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Appraiser in fraud cases to face judge; Inflated home values alleged in 'flipping'

THE BALTIMORE SUN

For the first time since an epidemic of fraudulent home sales began in Baltimore four years ago, an appraiser whose work was allegedly a key to dozens of inflated deals is expected to appear at a state hearing today on charges that he falsified his valuations.

G. Samson Ugorji, the appraiser, is charged with producing misleading appraisals on four houses bought and resold at large markups -- a practice known as flipping -- by Robert L. Beeman of Wilmington, Del. Beeman has flipped more than 100 Baltimore houses in the past three years. Ugorji's lawyer said his client performed 39 appraisals for Beeman.

Appraisers play a key role in property transactions because lenders will not finance sales unless an appraisal values the house at the purchase price or more.

The hearing, which is expected to continue tomorrow, comes amid increasing signs of an epidemic of sales of dilapidated houses that are bought and quickly resold for two to 10 times the purchase price, and with little or no renovation.

The state Department of Assessments and Taxation has pinpointed more than 2,000 city properties that were bought and then resold for at least double the purchase price in the past three years.

A Baltimore appraiser said he has reviewed hundreds of bad appraisals that were used to justify the sales. And a California insurance company warned this month that Baltimore "has recently become a hotbed for lawsuits against real estate appraisers."

Hearing today

At today's hearing, a state administrative law judge will hear charges brought by the state's Commission of Real Estate Appraisers. The judge has 90 days to recommend a disposition to the appraisers commission, which will make a final decision.

Possible penalties against Ugorji include a reprimand, a suspension or revocation of his state license and a fine of up to $5,000.

Ugorji refused to discuss the case. His attorney, Godson M. Nnaka, said the appraisers commission "is attempting to make my client a scapegoat." He said other appraisers worked for Beeman but that "to the best of my knowledge" none had been charged.

He said Ugorji's appraisals "were done in compliance with appropriate rules governing appraisal work."

Ugorji received his standard $300 fee for the appraisals and nothing more, Nnaka said, adding that his client Ugorji "had no knowledge or information of Mr. Beeman's activities."

A commission official initiated the case against Ugorji in February 1998 after reading in The Sun of a suit filed against Beeman, Ugorji and others involved in the sale of 211 N. Montford Ave. in East Baltimore.

Shortly after the sale, the city tore down the house when it began to crumble during demolition of an adjacent house.

The suit was filed by Andre Weitzman, a Baltimore attorney, on behalf of the owner, Yvonne Peaks. Since then, he has added dozens of Beeman buyers to the suit and filed other suits. All told, he represents more than 100 homebuyers

The U.S. attorney's office and postal inspectors are investigating Beeman and others involved in his deals.

Beeman paid $15,000 for the house at 211 N. Montford Ave. in February 1997. Days later, Peaks, a nursing assistant, signed a contract to buy the house for $45,900, the suit says, and gave Beeman a $500 down payment.

$7,000 in repairs

Beeman made repairs worth about $7,000, according to the suit.

Before settlement, the sales price was changed to $83,000, although the suit claims that the only money in the deal was the $58,100 first mortgage issued by a Florida lender.

Ugorji appraised the house for $83,000.

The charges against Ugorji involve the Peaks appraisal and three others he did for Beeman. The charges point to numerous mistakes and inaccuracies alleged.

They say Ugorji "inflated and overestimated the value" of each house and "selectively used sales of doubtful comparability in order to support a high value."

Comparable sales -- usually three similar properties -- are a key feature in an appraisal. They are supposed to be recent sales of similar houses in the neighborhood and are a critical measure of the value of the house being appraised.

Beeman purchased the four houses involved in the charges against Ugorji for prices ranging from $15,000 to $25,000 and sold them for prices ranging from $80,000 to $90,000, according to documents in the case.

The appraisals that supported those prices were "misleading, if not fraudulent," William T. Beach, chief of the Valuation and Appraisal Division of the Maryland Department of General Services, wrote in reports evaluating Ugorji's work.

In one case, Beeman bought a house in the 700 block of N. Streeper St. for $16,000 in early 1997 and sold it several months later for $83,000.

Beach said that in appraising the house, Ugorji noted three recently flipped houses -- two by Beeman -- as the comparable sales. Two of the houses had been bought for $18,000 and the third for $27,000. They were quickly sold for $82,000 to $84,000.

'Misleading picture'

Beach said Ugorji's appraisal "created a misleading picture of the subject neighborhood" by using those flips as comparable sales while "ignoring and not identifying the majority of typical sales" in the neighborhood."

Ugorji is the first appraiser to face state charges in flipping, but a number of appraisers have been named in lawsuits.

Calling Baltimore a "hotbed for lawsuits," Robert C. Wiley, president of a California insurance administrator, said more than 16 Baltimore-area appraisers have asked their insurers to finance their defense against charges that they inflated appraisals for fraudulent flips.

In a memo to Baltimore appraisers, Wiley warned them to be careful to avoid becoming "major targets" of lawsuits.

More than a dozen appraisers have been named in lawsuits, but the commission that regulates them has been slow to act.

The commission chairman, Gregory John Glover, conceded as much recently.

"We are going after people," Glover said at a commission meeting. "It has taken us a while to get to this point."

The commission has referred complaints about three other appraisers to state lawyers for review.

Appraisers do not have to be licensed in Maryland unless they work on transactions involving the government -- for example, sales where the Federal Housing Administration or the Department of Veterans Affairs is insuring a mortgage. Unlicensed appraisers are not regulated by the commission, said Charles Kazlo, its executive director.

A total of 2,336 appraisers are licensed in the state.

Buyers in flip cases usually aren't given copies of their appraisals -- and often fail in efforts to obtain them -- but the commission requires a formal complaint naming the appraiser before it will move.

Glover has urged mortgage companies to file complaints against appraisers.

Kenneth E. Baker, a Cockeysville appraiser, said he has reviewed hundreds of fraudulent appraisals at the request of lenders who suspect they were duped in property flips.

Two years ago, Baker says, he did one review a week. Now, he said, he and three appraisers work seven days a week and have a backlog of 60 reviews waiting to be done.

"This review work -- it's just unbelievable, overwhelming," he said. "It's the biggest part of our business."

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