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Foreclosures leave Clearwater's Island Estates residents disenchanted

In a cobalt blue Bentley that he bragged once belonged to boxer Mike Tyson, Marty Donovan looked the part of a superstar real estate agent.

And he was. The Chicago native racked up dozens of home sales between 2004 and 2007, most in a single neighborhood, Clearwater's Island Estates. His $40-million in annual sales placed him at the top of heap.

"I was living in la-la land in Island Estates," Donovan says now. "I even did tours in a pimped-out golf cart. People loved it. It was island living."

Island living isn't so sweet anymore. And a lot of residents single out Donovan's business dealings for ruining their neighborhood.

Of the 36 houses in some stage of foreclosure in Island Estates, at least a quarter were owned, listed or handled by the 44-year-old Realtor.

The affluent waterfront community of about 500 houses and 2,000 condos sticks out as one of the most depreciated neighborhoods in the Tampa Bay region.

Prices have dwindled more than 45 percent since 2006, nearly double the decline of the Tampa Bay area market in the same period.

Sale prices on the island averaged

$1.25-million two years ago. Among the homes under contract this month, the average price is $670,000.

Zillow, a firm that tracks home values, ranks Island Estates second worst out of 290 neighborhoods in the Tampa Bay area.

Critics have distributed anti-Marty flyers. Others bray for his punishment, including suggestions he be tarred and feathered.

"Marty was instrumental in driving property values down. I think he just got carried away. It just wasn't a good thing for the island," said Joan Leeds, an agent with Prudential Tropical Realty who competed with Donovan.

When critics describe Donovan's prominent role in inflating property values — and abetting their subsequent collapse — they point to the Realtor's unusual shopping spree in the spring and summer of 2006.

A typical purchase was the house at 213 Leeward Island. Listed for $998,000 by an investor who'd bought it two years earlier for $530,000, Donovan bought the

50-year-old, 1,900-square-foot house for the recorded price of $1.3-million.

The owner got his $998,000. Almost all the rest of the loan money was kicked back to Donovan's business partners, allegedly to make repairs on the house.

But within less than a year, Donovan stopped making monthly payments. Promised renovations never materialized and no one can account for the money supposedly borrowed for that purpose.

M&T Bank foreclosed and marked down the house for quick sale this year. The sale price: $451,000.

"Homes kept selling that I knew weren't even worth the price of the ones I had. I just kept wondering what the hell had gone wrong," longtime Island Estates Realtor Bill King said of Donovan's deals.

An agent with Joanne Hiller & Associates, Donovan left town in December, after the banks initiated foreclosure against all six of his remaining properties, valued at more than $7-million. He's living in Lynchburg, Va., to "clear my head a little bit."

Donovan insists all he's guilty of is greed, stupidity and blindness. He trusted colleagues whom he shouldn't have trusted. He wanted to become a millionaire the easy way.

But, contrary to a whispering campaign against him on the island, he denies he did anything illegal. He views himself as a whipping boy for a housing market few thought would collapse.

"The market controls itself. No one controls it,'' Donovan said. "I do feel bad about prices going down. It does make me sick. I do not revel in it at all. I'm in the same boat as they are."

Island Estates is a 11/2-mile-long barrier island east of Clearwater Beach. It's made up of fingers of sand separated by saltwater inlets. Many of the houses are humble 1950s construction, but almost every one has backyard access to the Gulf of Mexico.

As with most Florida waterfront property, home values shot up from 2001 to 2006, attracting property speculators like never before. In a disproportionate number of cases, Donovan was the go-to man.

He prospered in the churn of the market. Always smiling, he cruised the island in his Mercedes and Bentley. His clothes were top rack. He bought a 48-foot yacht. A compulsive social butterfly, he outhustled and outtalked every other Realtor.

"He sold more properties at a higher price than anyone," King said. "I don't think of Marty as a businessman. He was just a likeable person selling property."

For Thomas and Brenda Sheehy, Donovan was a life saver. The couple needed to sell their home at 624 Snug Island in 2006. An investor friend of Donovan's didn't get a loan to buy the house, so Donovan stepped in and paid $1.1-million.

"I was very grateful to him," said Brenda Sheehy, a retired Delta Airlines flight attendant.

The couple didn't flinch when the loan amount turned out to be at least $200,000 more than the price. Pinellas County recorded the price as $1.4-million, four times what the Sheehys paid for the house in 1995.

"He brought his own person in to do the appraisal. That's kind of unusual,'' Sheehy said. "He told us he was going to use the money for renovations."

As with most of the other houses he owned, Donovan stopped making payments after a period of months. The house was never rehabbed. The lender is selling Sheehy's former place at foreclosure auction on Monday.

St. Petersburg appraiser Frank Gregoire, until recently chairman of the Florida Real Estate Appraisal Board, said the sales bear the hallmarks of a common scam.

Buyers find a compliant appraiser to justify a higher loan amount from the bank, pay the seller a lesser amount, stop making house payments and walk away with the extra cash.

More sophisticated operators make payments for several months before they quit the property, Gregoire said. That way it looks like they were honest buyers but simply fell on financial hard times.

"Some poor schmuck sticks up a bank and gets $10,000 and the FBI will pursue him like he's the scourge of the earth," Gregoire said. "Other guys use real estate to take a bank for hundreds of thousands or tens of millions of dollars. I wish they were pursued with the same zeal.''

Like other Realtors, Donovan is licensed by the Florida Department of Professional Regulation. Citing confidentiality rules, the department won't acknowledge if anyone has filed complaints against him.

Donovan insists he never dealt in fraud. He believed business partners who told him the homes would appreciate to

$2-million. They would all make a legitimate killing.

Donovan said money borrowed in his name totalling more than $1-million went into an account for Shorefront Ventures LLC, controlled by his friend Chris Malcom. It vanished.

"I swear on the Holy Bible I didn't get any money. The only thing I'm guilty of is complete stupidity,'' Donovan said.

Malcom didn't return a call from the Times. Another partner, Chad Evans, has moved to Ohio. He couldn't account for the missing money. Evans said he's doing "church work" and said Island Estates problems are the "blatant result of greed on the banks' part."

"I didn't run off with any money," Evans said. "I didn't leave anybody hanging high and dry.''

Though Donovan's deals weren't the only bloated transactions on Island Estates, they were more numerous and conspicuous. Benchmarks set by his sales and purchases inflated residents' property tax bills and polluted real estate data. People confident they were sitting on $1.3-million houses have learned the homes are worth half as much.

Clearwater code enforcement officers have fielded calls about dead lawns and murky, bug infested pools at Donovan's houses. In what could be the low point of the troubles, the island's civic association is considering whether to stock one of Donovan's abandoned pools with mosquito larva-eating fish.

Donovan, despite claims of poverty, hopes to re-establish himself in the realty business — if the island will have him.

"I'm scared to go back since everyone hates me," he said from Virginia. "People love to see other people's misery. You learn who your real friends are."

Island Estates has been ranked the second worst of 290 neighborhoods

inTampa Bay for home devaluation. Sale prices on the island averaged

$1.25-million two years ago.

Among homes under contract this month,

the average price is just $670,000.

Many residents blame real estate agent Marty Donovan.

Foreclosures leave Clearwater's Island Estates residents disenchanted 04/05/08 [Last modified: Friday, April 11, 2008 4:15pm]
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