vs.
Respondent.
Case No. 16-2583PL
Pursuant to notice, a final hearing was held in this case on July 11, 2016, in Tallahassee, Florida, before E. Gary Early, a designated Administrative Law Judge of the Division of Administrative Hearings.
Joseph M. Helton, Jr., Esquire Department of Business and
Professional Regulation Office of the General Counsel 2601 Blair Stone Road Tallahassee, Florida 32399
Whether Respondent, Jason Dwight Walker, prepared a preconstruction appraisal report that was in violation of the Uniform Standards of Professional Appraisal Practice (USPAP), and thus section 475.624(4), Florida Statutes, and Florida Administrative Code Rule 61J1-9.001, as alleged in the First Amended Administrative Complaint and, if so, the sanctions to be imposed.
On February 26, 2016, the Department of Business and Professional Regulation (Department or Petitioner) filed its First Amended Administrative Complaint (Administrative Complaint) against David Dwight Walker (Respondent). The Administrative Complaint, consisting of three counts, alleged violations of the USPAP, specifically USPAP Standards
Rules 1-1(b) and 1-2(e)(1) and the USPAP Record Keeping Rule and, therefore, violations of section 475.624(4) and rule 61J1- 9.001, and requested that the Real Estate Appraisal Board (Board) assess unspecified penalties against Respondent’s state- certified residential real estate appraisal license, No. RD 3588 (license).
On March 11, 2016, Respondent filed his Petition for Formal Hearing, in which he disputed material allegations and requested a formal administrative hearing.
On May 10, 2016, Petitioner referred the petition to the Division of Administrative Hearings. The final hearing was scheduled for July 11, 2016, and was held as scheduled.
At the final hearing, Petitioner presented the testimony of James Courchaine, an Investigative Specialist II with the Department; Stephen Newman, the residential contractor for the property at issue; and Michael Rogers, a certified appraiser, who was accepted as an expert in real estate appraising, appraisal practice, and uniform standards. Petitioner’s Exhibits 3 through 8, and 13 through 16 were received in evidence. Respondent testified on his own behalf, and Respondent's Exhibit 5 was received in evidence. The parties jointly offered Joint Exhibit 1, which was received in evidence.
On August 1, 2016, a one-volume Transcript of the proceedings was filed, and notice thereof was entered on the Division of Administrative Hearings’ on-line docket.
The parties timely filed their post-hearing submittals, which have been considered in the preparation of this Recommended Order.
The actions that form the basis for the Administrative Complaint occurred in June 2012. This proceeding is governed by the law in effect at the time of the commission of the acts alleged to warrant discipline. See McCloskey v. Dep’t of Fin.
Servs., 115 So. 3d 441 (Fla. 5th DCA 2013). Accordingly, all
statutory and regulatory references shall be to the 2011 versions, unless otherwise specified.
The Department is the agency of the State of Florida having authority, among its other duties and responsibilities, to regulate the practice of real estate. The Division of Real Estate is a legislatively-created division of the Department. The Board is established within the Division of Real Estate and is vested with the authority to administer chapter 475, Part II, Florida Statutes, and to enforce the provisions thereof.
Respondent holds a license as a state-certified residential real estate appraiser, No. RD 3588.
On or about June 20, 2012, Respondent contracted to perform a preconstruction appraisal report for a residential home (the Proposed Home) to be constructed at 14682 Northwest Pea Ridge Road, Bristol, Florida. The prospective owners were Thomas Ryan Cherry and Jessica Rogers Cherry (the Owners).
The Proposed Home’s internal area was to be 3,458 square feet in size. The issue that forms the basis for the Administrative Complaint is the amount of that area that was to be built-out as the Gross Living Area (GLA) of the home.
Petitioner has alleged that Respondent failed to consider the entire eight-page construction contract that governed the construction of the Proposed Home. As will be
discussed in greater detail herein, the contract between the building contractor, Stephen Newman, and the Owners consisted of four numbered pages, the fourth page of which contained only a statutorily-required notice regarding construction defect claim procedures and the signature blocks. The contract also included a separately styled, numbered, and signed five-page Description of Materials. Page five of the Description of Materials included a provision that “[s]econd story will be framed and left unfinished. Owner to complete at future date. One 36” exterior door to be installed at head of stairs.”
Respondent was retained to perform a preconstruction appraisal by the appraisal management company, StreetLinks Lender Solutions (StreetLinks), which was acting as the agent for First Federal Bank of Florida (Lender). The Lender was the client for the appraisal, but Respondent’s selection was performed at the sole discretion of StreetLinks.
The appraisal agreement prohibited Respondent from contacting the Lender prior to delivery of the final appraisal report, or from attempting to obtain value or loan information from the Owners. Thus, of the parties to financing, StreetLinks was the sole allowable point of contact. The only plausible inference is that the information provided to Respondent in aid of the appraisal was provided by StreetLinks, or at StreetLinks’ direction.
Respondent was provided with the first three pages of the contract. The Contract provided that the Proposed Home was to be constructed “from Owner provided plans,” that “[t]he owner provided plans and Builder’s Description of Materials are part of this contract,” and that “[o]wner agrees to not inhabit the dwelling until all construction is complete, certificate of occupancy is obtained, and all funds to builder have been paid.” Respondent included the construction contract provided to him in his work file.
Respondent was provided with two floor plan sheets that depicted the two-story home at issue in its fully built-out and completed form. The floor plans included the layout of the Proposed Home, and general depictions of fixtures, counters and cabinets, lighting, fans and wiring. Respondent included the floor plan sheets in his work file.
In order to confirm the nature of the building to be constructed, Respondent called the contractor, Mr. Newman, and had a conversation with him that lasted approximately 30 minutes. Mr. Newman testified that he provided Respondent with the dimensions of the second floor and the location of the various rooms, information that Respondent sought in order to confirm information contained in the floor plans. Respondent made an accurate sketch of the configuration of the second floor
based on his conversation with Mr. Newman. Furthermore, access to the attic was described on Respondent’s specification sheet notes as “scuttle,” and not “stairs,” information that could only have been gathered from either Mr. Newman or the floor plans.
Mr. Newman did not have a firm recollection of whether he provided Respondent with information regarding the materials, appliances, and finishes to be used in the Proposed Home. Nonetheless, a preponderance of the evidence, including Respondent’s testimony and contemporaneous notes of the conversation, indicates that Mr. Newman provided Respondent with that information, though the evidence also suggests that
Mr. Newman understated the high quality of some of the finishes.
At no time during the conversation did Mr. Newman indicate that the second floor was not going to be finished as depicted in the plans, and would instead be considered “attic space.” Mr. Newman denied that he had any responsibility to advise Respondent that it was not his intent to build-out the second floor in accordance with his described configuration, despite the fact that floor plans depicting a completed second floor were sent to the Owners under his signature, and were thereafter provided to Respondent. It is simply not credible that such would not have been disclosed over the course of a lengthy and in-depth conversation under the excuse that “it’s
not my job to,” unless there was an intent to convince Respondent that the Proposed Home would be built in accordance with the plans.
Respondent included specification sheet notes and his second floor sketch from his conversation with Mr. Newman in his work file. Using the plans, contract, and other information as to the property independently obtained by Respondent, and taking into account the information received from Mr. Newman, Respondent developed and communicated an appraisal report,
No. 7393A, with an effective date of June 29, 2012. The appraised value of the Proposed Home was $250,000. That amount was consistent with and supported by properties of a size comparable to a 3,458 square foot home in the area.
The house was constructed in accordance with the contract and Description of Materials. The second floor was framed and floored, and plumbing was stubbed out, but it was not finished so as to be considered GLA.
The house as constructed contained a GLA of 2,014 square feet.1/ However, due to the very high quality (and expense) of cabinets, flooring, and fixtures, the cost of construction of the 2,014 square foot GLA home was $232,645, an amount very close to the $250,000 appraised (and financed) value. It is surprisingly (or not so surprisingly) serendipitous that the cost of the smaller home was so close to
the appraised value of the larger home. It seems more than a happy coincidence that the Owners and the contractor had sufficient financing to account for the luxurious finishes.
Respondent was not retained to do the draw inspections or the final inspection. Thus, he could not have known that the home as constructed was not consistent with the plans provided to him by StreetLinks, or with the description of the Proposed Home as discussed with Mr. Newman.
On or about June 14, 2013, the Lender filed a complaint with the Division of Real Estate alleging misfeasance in the preparation of the appraisal.2/ The documents submitted to the Division with the complaint did not include the two floor plan sheets that had been provided to Respondent, but did include the contract signature page and the Description of Materials that had not been provided to Respondent.
By letter dated August 14, 2013, the Lender, through its counsel, advised Respondent that it believed Respondent to have negligently prepared the appraisal, with the negligent act being Respondent’s failure to recognize that the second floor of the home was to remain unfinished. The letter provided, in part, that:
Via the appraisal, you represented that you reviewed the construction contract between the builder and the Property owner. I have attached a copy of that contract for your ease of reference as Exhibit “B” hereto.
However, the construction contract clearly indicates that the second story of the home would be left unfinished. Your appraisal failed to recognize this fact and now the home, as built, is nowhere near your appraised value.
The letter did not include Exhibit “B.” Respondent kept the letter and other communication with the Lender in his work file.
On September 4, 2013, Respondent sent an email to the Lender’s counsel, asking that “Exhibit B” of the Lender’s letter be provided to him. In response, the letter with all of the exhibits was sent to Respondent by email that same day.
Exhibit “A” of the Lender’s letter consisted of a Certificate of Compliance from the Lender’s agent, StreetLinks, and a complete copy of Respondent’s appraisal report.
Exhibit “B” of the Lender’s letter included the same three-page construction contract that was contained in Respondent’s work file. It contained the same letter from
Mr. Newman to the property owners. Finally, it contained floor plans for the home but, surprisingly (or not so surprisingly), it included only the floor plan sheet for the first floor of the Proposed Home. The Lender’s Exhibit “B” did not include the floor plan for the second floor of the Proposed Home that had been originally provided to Respondent by or on behalf of its agent, StreetLinks. Exhibit “B” of the Lender’s letter to
Respondent did not include the Description of Materials with the provision that the second story of the home would be left unfinished.
At the hearing, Petitioner offered what was represented to be the complete contract as an exhibit. The contract offered was four pages and, but for the statutorily required notice regarding construction defect claim procedures and the signature blocks, was identical to the contract in Respondent’s workfile. The exhibit also included the separately styled and signed Description of Materials. As set forth herein, the Description of Materials was not provided to Respondent by or at the direction of StreetLinks, or otherwise.
In analyzing the issues in this case, the undersigned paid close attention to the opinion of Petitioner’s expert witness, Mr. Rogers. Mr. Rogers opined that Respondent should have engaged in greater inquiry that would have revealed that the second floor was to remain unfinished, and as a result the GLA was stated, melodramatically, to be “tragically overstated.”
In his testimony, and his report which was received in evidence, Mr. Rogers noted that Mr. Newman’s cover letter to the Owners referenced a description of materials, estimate, and legal description. He noted that “it is actually atypical for the owner or lender to supply all of the information about the subject property the appraiser will need to produce credible
assignment results.” In instances of insufficient documentation, Mr. Rogers testified that among the options for dealing with that occurrence is for the appraiser “to go find that documentation and complete the assignment.”
Mr. Rogers believed that Respondent should have made “a request to the lender” for the referenced materials, apparently being unaware that the terms of Respondent’s engagement with StreetLinks prohibited such contact. He further opined that Respondent’s communication with Mr. Newman “was insufficient . . . to an accurate description of the proposed home,” and that “[e]xpansion of the conversation with the builder . . . was necessary.” How he was able to determine the sufficiency of a conversation to which he was not privy was not explained, and his opinion in that regard is given no weight.
Based on the totality of the evidence in this case, Respondent obtained information that was reasonably calculated to identify the relevant characteristics of the subject property. The contract, the complete floor plans for the first and second floors of the home, and the lengthy conversation with the builder were sources that were objectively reasonable and reliable, and consistent with USPAP and the Department’s statutory and regulatory authority.
Mr. Rogers acknowledged that complete floor plans are an appropriate source for information regarding the
characteristics of an appraised property. However, he discounted Respondent’s reliance on such floor plans in this case. His explanation for doing so was not compelling or persuasive, and is not accepted. Rather, the information used by Respondent, as described herein, was sufficient to identify the extent and character of the proposed improvements.
CONCLUSIONS OF LAW
Jurisdiction
The Division of Administrative Hearings has jurisdiction over the subject matter of this proceeding and of the parties thereto pursuant to sections 120.569 and 120.57(1), Florida Statutes (2016).
Standards
Section 475.624 provides, in pertinent part, that:
The board may deny an application for registration or certification of an appraiser; may investigate the actions of any appraiser registered, licensed, or certified under this part; may reprimand or impose an administrative fine not to exceed
$5,000 for each count or separate offense against any such appraiser; and may revoke or suspend, for a period not to exceed 10 years, the registration, license, or certification of any such appraiser, or place any such appraiser on probation, if the board finds that the registered trainee, licensee, or certificateholder:
* * *
(4) Has violated any provision of this part or any lawful order or rule issued under this part or chapter 455.
Rule 61J1-9.001, as amended on January 30, 2012, provided that:
All registered, licensed, or certified appraisers shall comply with the 2012-2013 Uniform Standards of Professional Appraisal Practice (USPAP), effective January 1, 2012, which is incorporated by reference.
USPAP Standards Rule 1-1(b) provides that:
In developing a real property appraisal, an appraiser must:
* * *
(b) not commit a substantial error of omission or commission that significantly affects an appraisal[.]
The USPAP “Comment” that accompanies Standards Rule 1-1(b) provides that:
An appraiser must use sufficient care to avoid errors that would significantly affect his or her opinions and conclusions.
Diligence is required to identify and analyze the factors, conditions, data, and other information that would have a significant effect on the credibility of the assignment results.
The USPAP Record Keeping Rule provides, in pertinent part, that:
An appraiser must prepare a workfile for each appraisal, or appraisal review, or appraisal consulting assignment. . . .
The workfile must include:
* * *
all other data, information, and documentation necessary to support the appraiser’s opinions and conclusions and to show compliance with USPAP, or references to the location(s) of such other documentation[.]
USPAP Standards Rule 1-2(e)(1) provides that:
In developing a real property appraisal, an appraiser must:
* * *
(e) identify the characteristics of the property that are relevant to the type and definition of value and intended use of the appraisal, including:
* * *
(i) its location and physical, legal, and economic attributes[.]
The USPAP “Comment” that accompanies Standards Rule 1-2 provides that:
Comment on (i)–(v): The information used by an appraiser to identify the property characteristics must be from sources the appraiser reasonably believes are reliable.
An appraiser may use any combination of a property inspection and documents, such as a physical legal description, address, map reference, copy of a survey or map, property sketch, or photographs, to identify the relevant characteristics of the subject property.
When appraising proposed improvements, an appraiser must examine and have available
for future examination, plans, specifications, or other documentation sufficient to identify the extent and character of the proposed improvements.
Identification of the real property interest appraised can be based on a review of copies or summaries of title descriptions or other documents that set forth any known encumbrances.
An appraiser is not required to value the whole when the subject of the appraisal is a fractional interest, a physical segment, or a partial holding. (emphasis added).
The Burden and Standard of Proof
The Division bears the burden of proving the specific allegations that support the charges alleged in the First Amended Administrative Complaint by clear and convincing evidence. Dep’t of Banking & Fin., Div. of Sec. & Inv. Prot. v. Osborne Stern & Co., 670 So. 2d 932 (Fla. 1996); Ferris v.
Turlington, 510 So. 2d 292 (Fla. 1987); Pou v. Dep’t of Ins. & Treasurer, 707 So. 2d 941 (Fla. 3d DCA 1998).
Clear and convincing evidence “requires more proof than a ‘preponderance of the evidence’ but less than ‘beyond and to the exclusion of a reasonable doubt.’” In re Graziano,
696 So. 2d 744, 753 (Fla. 1997). The clear and convincing evidence level of proof
[E]ntails both a qualitative and quantitative standard. The evidence must be credible; the memories of the witnesses must be clear and without confusion; and the sum total of
the evidence must be of sufficient weight to convince the trier of fact without hesitancy.
Clear and convincing evidence requires that the evidence must be found to be credible; the facts to which the witnesses testify must be distinctly remembered; the testimony must be precise and explicit and the witnesses must be lacking in confusion as to the facts in issue. The evidence must be of such weight that it produces in the mind of the trier of fact a firm belief or conviction, without hesitancy, as to the truth of the allegations sought to be established.
In re Davey, 645 So. 2d 398, 404 (Fla. 1994) (quoting, with
approval, Slomowitz v. Walker, 429 So. 2d 797, 800 (Fla. 4th DCA 1983)); see also In re Henson, 913 So. 2d 579, 590 (Fla. 2005).
"Although this standard of proof may be met where the evidence is in conflict, it seems to preclude evidence that is ambiguous." Westinghouse Elec. Corp. v. Shuler Bros., 590 So. 2d 986, 989 (Fla. 1st DCA 1991).
The provisions of law upon which this disciplinary action has been brought are penal in nature, and must be strictly construed, with any ambiguity construed against the Petitioner. Penal statutes must be construed in terms of their literal meaning and words used by the Legislature may not be expanded to broaden the application of such statutes. Elmariah v. Dep’t of Bus. & Prof’l Reg., 574 So. 2d 164, 165 (Fla. 1st
DCA 1990); see also Beckett v. Dep’t of Fin. Servs., 982 So.
2d 94, 100 (Fla. 1st DCA 2008); Whitaker v. Dep’t of Ins., 680
So. 2d 528, 531 (Fla. 1st DCA 1996); Dyer v. Dep’t of Ins. & Treasurer, 585 So. 2d 1009, 1013 (Fla. 1st DCA 1991).
Analysis
Count I
Having weighed and considered the testimony and evidence presented at the final hearing, and based upon the findings of fact made herein, the undersigned concludes that Petitioner did not prove, by clear and convincing evidence, that Respondent failed to use sufficient care to avoid errors that would significantly affect his or her opinions and conclusions. Rather, Respondent exercised diligence to identify and analyze the factors, conditions, data, and other information that would have a significant effect on the credibility of his appraisal report. Thus, although the appraisal was not accurate due to substantial errors of omission or commission on the part of StreetLinks and Mr. Newman, Respondent’s reasonable reliance on the information provided to him demonstrates that Respondent did not fail to use sufficient care or diligence in developing the real property appraisal.
For the reasons set forth herein, Petitioner failed to prove, by clear and convincing evidence, that Respondent
violated USPAP Standards Rule 1-1(b), rule 61J1-9.001, or section 475.624(4) as alleged in Count I of the First Amended Administrative Complaint.
Count II
Having weighed and considered the testimony and evidence presented at the final hearing, and based upon the findings of fact made herein, the undersigned concludes that Petitioner did not prove, by clear and convincing evidence, that Respondent failed to prepare a workfile for the subject appraisal. Rather, Respondent prepared and maintained a workfile that included data, information, and documentation, including, but not limited to, the two-story floor plans and his notes of the conversation with Mr. Newman, that was reasonably and objectively necessary to support his opinions and conclusions and to show compliance with USPAP.
For the reasons set forth herein, Petitioner failed to prove, by clear and convincing evidence, that Respondent violated the USPAP Record Keeping Rule, rule 61J1-9.001, or section 475.624(4) as alleged in Count II of the First Amended Administrative Complaint.
Count III
Having weighed and considered the testimony and evidence presented at the final hearing, and based upon the findings of fact made herein, the undersigned concludes that
Petitioner did not prove, by clear and convincing evidence, that Respondent failed to identify the characteristics of the Proposed Home relevant to the type and definition of value and intended use of the appraisal, including its location and physical, legal, and economic attributes. Rather, Respondent identified the property characteristics from sources that he reasonably believed, and which objectively should have been, reliable. Under the facts of this case, Respondent examined and maintained the plans, specifications, or other documentation, including, but not limited to, the two-story floor plans and his notes of the conversation with Mr. Newman, that were reasonably and objectively sufficient to identify the extent and character of the Proposed Home.
For the reasons set forth herein, Petitioner failed to prove, by clear and convincing evidence, that Respondent violated the USPAP Standards Rule 1-2(e)(1), rule 61J1-9.001, or section 475.624(4) as alleged in Count II of the First Amended Administrative Complaint.
Conclusion
The evidence in this case suggests that there may have been efforts on the part of persons other than Respondent to inflate the valuation of the Proposed Home in order to provide the financing necessary for the construction of a smaller home with more luxurious and expensive fixtures and finishes than
normal. Regardless, Respondent was provided with information that was objectively reliable and sufficient for him to perform the appraisal, and his reliance on that information was not a violation of USPAP, or the statutes and rules under which Petitioner exercises its authority.
RECOMMENDED that the Department of Business and Professional Regulation, Real Estate Appraisal Board, enter a final order dismissing the First Amended Administrative Complaint.
DONE AND ENTERED this 31st day of August, 2016, in Tallahassee, Leon County, Florida.
Filed with the Clerk of the Division of Administrative Hearings this 31st day of August, 2016.
1/ The completed GLA figure was derived by subtracting the area of the 38’ x 38’ second floor (1,444 square feet) from the 3,458 Proposed Home total square feet.
2/ The complaint was filed on behalf of the Lender by Kenneth Hart. Prior to the filing of the complaint, Mr. Hart worked for the Division of Real Estate. He left that position and went to work for the Lender for a time. By the time the investigation became active, Mr. Hart had returned to the employ of the Division of Real Estate. Though the interview process must have been made easier by Mr. Hart’s presence in the Division’s offices, there was no evidence of undue pressure or favoritism resulting from the complainant’s employment by the Division.
Joseph M. Helton, Jr., Esquire Department of Business and
Professional Regulation Office of the General Counsel 2601 Blair Stone Road Tallahassee, Florida 32399 (eServed)
15 days from the date of this recommended order. Any exceptions to this recommended order should be filed with the agency that will issue the final order in this case.
