County assessor's office: Duke's home sale price too high

(via NCTIMES)

By: WILLIAM FINN BENNETT - Staff Writer

When Randy "Duke" Cunningham sold his Del Mar Heights home to a defense contractor in late 2003, a subsequent county appraisal of the property to set its assessed value for property tax purposes showed the price was $300,000 higher than the home's market value, an official with the San Diego County assessor's office said Friday.

Cunningham sold the home to Mitchell Wade, the president of Washington defense contractor MZM Inc. in November 2003 for $1.675 million.

Since news of the deal surfaced June 12, questions have been raised over whether that sales price was above market value and whether the price was inflated by Wade as payback to Cunningham for the millions of dollars in defense contracts the company has received.


Cunningham, in his only public statement on the home sale to date, has denied any wrongdoing. His attorney said Friday that market conditions between 2003 and 2004 support the view that the sales price was reasonable.

On Friday, Chief Deputy Assessor David Butler said that an appraisal was conducted by his office on the Del Mar Heights property to determine its value at the time of the sale for tax purposes.

To determine its worth, the appraiser looked at a number of factors, Butler said: comparable location, square footage, quality of the house, amenities and sale prices.

"Obviously our appraiser at the time thought that was just too high a sales price based on the comparables," Butler said.

The appraiser made her evaluation of the house in April 2004, based on real estate values at the time of the sale. Wade put the house back up for sale in January 2004 for $1.68 million, but the house hadn't sold by the time of the appraisal.

"The fact that it hadn't sold (also) indicates the $1.675 million sales price was too high," Butler said.

Initial appraisals are always done after a property is sold, he added. But if the appraiser has any reason to believe that the sales price is out of the ordinary, further research is conducted.

"The first question is, 'Was this an arms-length transaction?' " Butler said.

In the case of the sale to Wade, not only did the initial look at comparable properties indicate that the price was higher than it should have been for setting assessment, the property was not listed and the sale was a private transaction arranged with the help of Elizabeth Allen Todd of The Willis Allen Co.

Todd, described by the congressman as a personal friend, did not return phone calls Friday for comment on this story.

Because the sale was private and because of the initial look at comparable sales, further investigation was done. The final appraisal showed that the true market value of the home was $1.375 million, Butler said.

As a federal grand jury investigates the financial ties between the two men, a former assistant U.S. attorney said this week that he believes the first thing grand jurors will be looking at is Cunningham's sale of his home to Wade.

For the past week or so, Cunningham's office has referred all calls to his attorneys. However, in a June 23 news release, Cunningham wrote that "Mr. Wade and I have been friends for years."

He added that because Todd had provided him with a list of comparable properties that were sold around the same time in his area, "I thought the asking price was fair and reasonable."

However, he acknowledged that conducting a private sale was a mistake.

"I recognized I showed poor judgement in not listing the house publically for sale. I should have given more thought to the perception it might create," Cunningham wrote.

After Wade put the house back on the market for $1.68 million, it sat on the market for 261 days. And by the end of that time, the listing price had come down to $1.3 million. He sold the house last October for $975,000, a $700,000 loss.

Butler said that after that sale, the home was appraised again. Because it had been on the open market for that many months without selling and because it sold for that price, the appraiser valued the home at $975,000. He noted that comparable home sale prices at the time of the second sale also put that sales price within the lower range of acceptable prices.

Cunningham's Washington attorney K. Lee Blalack said Friday that the $975,000 sales price in essence vindicates Cunningham.

"If this assessment is correct, Mr. Wade resold the Del Mar house in October 2004 at $400,000 below the supposed market value of the house in November 2003. The press continues to report that if anything, the value of the house in the hot California real estate market should have increased during that time ---- not decreased. So much for that theory. This assessment simply confirms that the fair market value of that property is a matter of opinion and that it was entirely reasonable for 'Duke' to have asked for the sale price he did."