I know what you’re thinking. Orange man bad. His rhetoric is offensive, hateful, divisive, etc. etc. The way he arrogantly descended that golden escalator made you hate the man instantly. Maybe you’re not thinking that at all. Maybe you love the man. It doesn’t matter. At some point, we need to clear our heads of the Trump hysteria and consider the potential ramifications of using certain punitive legal tactics against the man. We’ve seen a myriad of legal cases sprout up in the past year or so, and even the most ardent Trump hater has to admit that it looks a lot like lawfare. Indeed, the justice system has been hijacked by political operatives to target their enemy, and as much fun as that may be to watch, it never ends well for the rest of us plebeians sitting in the arena. Weaponizing the legal system may actually leave a certain intended target that is well-to-do unscathed (I mean, he’s called Teflon Don by the media), while leaving the rest of us sitting ducks.
A new form of political lawfare, the likes of which have never been seen, has been proliferating around the country in various forms by angry attorneys general. The one waged by New York AG Ms. Letitia James resulted in a ruling in which the punishment so ill-fits the crime it would make the Queen of Heart’s from Lewis Carroll’s Wonderland jealous, and should leave every home owner (and prospective homeowner) shaking in their boots. In fact, there is a case to be made that local municipalities should be bracing themselves for some pretty dire ramifications. You see, Kevin O’Leary is 100% correct. This is not about Donald Trump. This is about us. All of us.
For those unfamiliar, the NY civil fraud case brought against Trump involved the allegation that he overstated his assets, and that he took out loans against his properties using an inflated valuation. As it turns out, the local municipalities in which the properties in question reside had assessed them for a lower amount than his self-provided valuation. HA! Got him. Sounds sinister, right? Mr. Wonderful goes on TV and says, “but this is a victimless crime…every real estate developer in the country does it” and gets mocked by all the talking heads on CNN…and Jon Stewart (who we will get to in a minute). “The fact that there are no victims, doesn’t make it any less a crime!” they shout. “Off with his head!” The crowd pleasing judge disallowed a bevy of evidence, including testimony from the banks saying that they actually didn’t rely solely on Trump’s self-provided valuation in order to decide to lend, and that they would lend to the real estate mogul again in a heart beat. And with one gavel crash in an eleven week bench trial (no jury present), the judge ruled that Trump had to disgorge himself of $454,000,000. For those of us far enough outside the forest to see the trees, it did look like a thinly veiled attempt to seize Trump’s assets, to “get the orange man!.” (cue: cheering)
And then AG James looked directly into the camera and issued some harrowing words:
“No one is above the law.“
And this should frighten the heck out of everyone. Because she is right. That one phrase made clear that this is not about Trump. Businesses, realtors, etc. immediately saw the writing on the wall. So Governor Hochul immediately ran out to reassure everyone. “Nothing to see here… as long as you’re not Donald Trump, carry on doing what you’re doing.” Unfortunately, there is no written guarantee that this latest ruling will not set a precedent that will make every homeowner and business owner in NY a potential target.
The good news is that it is unlikely this ruling will stand up against appeal. Why? Because the case itself is ridiculous, and falls apart on basic logic and facts. So let’s unpack this a bit. As every homeowner knows, when you go to refinance, take out a HELOC or a home loan, you are always asked to provide an estimate of home worth. Many homeowners simply look at the “Zestimate” on Zillow (which is almost always wildly inaccurate), some consider what a neighbor just sold for, etc. There are many ways to arrive at an estimate of value. What the banks DON’T do is lend based on the borrower’s opinion of value. That would be risky and dumb. The first thing banks do is send out an experienced licensed appraiser to assess the property and provide a qualified opinion of value. When you get a mortgage, the bank lends based on the appraised value, not your contract price. In essence, it really doesn’t matter what YOU think. Lending is based on what the lender thinks. The bank doesn’t lend on your opinion of your own assets either. They insist on verifying all. Donald Trump has had his fair share of failures along with successes, and with the amount of times the man has filed for bankruptcy do you really think any bank is just going to lend to him without any due diligence? Unlikely. And, in fact, the banks that did the lending attested to that emphatically. So the argument that this is a “victimless crime” is not the point. The argument is that this is not a real crime at all. If it was, every single person that has ever applied for a mortgage or a refinance would be guilty as charged. If you make an offer on a house, you must check the assessor’s record with the local municipality. Because if you purchase it for anything for more than the tax assessed value and you’ve taken out a mortgage, both the seller and, possibly, you have committed fraud. Forget what the appraisal comes in at. Judge Arthur Engoron, who presided over the case, made it clear that the lender’s due diligence is meaningless. All that matters is what YOU proclaim the value of the home to be worth. I know what you’re thinking, “that’s silly, no one will come after me”, right? You’re not the big orange man that everyone hates, after all. The problem is that justice is blind. And there is no doctrine, no caveat in the ruling specifying that this only applies to one man: Donald Trump. There cannot be because that would be prejudicial and unconstitutional. Therefore, we are ALL sitting ducks. And whoever wields the baton of power can influence the gavel. If power migrates to a party or official that doesn’t like you, you can bet your bottom dollar that this ruling can be used to target you too. The appeals court knows and understands this, which is why I am pretty confident they will not open Pandora’s box and allow this crazy ruling to stand. The first evidence of this is the reduction in the amount of the bond. One prominent law professor opined that “the $175M reduction…shows that the appellate division has serious concerns about the validity of Judge Engoron’s decision.” A potential ramification of this decision is that it may incite a spate of lawsuits filed by homeowners against local municipalities. After all, municipal assessments of property value are, according to this ruling, deemed the gold standard. It therefore stands to reason that local assessors will soon be held to account for their work, should their valuations be misaligned with demonstrated market value, particularly in the wake of a recent sale. Take those properties that are over-assessed in highly taxed counties like Westchester. Such properties routinely sell for less than the amount for which they are assessed. With heightened attention and importance placed on the assessment rather than the market as a determination of value, shouldn’t this new ruling open the potential for lawsuits to spring up from homeowners angered by the fact that their home sold less than what the municipality appraised it for? Particularly considering the damages incurred from overpaid taxes… Just a thought.
Getting back to Jon Stewart, who recently mocked Mr. O’Leary’s media rant, then adopted a visage of gravitas, looked into the camera and declared “these are NOT victimless crimes. A loan that goes to the liar, doesn’t go to someone who gives a more honest valuation. So the system becomes incentivized for corruption.” He goes on to indignantly proclaim with a righteous finger wag that “avoiding taxes hurts all of us,” to a crowd awed to silence by this epic “own.” Only one problem. Jon Stewart, like the rest of the nation, is guilty of the exact same crime. As it turns out, in 2014, he sold his Tribeca condo for well above it’s appraised value…to the tune of 829% above it’s taxable value. It sold for $17.5 million, yet he was only paying taxes on an assumed valuation of $1.882 million. To make matters worse, the buyer of his condo took a loss on the property in 2021, and had to re-sell it for only $13 million. So Jon Stewart is not only a hypocrite, he’s a criminal. And as our righteous attorney general points out, no one is above the law…
Now, let’s get serious. Did Jon Stewart commit a crime? No. Did you when you re-financed or sold last month/year/week? No. Did Donald Trump? No. As much as you may hate the man….so much so that your finger itches every time you scroll past the meme of his private jet with the boot on the tire… resist the urge to delight in this ruling. It may well come for you one day, and you won’t be smiling when it does.
The Real Estate Diva 
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