October 17, 2007

Appraiser admits to manipulating property values

Alleged widespread practice may have artificially inflated home prices, property taxes citywide.

By PATRICK MALONE
THE PUEBLO CHIEFTAIN

He called it “aggressive” appraisal. Others might choose a different term.

During the trial of Maurice Goring on Tuesday, an appraiser who commonly set the prices of the homes Goring bought admitted he did a lousy job and often matched the figures Goring and others sought in his appraisals.

An expert enlisted by prosecutors in the case said such practices could escalate housing prices and property taxes communitywide.

Goring, 42, was indicted by a Pueblo grand jury on charges of theft, fraud and forgery. Also indicted were Judith Smith (aka Katzenberg), 23, and Alvin Jack Woolford, 57.

Smith and Woolford both accepted guilty pleas to reduced charges of misdemeanor forgery and pledged to testify against Goring. Both received sentences of probation and are prohibited from working in the mortgage field.

Woolford, formerly a Colorado Springs appraiser, said he appraised homes for Goring's business, Trinity Benefits Group, for three years.

“I should have backed out a long time ago,” Woolford said. “I should have stopped. It's not right.”

He said he sought out inappropriate home sales to compare to the properties he was appraising for Goring and others to reach the appraisal figures that his clients wanted.

“There were comments (from Goring and Smith), 'If we can't get this (amount) out of it, we can't make the deal work,' ” Woolford testified. “I was pretty aggressive.”

He said he intentionally tried to reach the numbers that Goring laid out for him.

Even dealing with prospective property buyers like Smith and Goring was unorthodox, Woolford admitted. Normally appraisers are enlisted by prospective lenders, such as mortgage brokers and banks, to give honest, independent appraisals of a property's worth.

“If people can't trust the price they're paying (for real estate), what's the system about?” said Ivor Hill, a Pueblo appraiser who sits on the Colorado attorney general's Mortgage Fraud and Foreclosure Task Force and is assisting the district attorney's office in Goring's prosecution. “The appraiser's supposed to be the only independent piece in the whole process.”

Woolford said in addition to the appraisals he did for Goring, he appraised 50-60 homes for others in Pueblo. He estimated 95 percent of those appraisals also were conducted “aggressively.”

Equally troubling was Woolford's testimony that of those appraisals, only about 10 were rejected by lenders, who conducted their own reviews of his work. He said his supervisors also accepted the figures.

He stopped short of accusing Goring of asking him directly to inflate the appraisal amounts.

“Not inflate, but seek a goal,” Woolford said. “It's not illegal but it's not normal practice.”

Market analysis appraisals are conducted by comparing a property to others of comparable size, amenities and location that have recently sold. Woolford said he selected inappropriate properties to compare in his appraisals in order to hit the marks set by Goring and others.

Woolford appraised a property at 1329 W. Abriendo Ave. at $311,000 in November 2004. Hill's more recent appraisal of the property came in $90,000 lower. It sold in May for $197,000.

Under cross-examination by Goring, Woolford said the drastic difference between his appraisal and the sale price could have been influenced by the fact that it was in foreclosure at the time of its sale.

Its taxable value listed on the Pueblo County Assessor's Web site is $274,000 - a figure in line with the sale price of comparable homes in the same tony Aberdeen neighborhood.

The problem with practices such as those admitted by Woolford is its ripple effect, Hill said. When home prices are inflated artificially, they run the risk of being used as a comparable property to appraise other homes, which in turn are inflated in value as well. Property taxes also are hiked artificially by such practices, Hill said.

He said the county assessor's office is aware that these practices are widespread, and tries to adjust property taxes accordingly.