Greenscape Homes illegally inflated home values in the western suburbs, lawsuit claims

A homebuilder who lost a business — and a few lawsuits — in the recession is now being sued by a buyer who says his new homebuilding company is defrauding customers by illegally inflating home appraisals.

Ken Neumann and his company, Greenscape Homes, stands accused of scheming with appraisers to massively inflate the values of his newly built homes, most of which are in the western suburbs, according to a lawsuit filed in Cook County.

The suit has been brought by Prabhas Mokkapat, who in February 2017 agreed to buy a Greenscape home in Arlington Heights that the company said was appraised at $850,000 — except the fair market value was $575,000, according to the suit. The “comparable sales” used to arrive at the appraisal relied on other Greenscape homes that also had inflated appraisals, the suit claims.

The practice dated back to 2012 and included four different home models, which were routinely overvalued by as much as 150 percent, according to the lawsuit. The inflated values were made by appraisers who had knowledge of the practice, and were given “excessive compensation” for their role in the scheme, the lawsuit alleges.

The suit does not say how it determined the homes were overvalued, and it does not say who the appraisers were that participated in the alleged scheme.

Neumann said he was unaware of the lawsuit being filed, but said the claims of inflated values are “contrary to what we believe in.”

Such practices are not only unethical, they are also criminal, Mokkapat’s suit says.

Neumann is not new to legal proceedings involving his homebuilding companies.

In 2005, Neumann Homes Inc. was the 35th largest homebuilder in the country, doing business in Illinois, Wisconsin and Colorado. But the housing market collapse hit the business hard. In 2007, the business sought bankruptcy protection, owing $235 million to eight banks, according to a 2012 Chicago Tribune article.

The bankruptcy proceedings “quickly grew ugly,” the Tribune reported, with suits and countersuits involving claims of unfinished subdivisions, unpaid contractors and shoddy work. Neumann was made to pay $1.25 million to settle those claims.

After the collapse of his first business, Neumann founded Greenscape in 2008 as a pared-down, self-financed homebuilding operation that focused on teardown sites in the western suburbs, according to the Tribune.

Mokkapat is seeking at least $1.5 million in damages in his lawsuit.