georgia Real Estate Commission’s “Find a Real Estate Agent” online searchable database says is a licensed real estate agent in the state of Georgia (9/2/05 - Present: Status is listed as “Active”). However, the DNK Investment Group website does not list anyone named Keesha Legrand under its “The Company” section (only Delroy Davy, Keesha Davy, Ples Bruce, Marsha Evans-Younger, and Charles Bonney), and the State of Georgia listing for Legrand is associated instead with an entity called Allure Realty Group, which similarly does not list a Keesha Legrand on its website.

2. Unlicensed Real Estate Company: Similarly, the Georgia Real Estate Commission has no record in its “Find a Real Estate Company” searchable online database of Davy’s investment company, DNK Investment Group (3355 Lenox Rd, Ste 750, Atlanta, GA 30326), or his real estate management firm, Sedona Realty Group (address unknown or perhaps the same as DNK’s). Again, in Georgia, according to the Georgia Real Estate Commission, in order to manage real estate, you must have a license.

   Additionally, it should be noted that the State of Georgia’s “Search for a Business Entity” database does include a “Active/Compliance” status listing for Sedona Realty Group, but here again, being a registered LLC in the state of Georgia does not supersede or set aside the Georgia Real Estate Commission’s licensing requirements for companies.

3. Steering: Greg Patten of Omni National Bank allegedly demanded that a loan applicant (the Alexander’s) engage the services of a particular entity or their loan application would be denied. If true, such tactics—steering loan applicants in the direction of one REALTOR®, appraiser, contractor, what have you—are problematic. (Editor’s note: According to Omni National Bank, it does require a local presence before lending to out-of-state investors, however Omni does not demand that an applicant engage the services of a particular entity as a term of approval.)
4. Cutting Corners: Greg Patten allegedly told the Alexander’s that he does not verify that work to a property has actually been done before releasing funds. Checks and balances exist for a very good reason. For the bank employee responsible for ensuring his bank’s funds have been properly spent to say this, as the Alexander’s claim, is remarkable. In my experience, real estate industry insiders who cut corners usually do so on a frequent basis, especially when they have special (i.e., exclusive) relationships with Realtors, contractors, appraisers, and other industry insiders. (Editor’s note: Omni National Bank has informed Flipping Frenzy that it regularly performs inspections and that inspections were performed in this instance as well, and that they had never been given any reason to question the way the inspections were handled.)
5. Section 8 Silliness: As I mention in the summary above, Delroy Davy held himself out as owner of the Alexander’s investment properties (the properties that were presented to the Atlanta Housing Authority (AHA) as being available for Section 8-qualified tenants). Registering the Alexander’s rental units with the AHA under false representations surely is a violation of the law and is something that the Housing Authority of the City of Atlanta will want to look into.

Real estate is a multitrillion-dollar-a-year industry. It fuels the American economy; builds personal wealth; and employs millions of mortgage bankers, real estate professionals (including licensed Realtors), contractors, and others who make an honest living financing, buying, selling, and improving homes.

Unfortunately, money attracts more than homeowners, investors, and honest professionals. It also attracts thieves–people who are looking to score large amounts of quick cash by cheating others out of their hard-earned and invested money. Through various clever scams and schemes, con artists have figured ways to pick the pockets of the real estate industry, real estate investors, and individual homeowners, often with the assistance of the very professionals who stand to suffer most from the industry’s demise.

Copyright 2008 Ralph R. Roberts