Arizona Republic Reports:

State questions land deals

Valley probe leads to suspensions of realty licenses

Pat Flannery
The Arizona Republic
Jul. 25, 2005 12:00 AM

A resurgence of questionable raw land deals in Arizona is keeping real estate investigators busier than usual, with a West Valley probe resulting in the recent suspensions of four real estate licenses and an order halting transactions among 100 people or entities.

Bill Day, Arizona Department of Real Estate's deputy director for investigations, said the West Valley investigation involved nearly 400 acres near Tonopah and was symptomatic of a growing problem with illegal subdivisions in Arizona .

Day and three investigators now juggle 125 cases at a time.

Arizona has a notorious tradition of raw desert-land sales in areas where water, sewer and other utilities were unavailable.

"Over the past few years," Day said, "with market prices going up, it has become more prevalent. It's popping up all over the state, not just in Maricopa County ."

The Tonopah case involved a large number of Canadian buyers and sellers, and Day said the department is still reviewing transactions to distinguish real buyers from straw buyers used to drive up land prices.

"There are some people who will want money back," he said.

Since state laws were broken, legitimate buyers may rescind their purchases, though the number who will opt to do it was unclear, Day said.

The state alleges that 128 parcels were carved out of the acreage in question near Thomas Road and 411th Avenue without following the state's subdivision rules.

Land may not be subdivided into six or more parcels of less than 36 acres each without being subjected to a public report. The report tells buyers the details of the subdivision, availability of utilities, intended streets, drainage, services and adjacent land uses.

The public report must be approved by the Real Estate Department before land sales may go through, and the department may, at its discretion, deny approval if a developer's financial standing is suspect.

The Tonopah land, dubbed Saddle Mountain Ranch, first saw activity when World Live Inc., through its president, Dore Pfaff, a local real estate salesperson, bought a 430-acre tract for $540,000 in August 2000, state records say. That initial tract was legally split into five smaller lots.

World Live, the state alleges, then split one of those lots into seven parcels.

"From this point forward, all divisions of property, requests for public reports and sales or offers for sale of the property were conducted in violation of the subdivision statutes," says a state cease-and-desist order issued last week.

Parcels, both original and newly subdivided, continued to be bought, sold and subdivided into smaller pieces through a host of transactions often involving a small circle of players and entities that did deals with each other and, ultimately, some end buyers.

A few 1.25-acre lots sold for as much as $35,000 each in an area where, according to the state's order, the sellers had not demonstrated an assured water supply or proper evidence that sanitary sewer services, roads or other utilities could be legally provided.

Day said investigators learned along the way that one person involved in the dealings "was indicted up in Canada for doing the same thing."

Though the investigation is ongoing, those involved were ordered to halt all activities. At the same time, the state summarily suspended the licenses of Valley brokers Kenneth Graham and J. Roger Alquist, and salespeople Pfaff and Matt Hiatt.

The department's actions may be appealed to its Office of Administrative Hearings.


Reach the reporter at pat.flannery@arizonarepublic.com or (602) 444-8629

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