Picher's Peril: Some claim buyout undervaluing homes

By Wally Kennedy
THE JOPLIN GLOBE (JOPLIN, Mo.)

CARDIN, Okla. February 19, 2008 09:52 am

— Tommy and Alice Sharbutt made ends meet on his military pension and her retirement income.
Sharbutt, who served two stints in Vietnam, tinkered on cars in his garage to make money on the side. The couple lived in a 67-year-old, three-bedroom house on narrow lots at 103 Wade St., in Cardin.
In January 2005, they decided to refinance. The appraiser for the mortgage company found three comparable properties in Miami. The comparables, based on recent sales, were valued at $76,000, $80,500 and $75,000, respectively. The houses were 54 years, 84 years and 46 years old. The appraiser valued the Sharbutt property at $75,000.
Tommy died of cancer on Sept. 1, 2007. A few weeks later, his widow received an offer from the Lead-Impacted Communities Relocation Assistance Trust, which is handling the $50 million buyout and relocation of property owners in the Picher-Cardin area.
The buyout and relocation of families from the Tar Creek Superfund Site in Northeast Oklahoma is the culmination of more than 30 years of struggle for the people of Picher and Cardin.
The Picher Mining Field, one of the richest lead and zinc deposits in the world, was the site of intense underground mining nearly 100 years ago. The mining took place during a time when environmental regulations were virtually non-existent.
When the mining companies ceased operations here in the 1970s, the region was left with an uncertain legacy of pollution that impacted the health of local residents. Children were especially vulnerable to a toxic mix of heavy metals. The lead-poisoning rate among children at one time was as high as 30 percent.
A $100 million effort by the U.S. Environmental Protection Agency to remove lead from residential yards damaged many homes. The region's status as a Superfund site further devalued properties.
A recent federal study by the U.S. Army Corps of Engineers found that large areas in Picher and Cardin could collapse at any time. That finding triggered the $50 million buyout of more than 700 properties that is now under way.
Alice Sharbutt received an offer of $50,200 for property on which she still owes $58,000.
Paul “Huck’’ Sharbutt, who is now helping his brother’s wife with her affairs, said, “I figured they would get in the neighborhood of at least $80,000. When we started asking questions about it, it was like: ‘Who are you? You ain’t nobody.’ It was either take it or leave it.
“I kept telling my brother before he passed on that things would be OK for Alice. That the buyout would help her,” he said. “I think it would have really upset him if he were still alive today.
“I was just sick when I saw the offer. She said, ‘I can’t believe that’s all you are going to offer on it.’”
Huck decided to dig deeper. The appraisal indicated the house had two bedrooms instead of three. There are two outbuildings on the property; the appraisal showed one. A 400-square-foot garage was omitted. The house has central air and heat. That was omitted, too.
Said Sharbutt: “The only way you can go back and ask for a review is if there is a discrepancy. So, we took this back before them and called this to their attention. The first time they said ‘no.’ The second time they sent it back, they raised the offer to $52,100.’’
Sharbutt then looked at the comparables the buyout appraiser used. One sold in 2006 for $38,000 at Commerce. It was a two-bedroom house built in 1915. The other comparables were two three-bedroom houses in Miami that sold in 2006 for $42,500 and $42,000. They were built in 1920 and 1938. The comparable houses were 12 to 25 years older than Alice’s home. None had central heat and air.
“The comparables used by the mortgage appraiser are all similar to my brother’s house. One of them even has a gabled front porch like his did,” Sharbutt said. “The appraiser for the trust said these lending companies will go out and get the highest appraised value so that they can lend you more money."
But Alice’s mortgage appraisal was for $75,000 — the lowest of the comparables. If the mortgage appraiser wanted to lend the most money to her, the highest comparable would have been used, he said.
“They can’t lend you that much more money than the house is actually worth. It makes no sense at all what’s happening here in Picher and Cardin with this buyout. It’s terrible,” he said. “My sister-in-law is going to have to borrow money to move, if she can. She’s 64. That’s not right.
“What’s really not right is when you know a dump of a trailer house in Picher has got an offer of $47,000. It’s not even a stick house,” he said.

The complaints
Though trust members and a state official overseeing the buyout have repeatedly said the acceptance rate on offers is as high as 95 percent and that only a vocal minority is causing trouble, records show the independent appraisers hired by the primary contractor, Cinnabar Services of Tulsa, have been dogged by complaints from the start of the buyout process last year.
Some residents say they are accepting whatever is offered because their properties in Picher and Cardin essentially have no value because of where they live. Any offer to get out is a good offer because it is likely to be the only offer they will get.
“It’s desperation. It’s like having a gun held to your head,” said Missy Beets, who believes her house was undervalued by thousands of dollars even after a review appraiser increased the offer from $70,000 to $75,000.
“I believe the trust and its contractor, Cinnabar, have attempted to manipulate and pressure us into accepting appraisal offers by purposefully withholding information that we needed to make these life-changing and difficult decisions,” she said.
In a recent letter to the trust, Beets also alleged: “We believe that Cinnabar, and therefore the trust, have routinely committed fraud in inflating some appraisals and using strong-arm tactics to force others to accept low offers.”
Cinnabar was awarded a $1.8 million contract to do appraisals and property acquisitions. The company, in a subcontract arrangement, hired independent appraisers to do the work. When those appraisers finish, the appraisal is handed over to the trust for approval. It then goes to Cinnabar.
An acquisition agent for the company then meets with the property owner. Local residents allege they cannot get straight answers about the values given for their properties because the agent did not do the appraisal.
They also say they don’t receive detailed information about the comparables unless they ask for it, and that they are often treated rudely by representatives of the company when seeking comparables. “Take or leave it” is a phrase some property owners say they have been told.
Beets wrote in her letter: “One only needs to compare the abbreviated appraisal reports provided by Cinnabar to those of Universal’s for the first buyout to see the difference in the thoroughness with which Universal approached the appraisal process.
“The process is one where Cinnabar simply provides the buyout offer with no background information on how it was derived or what is included in the offer. We are left with no way of knowing whether the offer is a good one,” she said.
The process differs from the first buyout, which was handled by Universal Field Services of Tulsa. That $3 million buyout involved about 50 families with children.
Clark Andrew, with Universal, said, “We did the appraisals with our own staff appraisers. We had only our appraisers do the work and only one reviewer. That lent consistency to the process. We did not subcontract out any of the appraisal work.
“Some folks were unhappy, but it was a very small number. We showed the property owners the comparable sales and the adjustments were shown to show how the value was arrived at. The appraisal involved a number of pages,” he said.
Universal went outside the immediate market, which Cinnabar was instructed to do as well, though comparables that Cinnabar used include properties in Commerce and Quapaw, which are closer to Picher and Cardin than Miami.
“We were told to get our comparables from Miami and not from the impacted area. We tried to support the highest value we could, but not anymore than they were due. We wanted to support the highest value the market could support, but we treated these appraisals like any other public project we have appraised,” Andrew said.

Problems arise
Betty Jo Cagle, one of three review appraisers hired by the trust for the larger, second-round of buyouts, said there were problems. Cagle, as recently as a month ago in a meeting at the Picher home of Missy Beets, said the first 25 or so appraisals should have been redone because the process was inconsistent.
“They had almost 200 appraisals done before they hired the review appraisers months later," she said. "Usually, the review appraisers are hired at the same as the appraisers.”
Trust records also show lots have been missed that should have been counted. Leased lots that should not have been counted have been added. Vacant houses on properties that should not have been counted have been added. Bedrooms and bathrooms have been miscounted. Wood-frame houses have been valued as trailer homes and vice versa. Garages have been omitted. Incorrect legal descriptions of properties have been used. The age of some properties was wrong.
In one instance, virtually identical houses in similar condition built by the same housebuilder at the same time were given values $10,000 apart. The values of some appraisals have been raised without follow-up inspections of those properties by the review appraiser, records show.
Of the 260 appraisals done to date, more than 50 have been reworked, records show. That’s nearly 20 percent.
Beets and other residents, including Aletha Redden and John Frazier, even contend they have been blackballed by the trust because they have publicly challenged the fairness of the appraisals.
Small yellow signs recently began appearing in front of houses and trailer homes in Picher that were acquired by the trust to show how much the property owner received per square foot so residents can judge for themselves whether the buyout offers are fair.

Official reaction
Robert Parmele Jr., co-owner of Cinnabar, admits mistakes have been made. He said mistakes are expected in a buyout of such scope, but only 10 of 270 property owners rejected the initial offer.
“An appraisal is an opinion based on the best market data the appraiser can find, the condition, size of the house and amount of land. There are many, many variables that affect the value of a piece of property.”
He also denied that homeowners were told to “take it or leave it.”
“The property owner has 15 days to say yes or no to the offer, or they can ask the trust to take another look at it,” he said. “They have a 15-day time period. There is no negotiation.”
Members of the trust met three weeks ago with representatives of Cinnabar to go over the appraisal process in preparation for the next phase of the buyout. The mid-course meeting was set before Picher residents became more vocal about what they saw as unfairness in the appraisal process.
J.D. Strong, who monitors trust activities for the state, said the meeting was held to see whether the process could be streamlined to increase accuracy and reduce error. The meeting was not called because residents of Picher and Cardin complained.
“The result of that meeting was that there wasn’t much modification that needed to be made to the process or that would be necessary. The trust just does not believe that is this case at all. I don’t see it from my end.
“It’s a human process that’s based on the best professional judgment. We have hired experienced appraisers to do the job.”
Asked about the number of errors made by appraisers, Strong said a big difference when comparing the first buyout to the second is the scale. About 50 properties were involved in the first buyout, which was completed in 2005. About 700 will be appraised and acquired this time.
“The first buyout took a couple of months. We have been at this for well over a year now, and we’re not even half way done,” Strong said. “When you are doing so many, the opportunity for error increases.”
Strong said no one has been asked to do what the appraisal company is being asked to do: Establish values for properties in an artificially devalued area.
“People need to understand there is a fair amount of best professional judgment in this to zero in on a value. We know it’s a difficult process all the way around. Occasional mistakes have been made. There is no way you cannot make mistakes in this process. ... But over half of the offers accepted have been accepted on the spot.”
Larry Roberts took over as operations manager of the trust after the first manager, Sonya Harris, resigned after complaining about the low offers property owners were receiving. Roberts said the property owners are getting detailed appraisal offers.
“We hired certified appraisers. By not having the appraiser meet with the property owner, it takes any politics out of it. Those things they say are happening are not happening,” he said.
“If there is a question, we will go over the appraisal report with the client and show them how the value was arrived at. We are using the same guidelines the state of Oklahoma uses.”
Roberts noted that some who have accepted offers have had letters placed in their files that state they accepted the offer under duress, but that most people were happy with the offers they had received.

Offer accepted
Among those who have accepted offers are Robert Smith, Susie Bryant, Darlene Evans, Gary Garrett and Amanda Davis.
Smith, who moved from a single-wide trailer home on leased land to a house in Baxter Springs, Kan., said he got “a fair price. It was pretty good deal.” He declined to talk about specifics.
Susie Bryant, who moved from a four-bedrooom house in Picher to a three-bedroom house in Miami, said, “I think I did OK. The people I talked to were very polite and professional. I would have liked to have had more, but with circumstances like they were, it was a good offer and an opportunity for me to move.”
Darlene Evans moved from a house on leased land at Hockerville to a house in Commerce. She said: “It’s a better house, but I had to get a loan to get the new house. I am on oxygen and our road here is paved. It was a pretty good deal with the trust. There ain’t no sense in complaining or griping.”
Gary Garrett, who moved from Cardin to Miami, said, “I did not get anything for my swimming pool, but I wanted out of there. I think it’s unsafe to live there.
“I felt like my offer was fair, but I brought this up about the poor people who are having to get low-interest-rate loans to move out of there. Those people can’t make a house payment. They barely have enough to pay groceries and utilities.”
Garrett, who has a pulmonary disease, said he was not shown the comparables for his property, but he knew what his property was worth because he is a building inspector by profession.
“The trust set the rules. It was take it or leave it," he said. "I know some people in Cardin and Picher are not getting enough money. The idea of the buyout is to get people out of there. I raised this concern several times, but it has fallen on deaf ears. I feel lucky to get what I got.”
Amanda Davis, who moved from Picher to a rental unit in Miami, said, “It was a fair offer. We were impressed with the company. They made the process very simple.”
Davis also said: “We had no choice but to take it. We have a 1-year-old son. We were not willing to take that chance with him.
“This was a very emotional thing for us. The home we were living in had zero value. We weren’t expecting to get rich from the offer. Because of the Environmental Protection Agency and what they did, our home was completely flooded underneath. It was full of mold. That took the value of our home to zero. And, we were in a Superfund site. We got $73 a square foot, and it was worth nothing.
“We got a really great offer, but the offer for our church wasn’t very good. Our church got $30.14 a square foot. That was not fair, but they decided to take it and move on. If you decline, you are stuck there.”

Wally Kennedy writes for The Joplin (Mo.) Globe.

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