A real estate appraiser whose license was renewed by Maryland regulators eight months after he pleaded guilty in federal court to making false statements on appraisals is scheduled to be sentenced today.
Dale F. Schulz of Jarrettsville, who did appraisals on sales by William Otto Schmidbauer and other Baltimore property flippers, could receive a maximum of five years in prison as a result of his guilty plea Feb. 24 of last year, but is likely to receive a considerably lighter sentence under federal guidelines.
Property flipping is the practice of buying a house at a low price and then quickly selling it for a much higher, usually inflated price. Appraisals are the key to property flips because lenders will not finance mortgages unless the house is appraised for the sale price or more.
An epidemic of flipping in Baltimore during the late 1990s cost lenders and the government tens of millions of dollars, scarred neighborhoods with vacant houses and financially ruined hundreds of duped buyers.
In what his former attorney, Richard D. Bennett, called a "very precise" plea agreement, Schulz admitted he had "falsely represented" that he had done numerous appraisals when someone else had actually done them. He acknowledged that "there were instances of false information in the appraisals" but did not admit knowing that the information was false.
The appraisals involved property sales that were financed with federally insured mortgages. Schulz agreed that the government lost between $500,000 and $800,000 because some of those houses went into default and the Federal Housing Administration paid off the lenders.
Two weeks after Schulz pleaded guilty, he was indefinitely suspended from involvement in federal transactions.
Despite the guilty plea and federal suspension, the Maryland Commission of Real Estate Appraisers and Home Inspectors, renewed Schulz's license in October for another three years.
In an online renewal application, Schulz said he had never been convicted of a felony or misdemeanor, Liz Williams, spokeswoman for the commission, said yesterday.
His current lawyer said Schulz was truthful. "In the federal system, you're not convicted until you're sentenced," said Gregg L. Bernstein, the attorney. "He honestly answered, 'No.'"
Bernstein took over Schulz's defense after Bennett became a federal judge last year.
Williams defended the appraiser commission's action.
"All we have to go by is the honesty of the licensee," said Williams. "The law does not require us to do background checks. Quite honestly, the financial resources and personnel resources are not available at this time."
She acknowledged that the commission could have reviewed the court file in the Schulz case and taken whatever action it considered appropriate. Later, she said, "We are opening a complaint against Schulz" that will be reviewed by the commission's complaint committee April 13.
Schmidbauer, the central figure in a flipping scheme that cost the government $2.5 million, pleaded guilty in April to a single count of conspiracy and was sentenced to a year and a day in prison.
In all, 18 people have been charged and pleaded guilty as the result of the investigation of Schmidbauer's activities that was prompted by an article in The Sun.