State to ask revocation of appraiser's license

Lawyer says scheme cheated homebuyers

January 11, 2000|By John B. O'Donnell | John B. O'Donnell,SUN STAFF

Charging that a Baltimore real estate appraiser was "part of a scheme" to buy and quickly resell city houses for more than their value, a state lawyer said yesterday that he will ask regulators to revoke the man's license.

"This case represents the tip of the iceberg of a scam that defrauded low-income, first-time home purchasers, as well as financial institutions," Gaston J. Sigur, an assistant attorney general, told a state administrative law judge at the opening of a two-day hearing on allegations against G. Samson Ugorji, the appraiser.

The case was brought by the State Commission of Real Estate Appraisers, which says Ugorji prepared misleading reports that "inflated and overestimated the value" of four Patterson Park-area houses he had been asked to appraise for Robert L. Beeman, a Wilmington, Del., speculator.

Beeman has bought and resold dozens of houses in Baltimore in the last four years. Court papers indicate he paid $5,000 to $20,000 for each house, performed modest cosmetic repairs and resold them for $68,500 to $85,000 -- far more than they were worth.

Ugorji and other appraisers provided reports that claimed the houses were worth at least the purchase price. Those reports persuaded lenders to provide mortgages on the properties, loans that usually exceeded their value.

Beeman is one of many speculators who have bought and resold more than 2,000 houses in Baltimore in the last four years in a process called flipping.

Rebutting Sigur's opening statement, Ugorji's lawyer, J. Seymour Sureff, argued that property appraisal "is not an exact science." He said that "complete accuracy is not possible" and that Ugorji's judgment of property values was "earnest and sincere.

"They were sound opinions," backed by independent reviews done for lenders who financed the mortgages, Sureff said.

"The financial institutions were satisfied," Sureff told Administrative Law Judge Laurie I. Pritchard.

After the hearing is concluded and follow-up documents are submitted, Pritchard will have 90 days to submit an advisory opinion to the appraiser commission, which will decide whether to accept or modify her recommendation. The commission could revoke or suspend Ugorji's license and fine him up to $5,000.

Sigur, the assistant attorney general, sought to introduce information on dozens of other Ugorji appraisals that was compiled by Andre Weitzman, an attorney who has filed several suits on behalf of more than 100 people who bought flipped properties in recent years.

Sureff, Ugorji's attorney, objected, saying his client had been charged in only four cases. Pritchard held off on a decision pending further arguments.

In his opening statement, Sigur said the four appraisals that are the basis of the charges "were not the result of a mistake nor isolated incidents."

"In fact," he added, "these appraisals, as well as dozens of others, were part of a scheme to buy properties in the city for next to nothing, cosmetically renovate them and sell them for a substantially higher price that had no realistic basis in fact." Ugorji, he said, wasn't the only appraiser involved.

Ugorji, the first appraiser charged with providing inflated appraisals to flippers, defended the four appraisals yesterday, saying he would do little different if he had a chance to do things over.

But he acknowledged that in one case involving a house at 211 N. Montford Ave., he had overstated the renovations done by Beeman, attributing the mistake to an editing error. The March 5, 1997, appraisal valued the house at $83,000 and said it had been "totally renovated" including the installation of "new plumbing and electrical systems."

Testifying under oath yesterday, Ugorji acknowledged that the plumbing and electrical systems were not new. He also said that the house may not have had new replacement windows, as his report stated.

He said the mistake occurred because he copied a report from an earlier appraisal and that he had not properly edited the document to accurately reflect the condition of the Montford Avenue house.

He insisted, however, that his description of the three-story rowhouse as "totally renovated" was accurate, given its condition relative to other properties in the area.

Beeman bought the house for $15,000 in February 1997 and sold it to Yvonne Peaks, a 49-year-old nursing assistant, for $83,000 two months later. The house was demolished by a city crew in June 1997 after it partially collapsed while an adjacent house was being torn down.

Ugorji said he was paid $300 for each of the 39 appraisals he performed for Beeman between December 1996 and mid-1997, when he stopped after a review appraiser questioned his work.

A state official who is a licensed appraiser and teaches appraising followed Ugorji to the stand and testified that the four appraisals were "misleading if not fraudulent."

William T. Beach, chief of the valuation and appraisal devision of the Maryland Department of General Services, accused Ugorji of violating the guidelines that appraisers are supposed to use, known as the Uniform Standards of Professional Appraisal Practice.

He was particularly critical of Ugorji's use of "comparable sales" of other houses to justify his valuations. Saying this is the most critical aspect of each appraisal, Beach said that Ugorji chose high-priced sales, some of which were not appropriate because their locations were not comparable, and others that were flipped properties.

Beach will be cross-examined by Ugorji's attorney today.

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