The Issue Whether Fred Catchpole and Gwendolyn Barker (Respondents) should be subject to disciplinary action as licensed residential real estate appraisers by the Department of Business and Professional Regulation, Division of Real Estate (Petitioner) for failure to exercise reasonable diligence in developing an appraisal report in violation of Section 475.623(15), Florida Statutes (2004).1/
Findings Of Fact Petitioner is the licensing authority for real estate appraisers in Florida with revocation and disciplinary authority over its licensees pursuant to Section 20.165 and Chapter 475, Florida Statutes. On or about September 16, 2004, Respondents Fred Catchpole and Gwendolyn Barker prepared, signed and communicated an appraisal report (Report) for the property, including a manufactured home, located at 209 Ponderosa Pine Court, Georgetown, Florida 32139 (Subject Property). At the time of the Report, Respondent Catchpole was licensed by Petitioner as a State Licensed Real Estate Appraiser, and Respondent Barker was licensed by Petitioner as a State Certified Residential Real Estate Appraiser. Both Respondents are currently licensed by Petitioner as State Certified Residential Real Estate Appraisers. The Report was prepared for Pass and Associates in connection with refinance of a loan secured by the Subject Property. Respondents issued a corrected version of the Report (Corrected Report) with changes and additions requested by the client in 2004, prior to refinancing the loan on the Subject Property. In October 2004, a One-Unit Residential Appraisal Field Review (Field Review) of the Report was conducted on behalf of Chase Manhattan Mortgage Corp., who was listed in the Field Review as the “Lender/Client.” Between 2004 and 2009, Respondents provided rebuttal and rebuttal materials to address the Field Review. In 2009, Chase Home Lending (Chase Manhattan Mortgage Corp. and Chase Home Lending are both referred to herein as “Chase”) filed a complaint with Petitioner regarding the Report. The complaint consisted of a cover letter from Larry Handley with Chase Home Lending, a copy of the Report, and a copy of the Field Review. The complaint was found legally sufficient and forwarded to Petitioner’s investigator. Petitioner’s investigator did not receive a copy of the Corrected Report. T. 15, 204. Following the investigation, the Administrative Complaints were filed against Respondents. Count I of the Administrative Complaints relies on a number of alleged problems with the Report or the supporting workfiles (Workfiles), as detailed in the “Essential Allegations of Material Fact” section of the Administrative Complaints. After dismissing Counts 2 through 12 of the Administrative Complaints at the beginning of the hearing, Petitioner did not provide an Amended Administrative Complaint for either Respondent. Count I of the Administrative Complaints is based solely upon Respondents’ alleged failure “to exercise reasonable diligence in developing an appraisal report in violation of Section 475.624(15).” Instead of providing Amended Administrative Complaints, during the final hearing and in its proposed recommended order, Petitioner addressed the following alleged problems with the Report or Workfiles: The address of comparative sale 2, listed in the Sales Comparison Analysis section of the Report, was incorrect. The Subject Property has a zoning classification of R-2, which is mixed residential, which was incorrectly stated in the Report. The Workfiles for comparable sales 1, 2, 3, 4, 5 and 6 listed in the Sales Comparison Analysis section of the Report are not supported by documentation contemporaneous to the effective date of the Report. Multiple Listing Services (MLS) is listed as a data source in the Sales Comparison Analysis section of the Report for comparable sales 3, 5 and 6, but the Workfiles lack MLS documentation for those comparative sales. The Sales Comparison Analysis section of the Report failed to identify features for comparable sale 2 that were noted in the Workfiles. The Workfiles lack data to support the gross living area for comparable sale 6 noted in the Sales Comparison Analysis of the Report. The Report failed to note fences on the comparable sales, failed to make adjustments for the fences in the Sales Comparison Analysis section of the Report, and failed to address whether the fences had an influence on the price. The Report contains inconsistent Cost Approach data. The Workfiles lack documentation supporting the Estimated Site Value, Lump Sum, and As-Is Value data for the Subject Property in the Cost Approach sections of the Report. The Workfiles lack documentation supporting the Site Value for the Subject Property listed in the Cost Approach sections of the Report. The Workfiles lack documentation supporting the market trends outlined in the Sales Comparison Analysis section of the Report. The Report lacks internal consistency. At the final hearing, Respondents addressed each of the above-listed allegations. Alleged Incorrect Address in Comparable Sale 2 The incorrect address was a minor typographical error. The address listed for comparable sale 2 was only one number off the actual street address. The Report listed the street address as 815 CR 309B instead of the correct street address of 815 CR 308B. [underlines added]. The Corrected Report corrected the typographical error in the street address. Alleged Wrong Zoning Classification for the Subject Property The Subject Property is zoned “R-2, mixed residential” in the public records of Putnam County. Page one of the Report, consisting of the first page of the Uniform Residential Appraisal Report, Freddie Mac Form 70, revised 6-93, the Report lists as the specific zoning classification and description, “single family residential R-2.” At the final hearing, Respondent’s investigator, who pointed out the alleged error in the Report, admitted that he had not had training in filling out the Freddie Mac Form 70. The description used in the Report is consistent with the public tax record information on the web, which describes the Subject Property as “residential” with a zoning of “R-2.” Exhibit R-18. In addition, the One-Unit Residential Appraisal Field Review Report of the Report, which was prepared to determine the correctness of the procedures used by the original appraisal, specifically stated, “The zoning is correct.” Exhibit R-37. Alleged Lack of Contemporaneous Documentation Supporting Comparative Sales Petitioner’s witness, Francois K. Gregoire, a real estate appraiser who reviewed the Report, provided testimony to support a number of the factual allegations in the Administrative Complaints. Based upon his credentials, Mr. Gregoire was allowed to offer opinions on the Report as an expert in residential real estate appraisals. An appraiser’s workfile must be contemporaneous with the development and communication of the appraisal report. In addressing this allegation, Mr. Gregoire referenced comparable sales data in the Workfiles taken from Win2Data and Putnam County tax rolls in 2008, approximately four years after the effective date of the Report, which was issued in September 2004. Although Petitioner’s expert opined that since the data was retrieved in 2008, it could not be contemporaneous, the 2008 data included comparable sales contemporaneous with the Report. The fall 2004 issue of the Florida Real Estate Appraisal Board News & Report included a question and answer from the Appraisal Standards Board (ASB) relating to the Uniform Standards of Professional Appraisal Practice (USPAP). The question and pertinent parts of the answer stated: Question: Recently I have considered maintaining only electronic workfiles (i.e. saving only electronic versions of my reports and supporting data, and scanning any paper documents used so that copies may be stored on electronic media). Is this prohibited by USPAP? Response: No. There is nothing in USPAP that would prohibit an appraiser from maintaining only electronic versions of workfiles. The Record Keeping section of the ETHICS RULE states, in part: The workfile must include: the name of the client and the identity, by name or type, of any other intended users; true copies of any written reports, documented on any type of media; summaries of any oral reports or testimony, or a transcript of testimony, including the appraiser’s signed and dated certification; and all other data, information, and documentation necessary to support the appraiser’s opinions and conclusions and to show compliance with this Rule and all other applicable Standards, or references to the location(s) of such other documentation. As long as an electronic workfile contained these items, it would be sufficient. An appraiser must also be mindful of the requirement to have access to the workfile for the applicable required time period. The appraiser must ensure that the proper software is maintained to allow access to the electronic files. (Italics in original.) October 2008, the ASB issued a sequel its 2004 opinion, in the following response to the following question: Question: In the course of preparing my appraisals, I often research Multiple listing Service (MLS) and other data sources. I use this information to develop conclusions regarding neighborhood value ranges and market trends. Is it necessary for me to include copies of this information in my workfile? Alternatively, can I simply reference the data sources in my workfile. Response: References in the workfile to the location of documentation used to support an appraiser’s analysis, opinions, and conclusions can be adequate. It is not always necessary for the appraisal workfile to include all the documentation provided the referenced material is retrievable by the appraiser throughout the workfile retention period. Care should be exercised in the selection of the format and location of documentation. The Workfiles reflect that Respondents used MLS, Win2Data, and MLS public records to support the Report. While contemporaneous paper copies may not have been maintained of all the data, they were retrievable as reflected in the workfiles. Alleged failure to include MLS Listings in the Workfiles When Listed as a Source for Comparative Sales 3, 5 and 6 As noted in Finding of Fact 21, supra, while MLS and other supporting data contemporary with comparative sales 3 and 5 listed in the Report may not have been kept in the Workfiles, they were retrievable. See, e.g., Exhibit R-20, pp. 74-75 (listing 2009 tax data showing comparative sale 5 on 6/8/2004 for $92,000 and MLS data retrieved on 2/28/10 showing subsequent sale of the property on 7/20/05 for $110,000). Moreover, contrary to the allegation, the Report does not list MLS as a data source for comparative sale 6. Rather, the Sales Comparison Analysis section of the Report lists “WINDAT/PUB REC/DRIVEBY” as the data and/or verification source for comparative sale 6. See Exhibit P-2, p. 3. Alleged Failure of Report to Identify Features for Comparable Sale 2 Noted in the Workfiles Paragraphs 6(R) and 6(S) of the Administrative Complaints allege that the Report failed “to note that comparable sale 2 had a hot tub,” and failed “to note the renovated status of comparable sale 2, as outlined in workfile documentation.” According to Mr. Gregoire, “in Comparable Sale Number 2, the MLS printout indicates some features that were not described in the appraisal report. There’s inconsistency between the work file data and what was reported in the appraisal.” T. 93-94. While the MLS listing in the Workfiles provided additional information, there is no indication that the information was “inconsistent” with the Report. At the final hearing, Respondent Catchpole explained their rating in the Report of comparative sale 2 as “good,” accurately reflected recent renovations in that sale when compared to the “good” rating given to the Subject Property, which, at the time of the Report, had new floors, new carpets, and a new AC system. T. 202. Alleged Lack of Data in the Workfiles to Support Gross Living Area Listed in Report for Comparable Sale 6 The gross living area reported in the Report for comparable sale 6 is 840 square feet. At the final hearing, Petitioner’s expert, Mr. Gregoire, testified that there is no contemporaneous data to support that figure, and noted that the contemporaneous Win2Data in the Workfiles lists the square footage for comparable sale 6 as 2,380 square feet. In making his observation, however, Mr. Gregoire conceded that Win2Data sometimes rolls non-living areas into the reported living area. T. 99. The 2008 tax data in Respondents’ Workfiles for comparative sale 6 shows that the “base” square footage for the mobile home on comparative sale 6 was 840 square feet, which is the same square footage reported in the Report. Exhibit P-3, p. 60 While the tax data print-out is not contemporaneous with the sale, the tax data on that print-out reflects the 2003 sale for $89,000 listed in the Report, and provides a basis for the reported 840 square feet for comparable sale 6. As noted above, electronic data that has retrievable information contemporaneous with the Report is acceptable. Alleged Failure of the Report to Note or Make Adjustments for Fences on the Comparable Sales Respondent Catchpole explained at the final hearing that, in addition to reviewing public sources and MLS listings, Respondents based their Report on actual drive-bys of the comparative sales. According to Mr. Catchpole, as memory served him from six years before when the Report was written, only one fence was visible from the road. Mr. Catchpole further explained that they did not add any value to the comparative sales for the fences which they saw because they considered them to be personal property and were not a 100 percent sure that the fences they observed belonged on the comparative sale property, as opposed to adjacent land. According to Mr. Gregoire, whether or not comparative sales had fences should have been reported in the Report, “because to some buyers, that may have had an influence on the price.” T. 101. Mr. Gregoire conceded, however, that “I can’t say whether or not there should have been an adjustment, because I haven’t done an appraisal in this area.” Id. Alleged Inconsistent Cost Approach data in the Report Petitioner’s expert witness, Mr. Gregoire, noted during his direct examination that there were inconsistent values between the Estimated Site Value of $15,000 set forth on page 2 of the Report and the Market Value of Subject Site reported as $10,000 on page 5 of the Report. He also noted that the value for “Lump Sum” of $8,000 set forth on page 2 of the Report was different from the $5,000 value for “Lump Sum” reported on page 5 of the Report. Finally, he noted that the “As is” value of $15,000 for site improvements set forth on page 2 of the Report was different from the $10,000 value reported on page 5 of the Report for “other depreciated site improvements.” Exhibit P-2, pp. 2, 5. According to Mr. Gregoire, these internal inconsistencies made the Report misleading and demonstrated a lack of due diligence in its preparation. T. 107-110. Mr. Gregoire’s observations, however, did not take into account the fact that Respondents issued a Corrected Report with changes and additions requested by the client in 2004, prior to refinancing the loan on the Subject Property. T. 15; Exhibit R-1. The Corrected Report corrected the inconsistencies pointed out by Mr. Gregoire. Exhibit R-1, pp. 2, 9 (the Corrected Report lists both “Estimated Site Value” and “Market Value of Subject Site” as $15K; reports the “Lump Sum” value consistently as $8K; and consistently reports both “As is Value of Site improvements” and “Market Value of Subject Site” as $15K). Alleged lack of documentation in Workfiles supporting the Estimated Site Value, Lump Sum, and As-Is Value data for the Subject Property in the Cost Approach sections of the Report. The record citations provided in the Proposed Recommended Order submitted by Petitioner do not clearly indicate the alleged problem with the estimated site value, other than the inconsistency, which was corrected in the Corrected Report. Petitioner’s PRO, ¶ 22. Nevertheless, there were six comparable sales listed in the Report, and Corrected Report, with supporting data in the Workfiles from which estimated site cost data could be derived. As further noted by Respondent Catchpole, site data was addressed in an addendum to the Workfiles noting: Where difference in the size of the site did not afford additional utility, there was no adjustment taken, it was considered excess land. (P-3, p. 4) Mr. Gregoire also stated that there was no identification as to what “lump sum” is, either in the Report or the Workfiles. T. 109. At the final hearing, in his cross- examination of Mr. Gregoire, Respondent Catchpole indicated that the lump sum figure included porches and the air-conditioning system. In response, Mr. Gregoire stated that, if that was the case, it should have been disclosed. T. 139. There is no evidence, however, in the Field Review, that the “lump sum” category was criticized. In fact, the Field Review reported that “the data in the improvements section [is] complete and accurate.” Exhibit R-37, p. 1, § II, ¶ 4. Further, there is no evidence that the lender asked for further explanation prior to refinancing the loan on the Subject Property. As far as the alleged failure of supporting documentation for the “as is” value of site improvements on page 2 of the Report, although noting that it was not specifically identified in the report, Mr. Gregoire conceded that the value “easily corresponds with the way it’s described on Page 5 of [the Report] as Other Depreciated Site Improvements. But there is no explanation as to why in one - - it goes from $15,000 [on page 2] to $10,000 [on page 5 of the Report].” T. 110. As noted above, however, the Corrected Report, which Mr. Gregoire did not review, corrected the inconsistency between the two “as is” values set forth in the Report. Alleged Lack of Support for the Site Value for the Subject Property listed in the Cost Approach sections of the Report As noted in Finding of Fact 30, supra, the Workfiles contain comparable sales supporting the site value for the Subject Property, with an explanation in an addendum in the Workfiles. In addition, the Field Review of the Report prepared in 2004 marked “Yes” to the inquiry, “Did the appraisal report contain the appropriate prior sale(s) and/or prior listings(s) of the subject property and comparable sales?” Exhibit R-37, p. 1. Aside from the comparative sales, there was also data in the Workfiles showing other land sales in the area. Exhibit P-3, pp. 64-65. Alleged lack of documentation supporting the Market Trends outlined in the Sales Comparison Analysis section of the Report. The Neighborhood section of the Report indicates that the subject property is in a suburban area with 25 to 75 percent build-up and stable growth, and with stable property values, demand and supply in balance, and a marketing time of three to six months. Exhibit P-3, p. 1 (top third); T. 110. The Report finds that the following factors affect the marketability of the properties in the neighborhood: MSA 3600 the area located in south Putnam County, is convenient to major transportation routes which offer easy access to employment opportunities, schools, and most residential services. The homes in the area exhibit average to good quality and appeal and are typically frame, manufactured or masonry construction and are generally well maintained. P-3, p. 1. The Report states as market conditions in the subject neighborhood: The market is currently stable with mortgage funds available to qualified buyers at competitive rates. There is no evidence of concessions, buydowns, or discounts which would affect market value. Property values are relatively stable with no changes expected in the market in the near term. Recent fluctuations in mortgage lending rates do not appear to have affected market values in the subject market. Exhibit P-3, p. 1. According to Mr. Gregoire, referring to the Workfiles, he “couldn’t develop any trend here based on the way it’s maintained, whether it’s stable or not.” In addition, Mr. Gregoire opined that the Workfiles contain poor support for the reported single-family price range. T. 111. Mr. Gregoire acknowledged, however, that the Workfiles include, “in addition to the comparable sales that we discussed, some what I call on-line printouts.” Mr. Gregoire also acknowledged that the Workfiles contained several sales in the above $200,000 price which are indicated as being the high price. According to Mr. Gregoire, however, “it doesn’t necessarily show a predominant value there.” T. 110-111. The on-line printouts referenced by Mr. Gregoire appear on pages 26 through 30 of the Workfiles for improved property, and pages 64 and 65 of the Workfiles for land sales. Exhibit P-1, pp. 26-30, 64-65. The on-line printouts were derived from Win2Data, which Mr. Gregoire admitted was a recognized service for extracting market data. While Mr. Gregoire suggested that the “RealQuest” data source he utilizes was superior because it has updated on-line data, on- line Win2Data is also available and was utilized by Respondents. T. 150. The evidence did not show that the market data utilized by Respondents was deficient. Respondent Catchpole is also expert in real estate appraisal. He has a master’s degree in business administration, has testified as an expert before Congress, the United States District Courts in Georgia and Florida, and before the United States Bankruptcy Court in the Middle District of Florida. He has testified in numerous circuit courts in Florida. He has been a member of the Appraisal Institute. He has appraised nuclear power plants, been an advisor for real estate investment trusts, and has been an appraiser for Whirlpool, Citi Corp and Shearson Lehman. In the exchange during Mr. Gregoire’s cross- examination by Respondent Catchpole, it was clear that they had a difference of opinion as to how to best support an appraisal. See T. 115-167; see also T. 196-198. The evidence was insufficient to show that Mr. Gregoire’s approach was superior to the method utilized by Respondents in conducting the appraisal reflected in the Report or that Respondents did not use reasonable diligence in its preparation. Alleged Failure of Respondents to Maintain Internal Consistency in the Report In support of this allegation, Petitioner cites to Mr. Gregoire’s testimony at the final hearing that “it is the appraiser’s responsibility to ensure internal consistency and to ensure that the report reflects their opinions and conclusion before they affix their name to the report or certification. Petitioner’s PRO, p. 12; T. 135. Aside from the fact that Mr. Gregoire’s opinion did not reflect the Corrected Report, it is apparent his opinion did not consider other information provided by Respondents in support of the Report. While the Field Review was critical of a number of aspects of the Report, Respondents provided rebuttal to that Field Review prior to the complaint by Chase initiating this action. Some of the rebuttal included information indicating that the reviewer who prepared the Field Review had used comparable sales that were not arm’s length transactions. Although Petitioner’s investigator saw the information provided by Respondent Catchpole indicating that the reviewer’s comparables were not arm’s length transactions (T. 53), Mr. Gregoire did not review that information. Mr. Gregoire admitted that he was aware that Respondents provided a written rebuttal with documentation to Chase to the Field Review conducted in 2004. At the time of his testimony in this case, however, Mr. Gregoire had not reviewed any correspondence related to the rebuttal. T. 117-118. One document in particular, Exhibit R-30, that was provided to Petitioner’s investigator from Respondents’ Workfiles, contained notes from Respondent Catchpole contemporaneous to the Report indicating that Respondent Catchpole had contacted the property appraiser’s office to resolve differences in comparable sale 2 between the MLS listing and public records. T. 65-66. Mr. Gregoire was not provided this further evidence of Respondents’ diligence prior to his testimony. T. 121-122. In addition, the Workfiles submitted as Exhibits P-3 and P-7, were offered as the same documents. T. 25. It is clear, however, that a number of documents in P-7 were not in P-3. P-3 consists of 78 pages, whereas P-7 has 94 pages. It is apparent from Mr. Gregoire’s testimony and reference to Exhibit P-3, that his opinions were based upon his review of P-3. There was also evidence that there were a number of documents provided to Petitioner’s investigator, but not placed in Exhibit P-3 for review by Mr. Gregoire for his analysis. Exhibits RA-1 through RA-12, RB-1, and RC-1 through RC-8. While ultimately not used as comparative sales, the documents are additional evidence of Respondents’ efforts and diligence in preparing the Report. In addition, the refinanced loan for which the Report was provided has never gone into default. In sum, the evidence adduced at the final hearing was far less than convincing that Respondents did not use reasonable diligence in preparing the Report.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Business and Professional Regulation, Division of Real Estate, enter a Final Order dismissing the Administrative Complaints. DONE AND ENTERED this 19th day of May, 2010, in Tallahassee, Leon County, Florida. S JAMES H. PETERSON, III Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 19th day of May, 2010.
The Issue The issues to be determined are whether Respondent committed the violations alleged in the Amended Administrative Complaints and if so, what penalty should be imposed?
Findings Of Fact Petitioner is the state agency charged with the licensing and regulation of real estate appraisers in the State of Florida pursuant to section 20.165 and chapters 455 and 475, part II, Florida Statutes. At all times material to the allegations in the Amended Administrative Complaints, Respondent has been a certified residential real estate appraiser, and has been issued license number RD 1226. Respondent has been licensed since 1991 and has no history of disciplinary action taken against his license. He trades as Rhea Appraisals, Inc., located in Gainesville, Florida. For the period from October 23, 2009, through May 12, 2010, Respondent was the supervising appraiser for registered trainee appraiser Leslie Corey Bullard. From October 8, 2009, through at least July 2011, he also supervised registered trainee appraiser Beverly Sanders Archer. Respondent was Mr. Bullard's first supervising appraiser. The Program Alachua County elected to participate in the federally- funded Neighborhood Stabilization Program ("NSP"), which is administered on the state level by the Department of Community Affairs. To that end, Alachua County contracted with Meridian Community Services Group ("Meridian") to assist in the implementation of the program. In a nutshell, the NSP is a program by which the Department of Housing and Urban Development provides funding for local governments to acquire properties in order to rehabilitate them and re-sell them to low-to-moderate-income households, or to rent them to very low-income households. As explained at hearing, properties that are acquired through the program cannot be sold for more than the costs of acquisition, rehabilitation, and "soft costs." As a result, the local government can only purchase the property at one percent or below the appraised value. In 2010, Alachua County solicited bids for appraisers to appraise properties that it considered buying through the NSP. Rhea Appraisals, Inc., obtained a contract to appraise 20 of the properties for the program. Corey Bullard was involved in the procurement of the contract to perform the appraisals. The listing price for the properties was generally the price listed in the multiple listing service ("MLS"). Alachua County had instructed that the offer for the properties considered for purchase was to be at the listing price. Once the appraisal was performed, if it appraisal did not come in at within one percent of the listing price, then the offer is amended to reflect one percent below the appraisal. If the seller does not agree to the change, that property is not purchased. Rhea Appraisals, Inc., was to be paid $225.00 for each property appraised. Payment for the appraisal was not dependant on the results of the appraisal. At issue in these cases are the appraisals for three properties. For each of these properties, two appraisals were actually performed. The Initial Appraisals An appraisal was communicated by Rhea Appraisals, Inc., for a property located at 3009 NE 11th Terrace, Gainesville, Florida (Property 1, related to Case No. 11-3007), on April 8, 2010 (Petitioner's Exhibit 13). The appraisal report is signed by Cory Bullard and by Respondent as his supervisor, and the front summary sheet lists Corey Bullard as the appraiser. The appraisal indicates that the inspection of the property and of the comparable sales took place on April 2, 2010, which is listed as the effective date of the report, and the appraisal is signed by both Mr. Bullard and Respondent on April 8, 2010. The appraisal report provides an opinion of value of $52,000. The list price for the property, and thus the offer made by the County, was $65,000. The Comments on Appraisal and Report Identification state that "Corey Bullard provided assistance in the gathering of data, photographing and entering data into this report." Included in the appraisal's certification are the following statements: My employment and/or compensation for performing this appraisal or any future or anticipated appraisals was not conditioned on any agreement or understanding, written or otherwise, that I would report or present analysis supporting a predetermined specific value, a predetermined minimum value, a range or direction in value, a value that favors the cause of any party, or the attainment of a specific result or occurrence of a specific subsequent event (such as approval of a pending mortgage loan application). I personally prepared all conclusions and opinions about the real estate that were set forth in this appraisal report. If I relied on significant real property appraisal assistance from any individuals in the performance of this appraisal or the preparation of this appraisal report, I have named such individual(s) and disclosed the specific tasks performed in this appraisal report. I certify that any individual so named is qualified to perform the tasks. I have not authorized anyone to make a change to any item in this appraisal report; therefore any change made to this appraisal is unauthorized and I will take no responsibility for it. An appraisal report for a property located at 12017 NW 164th Terrace, Alachua, Florida (Property 2) was communicated on April 6, 2010 (Petitioner's Exhibit 5, related to Case No. 11- 3008). The appraisal report is signed by Corey Bullard and by Respondent as his supervisor, and the front summary sheet lists Mr. Bullard as the appraiser. The appraisal indicates that the inspection of the property and of the comparable sales took place on April 2, 2010, which is listed as the effective date of the appraisal, and the appraisal is signed by both Respondent and Mr. Bullard on April 6, 2010. This appraisal report provides an opinion of value of $75,000. The list price for the property, and thus the offer made by the County, was $105,000. The Comments on Appraisal and Report Identification state that "Corey Bullard provided assistance in the gathering of data, photographing and entering date into this report. Appraiser won the bid for 20 properties from Meridian Community Services for $225 each." Like the report for Property 1, the appraisal certification contained the statements identified in finding of fact 15. Rhea Appraisals, Inc., also issued an appraisal report for property located at 2923 NE 11th Terrace, Gainesville, Florida (Property 3, related to Case No. 11-3009), signed by Respondent on April 8, 2010 (Petitioner's Exhibit 10). The report indicates that the date of the inspection of the property and of the comparable sales, and effective date of the report, is April 5, 2010. This appraisal report provides an opinion of value of $54,000. The list price for the property, and thus the offer made by the County, was $69,900. The Comments on Appraisal and Report Identification state that "Beverly Archer, state registered trainee appraiser #RT2255 provided assistance in the gathering of data, measuring and photographing the subject dwelling, and drafting information into the URAR." Like the report for Properties 1 and 2, the appraisal certification contained the statements identified in finding of fact 15. The Second Appraisals Subsequently, a second appraisal was developed by Rhea Appraisals, Inc., for each of these properties. Property 1 (11-3007) A second report developed for Property 1 (Petitioner's Exhibit 14), has an invoice attached to the front, and the summary sheet lists Hugh Rhea as the appraiser. The appraisal gives an opinion of value of $66,000, compared to the County's offer of $65,000. The second appraisal lists the effective date of the appraisal as April 2, 2010, and the date of the signature and report as April 8, 2010. These dates are the same as those listed on the appraisal with value of $52,000. There are no notations in the Comments on Appraisal and Report Identification section of the report, and while the appraiser's certification includes the same statement quoted as paragraph 19 in finding of fact 15, the first statement, although similar, states: 6. I was not required to report a predetermined value or direction in value that favors the cause of the client or any related party, the amount of the value estimate, the attainment of a specific result, or the occurrence of a subsequent event in order to receive my compensation and/or employment for performing the appraisal. I did not base the appraisal report on a requested minimum valuation, a specific valuation, or the need to approve a specific mortgage loan. No explanation is given as to why the second report was generated. However, the second report contains the following additional differences: On page one of the report, in response to the question, "[a]re there any physical deficiencies or adverse conditions that affect the livability, soundness, or structural integrity of the property?", the statement "[s]ubject is not functional in the current state as of inspection date" has been deleted in the second appraisal. In the first report, the condition of comparable sale 1 is listed as "superior." In the second report, it is listed as "inferior." In the first report, the condition for comparable sale 2 is listed as "average." In the second report, it is listed as "inferior." In the first report, the condition of comparable sale 4 is listed as "superior." In the second report, it is listed as "average." In the first report, the condition of what was described as comparable sale 6 is listed as "average." In the second report, the original comparable sale 5 is deleted and comparable sale 6 is listed as comparable 5. Its condition is described as "inferior." Respondent's work papers to not provide an explanation for the changes made from the first report to the second report for this property. Property 2 (No. 11-3008) The second appraisal for Property 2 has an invoice for $225 attached to the front, and the summary sheet lists Hugh Rhea as the appraiser, as opposed to Corey Bullard. The opinion of value is $105,000, which matches the initial offer by the County. The report contains two different effective dates: on page 2 the report states that the effective date is April 2, 2010, while the signature block on page 6 indicates that the effective date is April 6, 2010. The date of the signature and report is April 14, 2010. The Comments on Appraisal and Report Identification are the same as those listed in the initial report, and the appraiser's certification includes the same statements quoted in paragraph 15. No explanation is given as to why the second report was generated. However, the second report contains the following differences: In the first report, the estimated cost to cure the stated deficiencies was listed as $20,000.00. In the second report, this amount is reduced to $15,000.00. In the first report, the condition adjustment for comparable sale 1 is -$27,389.00, for a gross adjustment of 41 percent. In the second report, the condition adjustment was -$6,389, for a gross adjustment of 23.2 percent. The location adjustment for comparable sale 1 is changed from -$10,000 in the first report to no adjustment at all in the second report. The condition adjustment in the first report for comparable sale 2 is -$40,000.00. In the second report, it is listed as -$25,000.00. The location description for comparable sale 2 is listed in the first report as "urban/sup." In the second report, it is listed as "suburban/sup." The location adjustment for comparable sale 2 is listed in the first report, as -$20,000.00. In the second report, it is listed as -$10,000.00. The condition for comparable sale 3 is changed from "superior" in the first report to "average" in the second report. The condition adjustment for comparable sale 3 is listed in the first report as -$20,000.00. It is changed in the second report to no adjustment. The room adjustment for comparable sale 3 is listed in the first report as -$4,000.00. It is changed in the second report to -$2,000. The location description for comparable sale 4 is listed in the first report as "suburban/sup" and changed in the second report to "suburban." The location adjustment for comparable sale 4 is listed as -$10,000.00. It is changed in the second report to no adjustment. The room adjustment for comparable sale 4 is listed in the first report as +$4,000.00. It is changed in the second report to +$2,000.00. The basement adjustment for comparable sale 4 is listed as -$10,000.00 in the first report, and as -$5,000.00 in the second report. The condition adjustment for comparable sale 5 is listed in the first report as -$20,000.00. It is changed in the second report to -$15,000.00. The location adjustment for comparable sale 5 is listed in the first report as -$20,000.00. It is changed in the second report to -$10,000.00. The condition of comparable sale 6 is listed in the first report as "superior." It is changed in the second report to "average." The condition adjustment for comparable sale 6 is listed in the first report as -$20,000.00. It is changed in the second report to no adjustment. Respondent's work papers for Property 2 do not provide any explanation for the changes noted above. The second report for Property 3 (Petitioner's Exhibit 11) also has an invoice attached, which states "summary complete." The summary sheet lists Hugh Rhea as the appraiser. The appraisal gives an opinion of value of $71,000, compared to the County's offer of $69,900. The second appraisal lists the effective date of the appraisal as April 5, 2010, and the date of the signature and report as April 8, 2010. These dates are the same as those listed on the appraisal with value of $54,000. The Comments on Appraisal and Report Identification are the same as those listed in the initial report, and the appraiser's certification includes the same statements quoted in paragraph 15. No explanation is given as to why the second report was generated. However, the second report contains the following differences: The first report contains six comparable sales. The second contains only four, and of those four, only two (those with the highest value) from the first report were included in the second report. The property located at 2610 NE 12th Street was listed as comparable sale 4 in the first report and as comparable sale in the second report. The gross living adjustment for this property was listed as -$2,025.00, while in the second report it is listed as -$1,620.00. With respect to this same property, the carport adjustment listed in the first report is +$1,500.00, and is listed as +$2,000.00 in the second report. The property located at 2703 NE 11th Street was listed as comparable sale 6 in the first report and as comparable sale in the second report. The condition adjustment for this property is changed from no adjustment in the first report to +$10,900.00 in the second report. With respect to this comparable sale, the gross living adjustment listed in the first report is -$7,125.00 while it is listed as -$2,340.00 in the second report. In the first report, as part of the cost approach to estimating value, the remaining estimated life for Property 3 is listed as 17 years, while in the second report it is listed as 32 years. Similarly, the depreciation figure listed in the first report is $94,524.00, while in the second report it is listed as $76,797.00. Respondent's work papers for Property 3 provide no explanations for the changes listed above. The Explanations All three of the initial appraisals, as well as all three of the second appraisals, state that the price of the property was to be determined by the appraisals, and that the appraiser had requested a copy of the contract and was told they would be forwarded at a later time. After submission of the first appraisals, Corey Bullard testified that he received a telephone call from Esrone McDaniels from Meridian regarding the opinions of value, indicating that the opinions were too low. Mr. McDaniels does not recall such a conversation. What is clear, however, is that at some point Mr. McDaniels spoke to Mr. Rhea regarding the program to explain the mechanics of the process for the NSP. On April 13, 2010, Mr. McDaniels sent an e-mail to Mr. Rhea with the title "Alachua County Properties." The e-mail contained a table listing nine properties, including Properties 1-3. The table contained columns listing the property addresses; the initial offer amount; the final acquisition amount (if the sale was completed); and the appraised value. The appraised values listed in the chart for Properties 1-3 were the opinions of value listed in the first reports described, i.e., the lower values. Along with the chart was the following message: Mr. Rhea - - per our conversation, please find the information requested. Should you have any questions, please give me a call. As stated, per the program requirements, our properties must be purchased at or below 99% of the appraised value. For example, since HUD won't adjust the purchase price, the initial offer should be a minimum 99% of the appraised value. Therefore, the appraisal should represent 1% above the initial offer price above. Let me know if you have any questions. Thanks. Mr. Bullard was aware of the preparation of the second reports and was not comfortable with them being developed. He made excuses not to return to work, pass protected his electronic signature and filed a complaint against Respondent with the Department. Mr. Bullard also testified that Respondent's electronic signature was not pass-protected, and that all of the office staff had access to it. No evidence was presented to refute this statement. However, there is also no evidence that Mr. Bullard ever used Respondent's electronic signature without his consent, or that he failed to supervise Bullard's work. To the contrary, Mr. Bullard testified that for the two appraisals with which he was involved, Respondent provided supervision and approved the appraisals before they were communicated to the client. While the second appraisal reports for two of the three properties indicate that the date of the signature predated the e-mail from Esrone McDaniels, the only appraisal values listed in the e-mail are for the original, lower values. From the totality of the evidence, it is found that the only plausible explanation is that the appraisals were backdated to reflect an earlier effective date. Mr. McDaniel vehemently denied that he ever told Respondent to "hit a certain value with an appraisal, saying "Absolutely not. I don't have the authority to do that and I would never do that." He believed that the underlined sentence in his e-mail was part of his attempt to "explain the program, period," and was one example to drive across the one-percent federal requirement. Mr. Rhea, on the other hand, in his response to the Department's complaint, stated the following: Let's start with the orders or bids, Alachua County was allotted 3 to 4 million dollars to buy property across all of Alachua County but they had to be foreclosed, bank owned or short sales. . . . The properties in questioned [sic] are HUD or Fannie Mae owned properties. When Fannie Mae has a property listed before it goes on the market, they have 3 BPO's done plus an appraisal, then they set an asking price. Our assignment was to inspect the properties, check the repairs needed and then value the property "as is" knowing the property is contracted at the asking price. With 3 BPO's and appraisal to back it up the Realtor's contracted the house knowing this plus they also knew the county was mandated to purchase at that price. What Mr. Bullard did not understand and still doesn't, the assignment for the 20 appraisals scope of work was to concur with the work and valuation that already had been done. The first appraisal done did not come in at $50,000 and then I change the value. Mr. Bullard said the property is $50,000 and I told him he was wrong and that did not set well with him. . . . * * * About the conversation with Mr. Esrone McDaniel's, [sic] we talk about what the Alachua County Board of County Commissioners was mandated to do with the money. The properties have been contracted and he asked me whether I could come within 1% of the value. I told him I have a range of value of 5% so I said I thought I could. This is when I knew that Mr. Bullard did not get a handle on what the assignment was all about. The e-mail that Mr. Bullard was referring to, stated the program requirements, which is what Esrone and I talked about and Mr. Bullard took it out of context stating that I would help him out. Mr. Bullard told me at the start that he knew what the county wanted and come to find out, he did not have a clue. Although Respondent indicated in his letter that the scope of the project was "to concur with the work and valuation" that had already been performed, this scope is not reflected in the description contained in any of the six appraisals. To the contrary, the appraisals on their face indicate that no predetermined value is at issue. From the totality of the evidence, it is found that Respondent issued the second appraisals in each case for the purpose of confirming a predetermined value, i.e., the list price for each of the properties, as communicated to him in Esrone McDaniels' e-mail of April 13, 2010. The Applicable Standards Property appraisers are required to adhere to the Uniform Standards of Professional Appraisal Practice (USPAP), which are developed by the Appraisal Standards Board of the Appraisal Foundation. The USPAP Ethics Rule is divided into four sections: conduct, management, confidentiality, and recordkeeping. The conduct section provides in pertinent part: Conduct: An appraiser must perform assignments with impartiality, objectivity, and independence, and without accommodation of personal interests. An appraiser: must not perform an assignment with bias; must not advocate the cause or interest of any party or issue; must not accept an assignment that includes the reporting of predetermined opinions and conclusions; . . . The management section of USPAP provides in pertinent part: Management: An appraiser must not accept an assignment, or have a compensation arrangement for an assignment, that is contingent on any of the following: the reporting of a predetermined result (e.g., opinion of value); a direction in assignment results that favors the cause of the client; the amount of a value opinion; the attainment of a stipulated result (e.g., that the loan closes, or taxes are reduced); or the occurrence of a subsequent event directly related to the appraiser's opinions and specific to the assignment's purpose. According to Michael Adnot, the Department's expert witness, these USPAP standards require an appraiser to be independent, impartial, and objective, and an appraiser cannot advocate the cause of a client or pre-determine a value. Moreover, concurrence with a prior appraisal cannot be a condition of an assignment. If an appraiser feels pressure to reach a certain result, he or she should not take the assignment. Mr. Adnot's testimony is credited. Based upon the evidence presented, it is found that Respondent developed and communicated the second reports for all three properties with the intent of providing appraisal reports that came within one percent of the selling price, i.e., a predetermined value. The investigative costs for these three cases were as follows: for Case No. 11-3007, costs are $1,303.50; for Case No. 11-3008, costs of investigation are $1,501.50 and for Case No. 11-3009, costs total $1,336.50.
Recommendation Upon consideration of the facts found and conclusions of law reached, it is RECOMMENDED that the Florida Real Estate Appraisal Board enter a Final Order finding that Respondent violated section 475.624(2) and (15) as alleged in Case Nos. 11-3007, 11-3008, and 11-3009; suspending his license to practice as a certified residential real estate appraiser for a period of 3 years, followed by 5 years of probation; imposing a $6,000 fine and imposing costs in the amounts identified in finding of fact number 49, for a total of $4,141.50 in costs. DONE AND ENTERED this 17th day of February, 2012, in Tallahassee, Leon County, Florida. S Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 17th day of February, 2012.
