The Issue The legal issues are: Whether the Respondent violated Section 475.624(2), Florida Statutes, by culpable negligence or breach of trust in a business transaction; Whether the Respondent violated Section 475.624(14), Florida Statutes, by violating standards for the development or communication of a real estate appraisal or other provision of the Uniform Standards of Professional Appraisal Practice; Whether the Respondent violated Section 475.624(15), Florida Statutes, by having failed to exercise reasonable diligence in the developing or preparing an appraisal.
Findings Of Fact Petitioner is a state agency charged with regulation of real estate appraisers. Respondent is a licensed state-certified general real estate appraiser holding license number 0479378 issued by the Petitioner. Her most recent business address is 416 Oleander Avenue, Daytona Beach, Florida 32118-4034. In July 1991, Neil A. Braley and Charlene J. Johnson engaged Lawrence Johnson and Associates, Inc. to make an appraisal of a business and real property located at 729 Broadway, Daytona Beach, Florida. Mr. Braley specifically asked for an investment value on the property for the purpose of dissolving the partnership which operated the business to be appraised. TX-74, line 10. Harold Rose, the owner and president of Lawrence Johnson and Associates, Inc., (hereafter "Johnson Associates") contracted with the Respondent to "work up the numbers for an income approach of what the business, land, and improvements which belonged to the partnership." The Respondent was charged to work up what that partnership had invested in that property; business, land, and improvements. See TX-75, line 16. Johnson Associates prepared the appraisal and Rose reviewed the finished product. Because of the demands for completion by Braley, Rose did not carefully review the appraisal, which was the first one prepared by the Respondent. Rose failed to catch the fact that the appraisal stated that it was based on "market value" rather than investment value. Braley received the appraisal, and was pleased, thanking Rose for the job. See TX 80, line 10. The appraisal states under the "Assumptions and Limiting Conditions" that "no right is given to publish this report, or any part of it, without written consent of the maker." No request for release of the appraisal was ever received by Rose. The appraisal which the Respondent worked up, and which she signed, states that the fair market value of the subject property is $570,000. It should have stated that the investment value of the business was $570,000. In December 1991, Raymond H. Heffington and Mark A. Carper did another appraisal of 729 Broadway and determined that the fair market value of the real property was $220,000. At the time of the appraisal, the business was in the process of closing out. In Heffington's opinion, Respondent's appraisal was deficient in required analysis, documentation, and presentation based upon the Respondent's reliance on the income approach for the basis of her evaluation of the real property. TX-28, line 22. Clifford E. Fisher, an expert in real estate appraisal, opined that the Respondent's appraisal report did not make it clear what interests were being appraised, and went beyond appraising the fee simple interest, i.e., appraised more than the real property. Fisher stated that both failings were a violation of uniform standards. The Respondent admitted that she failed to catch the statement in the appraisal report, which she signed, that stated that it was an appraisal of the fair market value.
Recommendation Based upon the consideration of the facts found and the conclusions of law reached, it is, RECOMMENDED: That the Respondent be fined $500. DONE and ENTERED this 23rd day of May, 1994, in Tallahassee, Florida. STEPHEN F. DEAN, Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 23rd day of May, 1994. APPENDIX CASE NO. 93-3987 Both parties submitted proposed findings which were read and considered. The following states which of those findings were adopted, and which were rejected, and why: Petitioner's Findings Action Taken Paragraphs 1-9 Adopted. Respondent's Findings Action Taken/Why Paragraph 1 First portion adopted; second portion irrelevant. Paragraph 2 First portion irrelevant; second portion adopted; lending institution's losses are irrelevant because the report on its face should have only been provided upon written permission of the report's maker. Paragraph 3 Adopted. COPIES FURNISHED: Steven W. Johnson, Esquire Department of Business and Professional Regulation Division of Real Estate Post Office Box 1900 Orlando, FL 32802-1900 Arthur M. Ossinsky, Esquire 500 North Oleander Avenue Daytona Beach, FL 32118 Darlene F. Keller, Director Division of Real Estate Department of Business and Professional Regulation P.O. Box 1900 Orlando, FL 32802-1900 Jack McRay, Esquire Department of Business and Professional Regulation Northwood Centre, Suite 60 1940 North Monroe Street Tallahassee, FL 32399-0792
The Issue At issue is whether Respondent committed the violations set forth in the Administrative Complaint dated April 2, 2002, and, if so, what penalty should be imposed.
Findings Of Fact Petitioner is a state agency responsible for the licensing, regulation and discipline of real estate appraisal licensees in Florida. At all times material to this case, Respondent was a Florida state-certified residential real estate appraiser. Persons holding such licenses are required by law to assure that the state is apprised of the licensee's physical address. The purpose of the law is to assure that state regulators, as well as clients who may have issues regarding appraisals performed by the licensee, are able to contact the appraiser in a timely manner. At all times material to the charges against him, Respondent registered with Petitioner the address of 5299 West 28th Avenue, Hialeah Gardens, Florida 33016 as his current address. On or about February 2, 1996, Respondent developed and communicated an appraisal report for residential property located at 28204 Southwest 43 Court, Homestead, Florida 33033 (subject property). On or about August 12, 1999, Petitioner received a complaint concerning this appraisal. In furtherance of its legal obligation to investigate such complaints, Petitioner promptly wrote to Respondent at his registered address. The letter was not returned, and thus a legal presumption arises that it was received by the person(s) residing on the premises. That person was Respondent's mother. At the time the letter was sent and received at Becerra's registered address, Becerra himself was living in Colorado. Because Becerra had never notified Petitioner of the change of address; (there is no evidence as to whether Becerra's mother did or did not forward or otherwise deal with her son's mail) the state was thwarted in its efforts to determine the bona fides of the complaint. Eventually, Becerra came back into compliance with his obligation to provide the state with an accurate address. On January 29, 2002, state investigator Brian Piper (Piper) arranged to meet Becerra at his new location, 665 West 35th Street, Hialeah, Florida, a private residence where Becerra maintained a home office. Becerra knew that the purpose of Piper's visit was to investigate the 1999 complaint regarding his appraisal of the subject property in particular, and Becerra's appraisal business in general. Under Florida law, real estate appraisers must maintain a file with all documents pertaining to an appraisal for at least five years after the date of the issuance of the appraisal, and for at least two years after final disposition of any judicial proceeding in which testimony concerning the appraisal was given, whichever period expires last. Thus, by the time Piper met with Becerra regarding the February 2, 1996 appraisal, Becerra was no longer legally obligated to have documents relating to that appraisal in his possession. He was, however, required to cooperate with Piper's investigation. Instead, he was hostile, suspicious, and secretive in his dealings with Piper. Becerra would have been within his rights to say, unambiguously, that the file concerning this appraisal, or any 1996 appraisal for that matter, had been discarded in the ordinary course of business sometime after the five-year statutory record keeping period expired. Becerra did not make such a representation. Instead, he suggested to Piper that his documents were maintained on a computer, and/or at another location. As an afterthought, he raised the possibility that the documents no longer existed. Piper asked, as he was entitled to do, questions regarding Becerra's practices regarding the development and maintenance of records concerning appraisals. Becerra refused to answer. Frustrated in his efforts to determine whether the complaint regarding the 1996 appraisal was valid, Piper sought to exercise on behalf of the state its right to conduct a spot- audit of Becerra's books and records related to pending appraisals. Observing what appeared to be appraisal request forms taped to the wall of the Becerra's office, Piper sought access to the files concerning these appraisals. Becerra refused to cooperate and demanded that Piper leave his home/office. Becerra did not then and did not at hearing claim that Piper had requested information or made demands that he was not lawfully entitled to request or make. Instead, he contended that because more than five years had elapsed between the date of the appraisal and the time the state was able to find Becerra to ask him to produce the documents, Becerra cannot be disciplined for failing to produce the documents. The evidence established that Piper and DBPR acted at all times reasonably and in accordance with their legal duty to investigate specific complaints and to, more generally, monitor the operations of state-licensed appraisers to assure that they are performing their jobs in accordance with Florida law and the public interest. The evidence further established that Becerra's failure to fulfill his statutory duty to keep the state informed of his whereabouts was the sole reason the state had been unable to directly inform Becerra of its need to review the documents, and to conduct appropriate investigations into the quality of the February 2, 1996, appraisal; and, later, into the management of his appraisal business at the time of Piper's visit to Becerra's home office on January 29, 2002. A comparison of the February 2, 1996, appraisal for the subject property with public records which were available at the time the appraisal was rendered revealed several discrepancies. For example, the appraisal reported an incorrect folio number for the subject property, an error which Becerra admits. In addition, the appraisal contained inaccurate information regarding the then-owner of the property and the square footage of the house. It also omitted reference to a previous sale, and made no mention of the fact that the subject property was located in a gated community. Transactions cited in the appraisal as comparable sales were not, in fact, comparable. The appraisal left out the impacts of Hurricane Andrew upon the property; those impacts were, at the time of the appraisal, significant. While the evidence is sufficient to establish that the appraisal was not a model of accuracy and attention to detail, the absence of Becerra's records, coupled with the fact that several pages of the appraisal were missing from the (anonymous) complaint which precipitated the investigation, render it impossible to determine whether Becerra did, in fact, fail to fulfill the minimum standards expected in an appraisal prepared by a Florida licensee. By the time the state was able to locate Becerra and conduct its investigation, the statutory period for which documents pertaining to the appraisal had expired, and it was no longer possible to determine whether Becerra had fulfilled his legal duty to maintain the file for five years. Additionally, it was no longer possible to determine whether there were credible explanations for the discrepancies and apparent errors in the appraisal of the subject property, or whether he had in fact performed the appraisal negligently. Becerra unlawfully failed and refused to cooperate with the state's reasonable inquiry into his current appraisal cases.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law it is RECOMMENDED that a Final Order be entered finding Respondent guilty of violating Section 475.624(1), Florida Statutes, by reason of his violations of Sections 475.623 and 425.626(1)(f), Florida Statutes, imposing a fine of $5,000 and permanently revoking respondent's real estate appraisal license. DONE AND ENTERED this 10th day of July, 2003, in Tallahassee, Leon County, Florida. S FLORENCE SNYDER RIVAS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 10th day of July, 2003. COPIES FURNISHED: Sergio A. Becerra 665 West 35th Street Hialeah, Florida 33012 Juana Carstarphen Watkins, Esquire Department of Business and Professional Regulation Hurston Building, North Tower, Suite N308 400 West Robinson Street Orlando, Florida 32801 Frank Gregoire, Chairman Real Estate Appraisal Board Department of Business and Professional Regulation Post Office Box 1900 Orlando, Florida 32802-1900 Hardy L. Roberts, III, General Counsel Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-2202
Findings Of Fact Respondent is a state certified general appraiser, holding license number RI 0000912. In late 1993 First Sarasota Mortgage Company hired the appraisal company for which Respondent worked to prepare a "small income property report." This was a short form appraisal report used for multifamily housing, up to seven attached units. Respondent visited the subject duplex to meet the borrower and inspect the property. He found the duplex in bad disrepair. The building was constructed in 1928. Forty or fifty years ago a prior owner removed a second story from the building, leaving it a single-story building. The interior walls are the original walls of the building, which is a legal nonconforming use in an area without other duplexes or similar properties. The building also suffered from a serious termite inspection. Respondent reported what he had seen to the loan officer at First Sarasota. He told her that the property had considerable deferred maintenance and was not as represented by the borrower to the bank. Contrary to the borrower's assurances, the building was infested with termites, either uninsured or underinsured, and not owner-occupied. The loan officer instructed Respondent to continue the appraisal and try to find comparables. After about two and one- half days of research over a five day period, during which time he kept the loan officer informed of his lack of progress, Respondent contacted the loan officer and told her what he had found. After searching in a 15 mile-radius Respondent had still been unable to find properties that did not require large adjustments due to the age or condition of the property. The loan officer agreed that the comparables were useless. Respondent asked her whether he should continue the project or stop. She said that she would talk to the borrower and get back to Respondent. The loan officer called Respondent the next day and said stop working on the project. The loan officer denied the loan application, evidently due to the inadequacy of the property to be mortgaged. Although the lender ordered the appraisal, the borrower had paid the lender in advance for the appraisal. Respondent went to his supervisor and explained that the borrower had already paid $450, and Respondent felt uncomfortable not giving him anything. Respondent suggested that they provide the lender with a letter of opinion based on their opinion of the worth of the property using a cost approach, omitting the market and income approaches due to the absence of comparables. The supervisor approved the issuance of a letter of opinion. A copy of the letter went to the borrower. Respondent did not hear from the borrower for some time after issuing the letter of opinion. Then the borrower asked for a formal appraisal report. Respondent offered a partial refund or the letter of opinion, but the borrower insisted on a formal appraisal report. which Respondent could not provide. The letter of opinion is on the letterhead of Respondent's employer and is dated October 4, 1993. Addressed to First Sarasota, the letter, which is signed by Respondent, describes the property and states: After a thorough inspection of the property, an intensive search of the Lee County Property appraisers tax records, the last three years of recorded sales taken from the Lee County REDI records, sales from the past two years taken from the Ft. Myers MLS and telephone interviews with local realtors and appraisers, it is our opinion that if an appraisal were to be per- formed on this property, the estimated fair market value of the subject property as of the date of inspection, 09/02/93, would be $65,000 to $75,000. The one-page letter explains in detail the calculations under the cost approach for the property, leading to a total value of $92,000 for land and building. A note adds that the cost approach was given little weight due to the magnitude of needed repairs, including repairs for termite damage. The final sentence of the letter states: "This is a letter of opinion only and is not meant to be misinterpreted or utilized as an appraisal." Twice, the letter disclaims being an appraisal report. The letter is accurate, reasonably detailed, and carefully conditioned. The main issue in the case is whether the letter of opinion is a permissible alternative to a formal appraisal report under the Uniform Standards of Professional Appraisal Practice (USPAP) that are incorporated into the disciplinary statutes. Statement of Appraisal Standards No. 7 was adopted on March 22, 1994, and is included in the 1995 USPAP. Statement No. 7 addresses the situations under which an appraiser may perform an assignment that calls for something less than, or different from, a formal appraisal, as required by USPAP standards. The commentary identifies the issue as follows: Throughout the history of real property appraisal practice, a perception has existed that certain types of transactions in the real estate market require something less than or different from a Complete Appraisal. The phrase something less than or different from in this context has meant a Limited Appraisal and a condensed report. To distinguish this type of assignment from a Complete Appraisal, different names have been created for this activity, including Letter Opinion of Value, Update of an Appraisal, Recertification of Value, and, more recently, Evaluation of Real Property Collateral. 1995 USPAP, page 73. Statement No. 7 proceeds to describe a "complete appraisal" and "limited appraisal" and a "self-contained appraisal report," "summary appraisal report," and "restricted appraisal report." Mentioning a provision that permits an appraiser to enter into an agreement that "calls for something less than, or different from, the work that would otherwise be required by the specific guidelines," Statement No. 7 explains: This provision goes on to permit limited departures from specific guidelines provided the appraiser determines the appraisal process is not so limited as to mislead the client and intended users of the report, the appraiser advises the client of the limitations and discloses the limitations in the report, and the client agrees that the limited service would be appropriate. 1995 USPAP, page 73. After an extended discussion of the types of appraisal reports and appraisals, Statement No. 7 concludes in part: Clarification of Nomenclature Various nomenclature has been developed by clients and client groups for certain appraisal assignments. The development of this Statement on Appraisal Standards is a response to inquiries about several types of appraisal assignments, and it is appropriate to clarify the meaning of these terms for future reference. The term Letter Opinion of Value has been used to describe a one-page letter sent to a client that stated a value estimate and referenced the file information and experience of the appraiser as the basis for the estimate. This type of service does not comply with USPAP, and should be eliminated from appraisal practice. . . . The Restricted Report is the minimum report format and replaces the concept of the Letter Opinion of Value. 1995 USPAP, page 75. The 1993 Uniform Standards of Professional Appraisal Practice, which was in effect at the time of the subject transaction, does not contain Statement No. 7 because the statement was not in effect at the time, nor at the time of the subject transaction. Appraisers have historically used letters of opinion and not been disciplined. Statement No. 7 represents an attempt, in 1994, to provide and clarification "for future reference." Nothing in Statement No. 7 nor the 1993 USPAP supplies Petitioner with any basis for disciplining Respondent for the use of the letter of opinion in 1993. The client in this case was First Sarasota, to which the borrower paid the appraisal fee. Respondent's letter is directed to the client, not the borrower. Nothing in the letter could possibly mislead the client or the borrower. The limitations of the letter are largely apparent in the letter itself. Perhaps most important, Respondent consistently kept the client informed about the project and disclosed for his client the abject condition of the property and misrepresentations of the borrower. Respondent's diligence in fact engendered the complaint from the borrower that resulted in this case. After the subject transaction the restricted appraisal report replaced the letter of opinion. Respondent discontinued use of letters of opinion since the October 4, 1993 letter. In October 1993, however, Petitioner could not discipline an appraiser for the use of a letter of opinion, at least under the facts of this case. The October 4, 1993 letter was not an appraisal report under either then-existing USPAP standards, but was a widely recognized alternative to a formal appraisal report. In October 1993, as is clear from the language of Statement No. 7, USPAP had not created the alternative of the restricted appraisal report and had not limited all communications from appraisers to one of three types of reports. There is absolutely no evidence that Respondent failed to use reasonable diligence in the preparation of an appraisal report.
Recommendation It is RECOMMENDED that the Florida Real Estate Appraisal Board enter a final order dismissing the Administrative Complaint against Respondent. ENTERED on December 21, 1995, in Tallahassee, Florida. ROBERT E. MEALE, Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 21st day of December, 1995. COPIES FURNISHED: Linda Goodgame, General Counsel Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, FL 32399-0792 Steven W. Johnson, Senior Attorney Department of Business and Professional Regulation Division of Real Estate P.O. Box 1900 Orlando, FL 32802 Gary A. Berleue, pro se 13604 Wainwright Ave. Port Charlotte, FL 33953 Darlene F. Keller, Division Director Division of Real Estate 400 West Robinson Street Post Office Box 1900 Orlando, FL 32802-1900
