I-Team: Some middlemen cashing in at homeowners' expense - WTOC-TV: Savannah, Beaufort, SC, News, Weather & Sports

I-Team discovers some middlemen cashing in at expense of homeowners

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NASHVILLE, TN (WSMV) -

As property values in Nashville soar, older, smaller homes in some neighborhoods are being torn down and replaced with bigger ones - sometimes, two or three houses.

New construction is booming, but there's more going on than meets the eye.

The Channel 4 I-Team has discovered that some middlemen are cashing in at the expense of naive homeowners, and there are questions about the business practices they use to acquire the properties they flip.

The I-Team started digging after homeowners asked Channel 4 to find out who's behind all those postcards they're getting: "Third notice," "final notice" or "sell your house 4 cash now."

The address on the postcards is a mail drop. The I-Team spent weeks researching property deeds and unraveling corporate records.

They led Channel 4 to people like 85-year-old Robert Hamm and his 82-year-old wife, Mary.

In March, Robert sold his home in west Nashville. It was the house he'd shared with his first wife before she passed away.

"I didn't see no sense in keeping it. I didn't need it," Robert Hamm said.

Robert Hamm had gotten one of those postcards in the mail, so Mary Hamm called. She met someone from a company called Property Savers at the house. He made an offer - it was less than her husband's asking price.

"And we got to talking, and stood there and talked and talked. And I said, 'Well, he asked 60.' He said, 'Well, I'll give him 50,'" Mary Hamm told Channel 4.

Robert Hamm sold his house for $50,000, though recent tax records valued it at $90,000.

"I sold it too quick. But you find out what you ought to have done, that you didn't do," Robert Hamm said.

The Hamms never knew until Channel 4 showed them the deeds the I-Team found that the buyer was a middleman. Property Savers made an instant profit of $25,000.

Remember: The company bought the house for $50,000. They resold it the very same day for $75,000.

"Well, the big man gets rich and the little man gets broke," Robert Hamm said.

The man behind Property Savers is Brian Ellwood. He's the one who made a $25,000 profit in one day selling the Hamms' house without doing any renovations or repairs.

Ellwood would not agree to talk to Channel 4 for this story.

"With the greatest respect to you and your company, I would like to decline to be interviewed," Ellwood told Channel 4's Nancy Amons.

The I-Team found the Hamms' transaction wasn't the only one that Ellwood and Property Savers handled. Ellwood, in fact, has been making a lot of money buying houses at bargain basement prices.

For example, Ellwood bought a home on Marie Street from an elderly woman for $29,500, even though the city valued it for tax purposes at $68,500. Property records show he resold it the same day for a profit.

Records also show he bought land on Pennington Avenue for $13,000 and resold it the same day for $32,000, making a $19,000 instant profit.

So what happens to the properties Ellwood buys? In many cases, he's buying them for a real estate development company called Building Masters in exchange for a fee. Building Masters tears them down and builds something new.

Daniel Pedley used to work for Building Masters as their accountant. Until, he says, he questioned their business practices.

"I was fired," Pedley said.

As their CPA, Pedley said he saw how much money Building Masters was paying Ellwood compared to how little the sellers were getting.

"To me, it was like, there's not a good representation for the seller. The seller is not being made aware of the value of his property. And to me, that's just not right," Pedley said.

He suspected the company was thriving on elderly or unsophisticated sellers, people like the Hamms, who had owned their property for decades and had no idea what it was worth.

But Ellwood knew their value. He bought homes cheap and provided Building Masters with a steady stream of just what they needed: land for new houses.

"They paid Brian Ellwood, in a span of about six months, almost a quarter of a million dollars," Pedley said.

Justin Hicks is the president of Building Masters.

"I don't see that we, that I've, done anything wrong," he told Channel 4.

He said Building Masters provides a good product and he denied taking advantage of any sellers through Property Savers.

"I am in no way affiliated with Property Savers. I don't run their business, I'm not a partner in their business. I have nothing to do with their company," Hicks said.

You may be asking: Is there anything wrong with flipping houses this way? That's a question for the state real estate commission.

Tennessee law says people who make a fee or commission for soliciting or negotiating the sale of real estate have to have a broker's license. While the real estate commission is not commenting specifically about this case, the agency says it is concerned about unlicensed activity and the threat it poses to the public.

"It's basically about the integrity of the profession," said Kate Abernathy, a spokesman for the commission.

The state confirmed that Ellwood doesn't have a broker's license, but it's unclear whether that's required.

Pedley told Channel 4 that he warned Building Masters they weren't supposed to use people like Ellwood.

"I have a broker's license. I know what the rules are. I told them, 'You can't do that.' They said, 'That's what we do,'" Pedley said.

Pedley said he discussed it with Hicks personally.

"He may have brought, he may have, brought something to somebody's attention, he may have not. I'm not sure," Hicks said.

Pedley says he even sent Hicks a follow-up email with his concerns.

"I don't remember if he did or not," Hicks said.

"We have a whole code of ethics we are supposed to operate under," Pedley said. "How do they sleep at night? I just don't understand it."

The Hamms don't expect to get any money back. They realize now that they should have done more research before selling their house, a house where Robert Hamm raised seven children, a house they wish they'd known Property Savers planned to sell the same day for a $25,000 profit.

"I would say, ‘Why didn't you tell me this to start with? Why didn't you give me more for the house?" Mary Hamm said.

A spokesman for the state real estate commission said it has not received any formal complaint against Brian Ellwood, Property Savers or Building Masters.

The real estate commission advises everyone to do their own research before selling their house.

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