MODESTO -- Questions are being raised over whether a Modesto nonprofit agency used taxpayer money to drastically overpay for an apartment complex that ended up needing major repairs.
The city of Modesto financed the $1.5 million deal without first inspecting the property. City officials acknowledge they relied solely on an appraisal from a Santa Cruz firm that was hand-picked by the building's owner.
"Normally, the buyer would order the appraisal, but the seller was adamant about having his own appraisal done," said Judith Ray, the Modesto city administrator whose department approved the purchase of the 30-unit apartment complex on behalf of the Stanislaus Community Assistance Project.
SCAP has come under scrutiny the past two months for how it spent federal housing funds, the lavish pay package awarded to its grant writer, and the fact its staff and their family members live in some of the homes bought and renovated with public money.
In the case of the apartment complex, the appraisal inaccurately described the property's condition and used suspiciously high comparisons to justify the sales price.
One real estate agent involved in the deal suspects the appraisal was intentionally inflated.
"I had that property listed for sale for almost two years and I hadn't gotten offers anywhere near to what (SCAP) was offering," said Janet Fernandez, who was the original property owner's real estate agent before the complex was foreclosed on.
Fernandez said she had gotten "at least two or three offers around the $1 million mark," and well-respected Modesto real estate professionals assured her that was all the building was worth.
Then, in spring of 2010, SCAP offered to buy the 30-unit complex at 221 E. Coolidge Ave., just off McHenry Avenue, for $1.55 million.
"I honestly didn't think that offer was going to appraise," Fernandez said, "but I was told (by SCAP's real estate agent Joseph Bondi), 'Don't worry, we have people who will make it work.' "
Before that deal could close, however, the property was foreclosed on by a lending company controlled by David Belleville of Santa Clara. After the foreclosure, another one of Belleville's companies ended up buying the apartments at a trustee sale for $250,000.
Less than two months later, Belleville sold the complex to SCAP for $1,465,500, based on the appraisal from a firm he selected. Ray said an outstanding WestAmerica loan for $1.1 million had to be paid off from the sales proceeds, so Belleville made $283,000 on the deal after expenses.
SCAP's agent Bondi and his company, PMZ Real Estate, were paid $36,630 in commissions. Fernandez said she was cut out of the deal and received nothing.
Bondi denied he had anything to do with inflating an appraisal.
"It is completely untrue that I ever said that I have people who could make it work," said Bondi, who handles most of SCAP's real estate transactions. "I had nothing whatsoever to do with hiring the appraiser on this transaction. The appraiser was hired by the seller, who I did not represent. I never even spoke to the appraiser who did the appraisal on the property."
In the end, taxpayers ended up paying even more for the complex than the appraisal said it was worth.
Appraisal left out problems
The city of Modesto, using federal stimulus money, spent $1,560,111 to buy the Coolidge property because it agreed to pay most of Belleville's closing costs, including $1,900 for the Santa Cruz appraiser.
After it bought the property, the city discovered the apartments needed major repairs that weren't reflected in the appraisal.
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