PHOENIX (CN) – KB Home, Countrywide Financial and LandSafe fraudulently overappraised KB homes in California and Nevada by more than $280 million, homebuyers say in a federal class action.
Plaintiffs claim the three companies plotted to overappraised 14,000 homes in the two states by at least $20,000 apiece since 2006. This amounts to $280 million in “inflated contract prices,” though plaintiffs say the actual fraud came to much more than that.
“The impact of this scheme is staggering,” the complaint states. “In KB Home’s ‘Southwest segment,’ that includes Arizona and Nevada, KB built over 14,000 homes since 2006, at an average price of approximately $250,000. Conservatively assuming an average inflated appraisal of $20,000 per home, that amounts to [$280 million] in inflated contract prices. The average inflation of sampled properties as part of counsel’s investigation is $82,169. Thus, actual inflated contract prices may be far greater than [$280 million].”
Plaintiffs claim that KB and Countrywide formed Countrywide-KB Home Loans to inflate “the sale amounts of KB Home properties and loan amounts of Countrywide loans by corrupting the appraisals of KB Home properties such that the appraisals would always indicate a value at or above the contracted sales price for the properties or were otherwise inflated.”
LandSafe, a Countrywide subsidiary and exclusive appraiser for KB Home, “blatantly falsified” sales prices for comparable properties by using prices from nearby homes or comparable properties that were in different communities, according to the complaint. Plaintiffs say the appraisals were also tainted by misleading statements about market conditions, which ignored downward trends in the housing market due to the economic recession.
Plaintiffs say that when a “prospective KB Home purchaser was able to have an non-complicit appraiser look at public records of recently closed sales of truly comparable properties, the independent appraisals revealed values far below the KB Home contract price and KB Home tainted appraisal to match.” If challenged, plaintiffs say, KB Home would accept the outside appraisal in order to close the sale, but failed to provide this information to other homebuyers.Plaintiffs are represented by Robert B. Carey and Donald A. St. John with Hagens Berman Sobol Shapiro.