Theodore A. Rinehart



03/15/10

Colorado Division of Real Estate
1560 Broadway #925
Denver, CO 80202
Attn:  Enforcement

Please treat this as a formal complaint against Paragon Appraisal Service, Advantage Sells, and the real estate license(s) of Theodore A. Rinehart.  Employing Broker EL40020819 and Certified Residential Appraiser CR40011516.

Specifically, I am asking the Board to investigate this complaint, take corrective or disciplinary action as allowed by law, and to inform me of the outcome.  In addition, I am asking the Board to promptly send me a form letter to confirm receipt of this complaint, provide me with a case number, and to make a good faith effort to spell the names correctly.

In support of this complaint, I have attached a complete (printed) copy of Mr. Rinehart's appraisal report for the property located at 5687 Distant View Pl, Parker, CO  80134.  The appraisal report is dated 11/09/07.  A .pdf version of the appraisal report is available on request.

For your convenience this document (including all attachments) is published on the Internet at:
http://www.mkgappraisal.com/letter2010_01.htm

Mr. Rinehart appraised the property at $1,260,000.  The subject property was a new construction builder sale.  This property was never (ever) worth a million dollars.  Not even close.

Pete Capra is (was?) the CEO of a local builder doing business as Golden Design Group (GDG).  During 2003 through 2006 GDG built and sold homes in (at least) 4 locations:  Castle Rock, Parker, South Aurora, and North Denver.  I estimate they sold 200 homes.  To the best of my knowledge, Pete Capra never used a licensed real estate agent, and none of the GDG homes was listed in MLS or exposed on the open market.

I have formed an opinion that substantially all of these homes were sold to straw buyers and/or outright crooks.  Two examples that come to mind are Demetrius Gianopoulos and Young Kim.

Presumably, all 200 of these transactions included an appraisal.  All 200 of the appraisals were used to justify big dollar mortgage loans which included big dollar mortgage fraud.  All 200 of these transactions resulted in early payment default and foreclosure.  This can be easily verified by the public (county) records.

I wonder how many of those 200 appraisals were done by Ted Rinehart.  And if not Mr. Rinehart, then who?

The subject appraisal report was prepared for a purchase mortgage on a brand new house.  According to public records there was a one million dollar first mortgage and a $108,000 second mortgage for a total of $1,108,000 from the good people at Wells Fargo and/or Colorado Mortgage Alliance.

This purchase transaction was a fraud.  Jason Kim is a straw buyer.  Jason Kim never made a down payment.  Jason Kim never moved into the house.  Jason Kim has never set foot in Colorado.

$37,000 Per Month

Jason Kim never made a monthly payment.  As a result, the mortgage loan went into default.  The property promptly went into foreclosure.  9 months later (8/12/08) the property was back on the market with an asking price of $600,000.  After 307 days on market, the property sold for $520,000.  Which is $740,000 less than the appraised value and $660,000 less than the mortgage.  From the date of the appraisal (11/09/07) to the date of the legit sale (7/29/09) works out to approximately 20 months.  Over this 20 month period, the property was losing value at the rate of $37,000 per month.

At the summary level, USPAP says an appraiser must be 2 things:  1) Ethical, and 2) Competent.  At the risk of oversimplification - an appraiser should know what's going on in the real estate market, and be willing and able to tell it like it is.  This appraisal report is a complete failure.

In September of 2005, Colorado had a big problem with foreclosures.  We were among the top 2 or 3 states in the country.  This was not a secret - it was in the newspapers and on TV.  A Rocky Mountain News article dated 9/10/05 said that Colorado was leading the nation in the rate of foreclosure.

This had been going on for 2 years when Mr. Rinehart did this appraisal.  How could any self respecting appraiser not know?  The appraisal report (dated 11/09/07) makes this statement -

The metro-wide single family median price has increased by 5% plus over each of the past 2 years.  The market appears to be stable.

On page one of the URAR, the box is checked "yes" to say the property is currently (or in the past 12 months) offered for sale.  The next line asks the appraiser to report data sources used, offering price(s), and dates.  The response is "MLS-List/Public Records".  No dates are given.  I believe this is incorrect and/or misleading.  To the best of my knowledge, the subject property was never listed on MLS.

The URAR asks the appraiser if they did (or did not) analyze the sales contract.  The appraiser checked the "yes" box.  Presumably Mr. Rinehart has retained a copy of the contract in his appraisal file.

The contract price is given as $1,280,000 dated 11/05/07 with a seller concession of 2% / $25,600.  The URAR asks the appraiser to "explain the results of the analysis of the contract...".  The report says:

"We confirmed the sales price, inclusions and the fact that there are seller concessions".

The thing that got my attention is the word "we".  I wonder who exactly is "we"?  The appraiser (Theodore Rinehart) certified (see #19) that he did not rely on "significant real property appraisal assistance from any individual".  I cannot imagine how someone could think that confirming the sales price and concessions is not "significant real property appraisal assistance".

One of the most important steps of every appraisal assignment is to define the geographic boundaries of the neighborhood, and then provide a range of dollar values.  The appraiser reports the high end of the range, the low end, and predominant.

The appraisal report shows the neighborhood boundaries as Jordan Road to the west, Main St to the south, Lincoln Ave to the north, and Parker Road to the east.  The north and south boundaries are both wrong.

The neighborhood values are reported at $800K low, $2M+ high, and $1.2M as the predominant value.  I wonder about the significance of the plus sign.  The top end of the range is not just $2M, it is reported to be $2M+.  Does the plus sign mean the top end of the range is (slightly?) more than $2M?  If Mr. Rinehart had thought the low end of the range was slightly less than $800 would he have used a minus sign?  Does the lack of a minus sign mean he felt the low end of the range was at least $800 or pretty much right on the number?  I see the plus sign as a small attempt to "sell" the neighborhood and to "sell" the subject property as loan-worthy.  If someone wants to say I am being nit-picky, I would not argue.  But I would also say the subject property is well south of Main St and the low end of the range is well south of $800,000.

I did a CMA on this neighborhood dated 3/08/10.  My search criteria was a one mile radius from the subject property, with every sale from 11/09/06 thru 11/09/07.  To be fair, I know that there are some sales that have been dropped from MLS because 11/09/06 is more than 3 years ago.  Having said that, my CMA did show 86 sales, and all 86 of these sales were readily available to Mr. Rinehart.  My CMA shows $198 low, $1.9M high, and $514 median price.  The property at 5935 Lasso Pl sold for $450 with a $15 concession (net=$435) on 9/5/07.  This is a 2,994 sq ft ranch located in Pradera, less than 0.6 mile from the subject.  See MLS listing #556320.

The low end of the range should have been reported no higher than $435.

Consider these 4 properties (MLS copies provided below):

  1. 5400 Craftsman sold for $549 less $16 concession (net=$533) 04/27/07.
  2. 5226 Mining Camp sold $557 on 04/04/07.
  3. 4940 Streambed listed at $700 on the date of the appraisal.
  4. 5473 Hacienda Pl listed at $726 on the date of the appraisal.

Each of these is a 2 story property.  Each of these 4 is roughly equal to the subject property in terms of location.  See attached map.

It's reasonable to ask - why would anyone pay $1.2M+ for the subject property when they could have bought 4940 Streambed or 5473 Hacienda for a half million dollars less?

The appraisal report presents 5 comps.  One of the comps is a nearby property from the same builder which was also a big dollar fraud sale.  The other 4 comps are all "custom" homes, per the MLS listing.

The appraisal says the house is appraised "as is".  And yet, the appraisal report states:  "The home is new home and will be built will very quality materials".

Never mind that the grammar is butchered - the appraiser is making promises about the quality of the work that has not yet been completed.

The appraisal report includes a 2 page summary of the qualifications and experience of Theodore Rinehart, the appraiser.  Based on my review of this 2 page summary, I cannot convince myself that Mr. Rinehart did not know any better.  And in some cases (for example, the butchered grammar and the promises about work yet to be done), I wonder if Mr. Rinehart signed his name to an appraisal that was done by someone else.


Better Comps

  1. 5473 Hacienda Pl,
    MLS pg1 and listing history
     
  2. 4940 Streambed Trl,
    MLS pg1 and listing history
     
  3. 5400 Craftsman Dr,
    MLS pg1 and listing history
     
  4. 5226 Mining Camp Trl,
    MLS pg1 and listing history
     

These are all 2 story properties located within a one mile radius of the subject property (see map).  All of these are reported in MLS.


I certify that the statements and information supplied by me are true and accurate to the best of my knowledge.





Philip G Rice
11268 E Linvale Dr
Aurora, CO  80014
720-282-3376
phil.rice@mkgappraisal.com

Attachments

Appraisal Report - .pdf format
Subject Property - MLS pg1 and listing history
Comp #1 - MLS pg1 and listing history
Comp #2 - MLS pg1 and listing history
Comp #3 - MLS pg1 and listing history
Comp #4 - MLS pg1 and listing history
Comp #5 - MLS pg1 and listing history

-- End of Letter --


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