Saturday, May 9, 2009 | 2 a.m.
Customers of KB Home are suing the homebuilder, claiming they paid more than their homes were worth because the company artificially inflated appraisals in cahoots with Countrywide Financial and its appraisers.
Representatives of the plaintiffs allege that KB Home, Countrywide and LandSafe Appraisal Services conspired over a three-year period to sell 14,000 homes in Nevada and Arizona with rigged appraisals that overvalued the homes by tens of thousands of dollars.
In two KB Home subdivisions cited in the complaint, sampled appraisals were inflated by about $82,200 per property, the lawsuit alleges.
“Even if we used a more conservative $20,000 per property, this alleged scheme would add $280 million in ill-gotten profits in KB’s pockets,” said Rob Carey, an attorney representing the homeowners.
Carey’s firm did not specify which KB Homes communities were connected with the complaint. In the Las Vegas Valley, KB Home built at least 14 subdivisions, but it’s unclear from the company’s Web site if construction of all these homes coincided with the alleged conspiracy period of 2006 to 2008. The subdivisions include five Inspirada communities in Henderson; four Mountain’s Edge communities in the southwest valley, and Ladera Crest in Summerlin.
The lawsuit was filed Thursday in U.S. District Court in Arizona by the Seattle-based law firm Hagens Berman Sobol Shapiro.
The suit alleges that KB Home steered buyers to complete a loan application from Countrywide, which then ordered appraisals from LandSafe, a subsidiary of Countrywide.
Certain appraisers were willing to “play ball,” arriving “at whatever number was necessary to close the deal at the price desired by Countrywide-KB,” the lawsuit alleges. The entwined companies controlled most or all aspects of a buyer’s real estate transaction, the lawsuit claims.
“The appraisals were fudged,” said Steve Berman, a partner with the Seattle firm. “We believe the top executives were involved in blessing this arrangement.”
KB Home disputes the allegations.
“It is particularly unfortunate in these challenging times that predatory attorneys file baseless lawsuits,” spokesman Craig LeMessurier said. “We look forward to proving the lawsuit is without merit.”
Bank of America, which owns Countrywide, responded similarly: “We believe the suit is without merit.”
According to the lawsuit, appraisers improperly selected distant and/or dissimilar properties to the KB homes being bought, used pending transactions as comparable sales and misused market factors, illegally boosting sales prices.
“Those profits come at the expense of the homeowner, who moves into a house already upside down, and the secondary market, buying tainted investments,” Carey said.
Attorneys representing seven homeowners — and thousands more, if the federal court grants the Seattle firm class action status — began investigating the matter about six months ago. During that period, attorneys spoke with “dozens” of appraisers and homeowners, Berman said, though he refused to disclose their names.