The real estate market is affecting local banks in addition to the mortgage giants. (more…)

Yet another lawsuit has been filed against the developers of the troubled Trump Tower Tampa on the Hillsborough River downtown. (more…)

The ripple effect of the collapsing Florida housing market has reached the halls of local government, with Hillsborough County pondering layoffs for some employees who oversee new construction.

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The school district of Hillsborough County, Fla., is growing fast. By 5,400 students a year, in fact. The result? A need for land.

But at what cost? A St. Petersburg Times report indicates that district officials often pay hundreds of thousands of dollars in unnecessary commissions to real estate brokers. Worse yet, after all is said and done, the district still ends up with properties inappropriate for schools. One would think that a district spending $11 million a year on increasingly scarce Florida real estate would worry about getting its taxpayers the best deals. But is that the case? Not necessarily.

• A real estate broker who was supposed to be working for the school district convinced a pair of landowners to sell their property to him for $25,000. The property was transferred to two land trusts, then “flipped” to the school district for $123,800 — a markup of more than 300 percent.
• The school district paid $1.1 million to buy a site that turned out to be a swamp (pictured above). Now it is spending an additional $1.2 million to fill said swamp.
• A district employee dodged an expensive mortgage penalty when school officials chose not to enforce a $900,000 agreement to buy her property. Officials instead condemned it, then ended up paying $157,000 more than the original agreement and 30 percent more than the land’s initial appraised value.
• The school district bought an elementary school site for $1.7 million. That is $600,000 more than it sold for three years earlier. Even more dubious? The property sits within a mile of 29 registered sex offenders.
• The district paid nearly $100,000 more than the appraised value for properties controlled by Matthew B. Cox, who authorities say masterminded a multimillion-dollar mortgage fraud scheme, and Chester B. Luney, a nonprofit executive at the center of a bribery scandal. Cox is now a fugitive, while Luney is in federal prison.
• While Florida law requires school boards to have a super majority vote when approving the purchase of property for more appraised value, the Hillsborough School Board routinely agrees to pay more than the average with no public discussion.

Hillsborough’s methods are unusual compared to other large Florida school districts, including Palm Beach, Orange and Pasco counties. While a few use brokers to scout sites, none offer commissions due to the potential costs. Most districts insist on handling the work themselves, but Hillsborough has its own real estate department consisting of two employees, neither of whom has significant land-buying experience.

FLIPPING OUT
Buying property at a low price, then marking it up and making a quick resale (also known as flipping) is common in a hot market. A broker helping to acquire land for the district and two land trusts used the practice to make a profit while dozens of properties were being assembled for Middleton High, a $46 million school that opened in East Tampa in 2002.

The Times found that the properties flipped by Fred Edmister, one of the district’s brokers, made significant cash at the district’s expense. With the land trusts’ help, Edmister assembled five parcels at $28,165, then sold them to the school district for $123,800. The beneficiaries of the land trust remain a mystery, as they are not recorded in public records.

“That’s why people set up trusts like that, for the confidentiality,” said Lawrence E. Fuentes, a Tampa real estate attorney.

The IRS has filed tax liens against him and has gone to court seeking permission to serve a tax levy on his business. Edmister was fined for violating standards of the Florida Department of Business and Professional Regulation. Yet despite the demise of his business, the broker continues to request that his commission checks from the district be paid to the unofficial company, and the district has consistently complied.

LAND CRAZY
Hillsborough isn’t the only Florida school district desperate to acquire land for new schools. Pasco is adding about 2,500 new students annually and plans to build 23 schools over the next five years — but unlike Hillsborough, that district required references, qualifications and prior experience before it signed agreements with two realty firms. Plus, the Pasco County School District will not pay commission or finder’s fees.

“They don’t get much out of it,” said Pasco assistant superintendent Ray Gadd.

Hillsborough school officials insist commissions are good deals for its taxpayers, noting that the 3 percent paid by the district is only half the industry standard 6 percent.

With so much money involved and such high demand for Florida real estate, the wrong people and companies can end up costing land seekers an arm and a leg. When the deals are tied to school districts and involve taxpayer money, the reason for concern is great. Hopefully this district cleans up its act and does a better job of overseeing the people who claim to be on its side — but who appear to be simply out for their own gain. Whether you are looking to buy or sell, reputable Florida real estate agents are often hard to find. Make sure you try.