TURLOCK — The former president of California State University, Stanislaus, appears to have avoided repaying several hundred thousand dollars in mortgage debt from the Turlock home he just sold.
Thousands of dollars in uncollected taxes also may be owed on that home because of incorrect property assessments, which went unreported for years.
Hamid Shirvani, who served as the university's president from 2005 until last summer, sold the home on North Quincy Road this month for $610,000. But that wasn't nearly enough to cover what he owed on his $1,180,000 house loan, which Bank of America had given him in 2007.
In approving the "short sale" this month, the bank reportedly agreed to accept substantially less than what Shirvani owed on his mortgage.
Short sales have become increasingly common the past couple of years as a way for banks to avoid foreclosures while allowing homeowners with upside-down mortgages to sell their homes. Homeowners who want to sell short usually are required to write a hardship letter that explains why they cannot afford to continue paying their mortgage and need the bank to accept less than it's owed.
Shirvani left Turlock last year to become chancellor of the North Dakota university system. The Bee was unable to reach him by phone or email Thursday or Friday.
At issue is how Shirvani was able to cash in on such a large loan in 2007. Two months before BofA approved that nearly $1.2 million loan, appraisers from the Stanislaus County assessor's staff had calculated the full-market value of Shirvani's home was $877,500.
Bank of America spokesman Rick Simon said Friday it is common for there to be differences between a home's assessed value and its appraised value. He said county assessments usually are not "as well researched or up-to-date" as appraisals done for a bank loan.
"A full licensed appraisal was done (for Shirvani's home in 2007), and the appraised value was $1.475 million, so the loan-to-value ratio was 80 percent," Simon said. "This would have been within jumbo loan guidelines at the time."
Simon noted how when that loan was made, "home prices were on a robust upward trend and property appraisals were reflecting a market view that values would continue to go up."
When Shirvani refinanced, public records indicate he received up to $650,000 in cash back from the deal, plus enough to pay off the $531,200 mortgage he had gotten in 2006.
Money back into home?
Some of the cash Shirvani received from refinancing in 2007 may have gone to cover what was spent remodeling the previous year. A Turlock building permit search shows renovations done at Shirvani's home in 2006 had a total valuation of nearly $280,000.
Because so much work was done to the house including adding 1,509 square feet to the main building, plus garages for four vehicles the property's full-market value was reassessed by the county in February 2007.
The home's revised assessment of $877,500 was supposed to be used to establish how much in property taxes Shirvani should pay in the future.
Basic annual property taxes are 1 percent of a home's assessed value. So a home assessed at $877,500 generally would pay $8,775 per year in property taxes, plus extra for things such as school bonds.
Turlock home values were on "a downwards trend" in spring of 2007, said Don Gaekle, Stanislaus' assistant assessor for valuations.
Stanislaus home prices peaked in late 2005, then began declining in the fall of 2006.
"In 2007 is when the market really took a nose dive," Gaekle recalled. Because home values declined so much, Gaekle said the county lowered assessments for many homes in 2008.
But that's when an assessment mistake was made on Shirvani's home.
After the big 2006 renovation, the Quincy Road home's physical "characteristics" were not properly updated in the county assessor's database. So when the county's computers automatically lowered assessments in 2008, Gaekle said, the wrong information on file caused Shirvani's assessment to be too low.
Rather than paying taxes based on a newly renovated 4,138-square-foot home with a four-car garage, new roof and extensive concrete work, Shirvani's taxes were based on the old 2,360- square-foot home and carport that had been built in 1968.
That assessment mistake apparently was repeated in 2009, 2010, 2011 and 2012.
The 2012 assessment, for example, puts the home's value at $317,000. Considering that house just sold for $610,000, the error is apparent.
Shirvani could get bill
The county's five-year assessment mistake saved Shirvani thousands of dollars in taxes.
A 1 percent tax rate on a home assessed at $317,000 would be just $3,170. But a home assessed at $610,000 would be billed $6,100 nearly $3,000 more per year.
"Generally when we find an error in an assessment, we're limited to four years of corrections," Gaekle said.
So even though Shirvani has sold the house, he still could be sent a bill for property taxes that should have been collected in 2009, 2010, 2011 and 2012. He said his office will look into the Quincy home's assessment history and consider what can be done about it now.
Michael Warda, a Turlock attorney, helped arrange the home's recent sale from Shirvani to a local dentist, Alan Vallarine. Warda said the home was appraised at least twice before that sale, so he is confident $610,000 is its current fair market value.
"This is one of the largest, nicest homes in the neighborhood," said Warda, noting how it had been remodeled with high-quality materials.
As a university president, Shirvani was expected to do a lot of entertaining in his Turlock home, according to Michael Uhlenkamp, spokesman for the California State University system.
Shirvani was paid an additional $45,000 to $50,000 per year as a housing allowance, on top of his $230,000- plus annual salary. The extra money was supposed to pay Shirvani's mortgage, property taxes and other housing expenses.
Uhlenkamp said university presidents are not required to specifically account for how they spend their housing allowances. Besides the housing allowance, Uhlenkamp said the university system did not give Shirvani additional money to help pay for his Turlock home, its remodeling or its mortgage debt.
Shirvani's new employment contract with the North Dakota State Board of Higher Education does not disclose any additional compensation for housing. Shirvani's current salary is $349,000.
Bee staff writer J.N. Sbranti can be reached at firstname.lastname@example.org or (209) 578-2196.
JULY 2005: Hamid Shirvani becomes president of CSU, Stanislaus; his contract gives him an annual $45,000 housing allowance (later increased to $50,000).
FEBRUARY 2006: Shirvani and his wife, Fatemeh, buy a home at 2212 N. Quincy Road, Turlock, for $664,000, of which $531,200 comes from a Bank of America mortgage.
JUNE 2006: Shirvani begins remodeling and expanding the home, taking out building permits on which the renovation's total valuation is listed as less than $280,000.
FEBRUARY 2007: Renovation project is completed and Stanislaus County assesses the home's full-market value at $877,500.
ABOUT MARCH 2007: A private appraisal done for Bank of America determines the home is worth $1,475,000, which was 68 percent more than the just-completed county assessment.
APRIL 2007: Bank of America gives Shirvani a $1,180,000 loan, which was about $650,000 more than what he needed to pay off the home's previous mortgage.
2008: The property gets mistakenly reassessed far below its real value because its tax assessment was based on the old home that had been built there in 1968, rather than on the greatly expanded and renovated home completed in 2007.
2008-2012: Property taxes are billed at levels far less than what a home of that value should have owed.
JULY 2012: Shirvani leaves Turlock to become chancellor of North Dakota's public university system.
MARCH 2013: Bank of America allows Shirvani to "short sell" his home for $610,000, far less than what he owed on his outstanding $1,180,000 mortgage.
Source: Information gathered primarily from public records