The Issue Whether the Respondent committed the violations alleged in the Administrative Complaint dated March 3, 2004, and, if so, the penalty that should be imposed.
Findings Of Fact Based on the oral and documentary evidence presented at the final hearing and on the entire record of this proceeding, the following findings of fact are made: The Division is the state agency responsible for investigating complaints filed against registered, licensed, or certified real estate appraisers and for prosecuting disciplinary actions against such persons. § 455.225, Fla. Stat. (2005). The Florida Real Estate Appraisal Board ("Board") is the state agency charged with regulating, licensing, and disciplining real estate appraisers registered, licensed, or certified in Florida. § 475.613(2), Fla. Stat. (2005). At the times material to this proceeding, Mr. Rutan was a certified residential real estate appraiser in Florida, having been issued a license numbered RD 2791. Mr. Rutan had been a certified residential real estate appraiser in Florida for approximately 10 years. At the time of the events giving rise to this action, Mr. Rutan was employed by Excel Appraisal. Mr. Rutan interviewed and hired Frank Delgado, Juan Carlos Suarez, and Ricardo Tundador to work at Excel Appraisal as state-registered assistant real estate appraisers. At all times material to this proceeding, Mr. Rutan was Mr. Suarez’s supervisor and was responsible for Mr. Suarez’s appraisals. On or about June 16, 1999, Mr. Suarez prepared an appraisal for property located at 9690 Northwest 35th Street, Coral Springs, Florida, in which he valued the property at $325,000. The property is a multi-family, four-plex property. Mr. Rutan signed Mr. Suarez's appraisal as the supervisory appraiser and certified on the appraisal that he had inspected the property by placing an “X” in the "Inspect Property" box. The appraisal form signed by Mr. Rutan contains a "Supervisory Appraiser's Certification" that provides: If a supervisory appraiser signed the appraisal report, her or she certifies and agrees that: I directly supervise the appraiser who prepared the appraisal report, have reviewed the appraisal report, agree with the statements and conclusions of the appraiser, agree to be bound by the appraiser's certifications numbered 4 through 7 above, and am taking full responsibility for the appraisal and the appraisal report. It is the custom in the industry that a supervisory appraiser who certifies that he or she has inspected the property in question must inspect the property inside as well as outside before he or she can sign the appraisal. Mr. Rutan inspected the property the day after he signed the appraisal and only inspected the property from the outside. The appraisal report on the property at issue herein listed a prior sale of the property from Rodney Way to Doyle Aaron for $325,000 on April 28, 1999. The appraisal failed to list the sale of the property on the same day from Julius Ohren to Rodney Way for $230,000. Mr. Rutan did not investigate the relevant sales history of the property and was unaware, therefore, that the property had been “flipped” and was considerably overvalued in the appraisal report.2 Mr. Rutan admitted that he did not investigate prior sales and that the property was substantially overvalued. Mr. Suarez listed in the appraisal report three "comparable sales," that is, sales of properties similar in type and location to the property being appraised, to support the valuation of $350,000. The first comparable property used in the appraisal was property located at 4102 Riverside Drive, Coral Springs, which was listed in the appraisal report as being previously sold for $315,000. Earlier on the day that the Riverside Drive property was sold for $315,000, however, it had been sold for $185,000. Mr. Rutan failed to research and review the sales of the comparable properties that were included in Mr. Suarez's appraisal report, and the "comparable sale" of property on Riverside Drive was not properly used to value the property that was the subject of the appraisal report at issue herein. Mr. Suarez failed to make the proper adjustments in value on the Riverside Drive property based on the features of that property that were superior to the features of the subject property. The Riverside Drive property was located on a canal and should have had a negative adjustment with respect to the subject property, which was not on a canal. Mr. Suarez included a positive adjustment in the comparable sales data for the Riverside Drive property. Mr. Rutan failed to review the comparable property adjustments submitted by Juan Carlos Suarez for the appraisal of the subject property. Mr. Suarez overstated the rental income of the subject property in his appraisal report. Mr. Rutan failed to research and review the rental figures Mr. Suarez submitted. When Mr. Rutan was notified by Brokers Funding, a company that purchased the loans on the subject property, that there were problems with the appraisal done by Mr. Suarez, Mr. Rutan checked additional comparable sales and interviewed the tenants in the building. He also hired another appraiser to conduct an appraisal of the subject property. Based on his investigation and Mr. Salimino’s appraisal, Mr. Rutan discovered the problems in Mr. Suarez's appraisal and report of the subject property. Mr. Salimino’s appraisal for the subject property was $290,000, but Mr. Rutan estimated that his appraisal would have been approximately $250,000. Mr. Rutan fired Mr. Suarez, as well as Frank Delgado, and Ricardo Tundador, all three of whom were subsequently indicted on federal charges relating to real-estate-appraisal scams. In a Final Order entered on April 22, 2002, Mr. Rutan was found guilty by the Board of violating Sections 475.624(14) and 475.624(15), Florida Statutes, and was ordered to pay an administrative fine of $1,000. Mr. Rutan trusted Mr. Suarez to do an honest and competent appraisal and was rushed by Mr. Suarez to approve the appraisal on the subject property. The evidence presented by the Division is sufficient to establish with the requisite degree of certainty that Mr. Rutan failed to carry out his responsibilities as Mr. Suarez's supervisory appraiser, failed to review Juan Carlos Suarez’s appraisal for accuracy, and failed to inspect the inside of the subject property, which caused or contributed to the substantially over-stated valuation of the subject property.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Florida Real Estate Appraisal Board enter a final order finding that William Rutan is guilty of violating Section 475.624(10), (14), and (15), Florida Statutes, as alleged in Counts I through IV of the Administrative Complaint and revoking Mr. Rutan's Florida certification as a real estate appraiser. DONE AND ENTERED this 31st day of August, 2005, in Tallahassee, Leon County, Florida. S PATRICIA M. HART 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 31st day of August, 2005.
The Issue Whether the Respondent committed the violations stated in the Amended Administrative Complaint filed September 30, 2009, and, if so, the penalty that should be imposed.
Findings Of Fact Based on the oral and documentary evidence presented at the final hearing and on the entire record of this proceeding, the following findings of fact are made: The Florida Real Estate Appraisal Board ("Board") is the entity responsible for licensing, regulating, and imposing discipline upon real estate appraisers operating in Florida. See §§ 475.613(2) and .624, Fla. Stat. (2007). The Department is the state agency responsible for investigating complaints and, upon a finding of probable cause by the Board, issuing administrative complaints and prosecuting disciplinary actions involving real estate appraisers in Florida. See § 455.225(1)(a), (4), and (6), Fla. Stat. At all times pertinent to these proceedings, Mr. Facendo was a state-certified real estate appraiser, having been issued license number RD-2598, and his business office was located in Plantation, Florida. In August 2007, Mr. Facendo's office received a request from University Capital Funding, a mortgage broker, for an appraisal on property known as 901 Southwest Worchester Lane, Port St. Lucie, Florida 34953 ("Worchester Lane property"). After receiving the request, Mr. Facendo consulted the Multiple Listing Service with respect to the Worchester Lane property and the neighborhood. Mr. Facendo then went to the Worchester Lane property, measured the property, inspected the interior and exterior of the property, and looked at the homes that were comparable to the Worchester Lane property. Mr. Facendo returned to his office and analyzed the data he had collected during the site visit. He used print sources and online services available in his office to verify the flood zones, neighborhood composition, land sales, and other information necessary to complete the appraisal. Mr. Facendo prepared the Appraisal Report for the Worchester Lane property and provided it to University Capital Funding. Mr. Facendo also compiled a workfile containing documentation he used to develop the Appraisal Report. The Appraisal Report contained three errors:2 Mr. Facendo included the incorrect zoning classification for the Worchester Lane property, identifying it as RM-143, residential multi-family, rather than the correct RS-2, residential; he identified the wrong location for the Worchester Lane property on the map included with the Appraisal Report,3 and he failed to include the lot number in the legal description of the property. Mr. Facendo stated in the Appraisal Report that the property was not in a FEMA (Federal Emergency Management Association) special flood hazard area, and he referenced FEMA Map # 12111C0290F, dated August 19, 1991. He did not include a copy of the map in the workfile he compiled when preparing the Appraisal Report. Mr. Facendo included in the Appraisal Report information regarding neighborhood characteristics, one-unit housing trends, one-unit housing, and present land use percentage. He indicated that the neighborhood was over 75 percent built-up and stable; that one-unit housing trends showed that the supply and demand for housing in the neighborhood were in balance, with marketing conditions partially stable to declining, and time exposure typically between three-to-six months; that the one-unit housing prices ranged from a low of $188,000.00 for new housing to a high of $450,000.00 for housing six years old, with a median of $305,000.00 for housing three years old; and that the present land use consisted of 80 percent one-unit housing and 20 percent commercial. Mr. Facendo did not include in his workfile documentation to support this information. Mr. Facendo concluded that the value of the Worchester Lane property was $305,000.00 when calculated under the Sales Comparison Approach method. In the Appraisal Report, Mr. Facendo identified 88 comparable properties currently for sale in the neighborhood, ranging in price from $175,000.00 to $360,000.00, and 72 comparable sales in the neighborhood within the previous 12 months, ranging in price from $188,000.00 to $450,000.00. Mr. Facendo did not include in his workfile documentation to support the number of properties currently for sale or the number of properties sold within the past 12 months. Mr. Facendo concluded that the value of the Worchester Lane property was $296,990.00 when calculated under the Cost Approach to Value method. Mr. Facendo placed a value of $60,000.00 on the property's home site. He calculated the square footage replacement cost new using the cost estimator in his online copy of the Marshall & Swift Residential Cost Handbook and noted in the Appraisal Report that this was the source of his cost data. Mr. Facendo also noted as a comment on the cost approach that he used the Marshall & Swift Residential Cost Handbook "& local builders [estimates]" as the sources of the cost figures he used to estimate the value of the Worchester Lane property using the cost approach. Finally, Mr. Facendo also consulted the South Florida 2007 Blue Book Construction and the 2007 National Building Cost Manual for cost data, but he did not mention these sources in the Appraisal Report. Mr. Facendo did not include in the workfile he compiled for the Appraisal Report documentation to support his opinion of site value, copies of the Marshall & Swift online calculations of the replacement cost new, copies of the local and national builder's data he used in his calculations, or copies of the Marshall & Swift data to support the square footage prices he used to calculate the value of the Worchester Lane property. Mr. Facendo signed the Appraisal Report on August 22, 2007, and noted on the Appraisal Report that it was effective August 22, 2007. In October 2007, JP Morgan Chase Bank, N.A.,4 ordered a review of Mr. Facendo's August 22, 2007, Appraisal Report of the Worchester Lane property. The review appraiser, John Nickerson, prepared a One-Unit Residential Appraisal Field Review Report ("Review Appraisal"), which he signed and dated October 8, 2007. In the review report, Mr. Nickerson opined that there were a number of errors in Mr. Facendo's Appraisal Report, including the zoning classification, the legal description, and the location of the property. Mr. Nickerson also criticized the comparable properties used by Mr. Facendo in the Sales Comparison section of the Appraisal Report and the site value assigned by Mr. Facendo in the Cost Approach section of the Appraisal Report. At some point, Mr. Facendo was advised by Chase Home Lending of the results of Mr. Nickerson's Review Appraisal, and he was provided with a copy of the report.5 In a letter to Chase Home Lending dated August 25, 2008, Mr. Facendo responded to the concerns raised by Mr. Nickerson in the Review Appraisal about Mr. Facendo's Appraisal Report. Mr. Facendo explained the basis for his choice of comparable properties and for the value he placed on the building site, and he discussed his reasons for believing that the conclusions regarding comparable properties and site valuation reached by Mr. Nickerson were flawed. As directed by an employee of Chase Home Lending, Mr. Facendo modified his August 22, 2007, Appraisal Report to include the correct zoning classification of RS-2, residential. Mr. Facendo was expressly directed by the employee of Chase Home Lending not to change anything on the face of the original Appraisal Report except for the zoning classification. Mr. Facendo followed this direction, and he did not revisit the Worchester Lane property or change any other information in the original Appraisal Report. The corrected Appraisal Report was, therefore, not a new appraisal report based on new information gathered in August 2008 regarding the Worchester Lane property. The corrected Appraisal Report was not effective in August 2008, and did not supersede the original Appraisal Report of August 22, 2007, except for the zoning classification correction.6 Mr. Facendo submitted the corrected Appraisal Report on the Worchester Lane property to Chase Home Lending on or about August 25, 2008, but he did not alter the original signature date or effective date of August 22, 2007. Mr. Facendo did not, however, include a copy of the original Appraisal Report in the workfile that he transmitted to the Department during the course of its investigation; the workfile contained a copy of only the corrected Appraisal Report. In signing the Appraisal Report, Mr. Facendo certified and agreed that he had complied with the USPAP that were effective when the report was prepared in August 2007. The Ethics Rule of the USPAP (2006) provides in pertinent part as follows: Record Keeping An appraiser must prepare a workfile for each appraisal, appraisal review, or appraisal consulting assignment. The workfile must include: the name of the client and the identity, by name or type, or 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. USPAP (2006) Standards Rule 1-1(c) provides: In developing a real property appraisal, an appraiser must: * * * (c) not render appraisal services in a careless or negligent manner, such as by making a series of errors that, although individually might not significantly affect the results of an appraisal, in the aggregate affects the credibility of those results. USPAP (2006) Standards Rule 1-4(a) and (b) provides: In developing a real property appraisal, an appraiser must collect, verify, and analyze all information necessary for credible assignment results. When a sales comparison approach is necessary for credible assignment results, an appraiser must analyze such comparable sales data as are available to indicate a value conclusion. When a cost approach is necessary for credible assignment results, an appraiser must: develop an opinion of site value by an appropriate appraisal method or technique; analyze such comparable cost data as are available to estimate the cost new of the improvements (if any); and analyze such comparable data as are available to estimate the difference between the cost new and the present worth of the improvements (accrued depreciation). USPAP (2006) Standards Rule 2-1(a) provides: Each written or oral real property appraisal report must: clearly and accurately set forth the appraisal in a manner that will not be misleading[.] USPAP (2006) Standards Rule 2-2(b)(viii) provides: Each written real property appraisal report must be prepared under one of the following three options and prominently state which option is used: Self-Contained Appraisal Report. Summary Appraisal Report, or Restricted Use Appraisal Report.[footnote omitted.] * * * The content of a Summary Appraisal Report must be consistent with the intended use of the appraisal and, at a minimum: * * * (viii) summarize the information analyzed, the appraisal methods and techniques employed, and the reasoning that supports the analyses, opinions, and conclusions; exclusion of the sales comparison approach, cost approach, or income approach must be explained.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Florida Real Estate Appraisal Board enter a final order dismissing all counts of the Amended Administrative Complaint dated September 30, 2009. DONE AND ENTERED this 4th day of March, 2010, in Tallahassee, Leon County, Florida. PATRICIA M. HART 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 4th day of March, 2010.
The Issue The issues in this case are whether Respondent violated sections 475.622(1), 475.622(2), 475.624(2), and 475.624(15), Florida Statutes (2007),1/ and Florida Administrative Code Rule 61J1-7.001(2), and, if so, what discipline should be imposed.
Findings Of Fact Mr. Hormes has been a state-certified general real estate appraiser since March 30, 1992. He was disciplined by the Department in 1995. On or about September 4, 2007, Mr. Hormes prepared an appraisal report (Original Appraisal)2/ for real property located at 754 West 4th Street, Cape Coral, Florida (Subject Property). The file number assigned by Mr. Hormes was 0708-248. Mr. Hormes signed the Original Appraisal on September 7, 2007. On the morning of September 7, 2007, he communicated the Original Appraisal to Cirrus Mortgage, which was the intended user of the appraisal. The Original Appraisal appraised the value of the Subject Property at $240,000, using a sales comparison approach. On the signature page of the Original Appraisal, Mr. Hormes stated that his state certification was "State Cert. Gen. Res. REA 1337." On the cover letter transmitting the Original Appraisal, Mr. Hormes put the following designation underneath his name: "State Cert. Gen. REA RZ #1337." The Original Appraisal had numerous errors. Mr. Hormes stated that the Subject Property was zoned as residential, but the Subject Property was zoned corridor district. The Original Appraisal stated the Subject Property was a two-story ranch, when it was a one-story ranch. The actual age of the Subject Property as of September 4, 2007, the effective date of the Original Appraisal, was 26 years. Mr. Hormes used three comparable sales to compare to the Subject Property. Two of the three comparable sales were listed as four years old. Mr. Hormes listed the age of the third comparable sale as nine years, but the house was built in 2003, making it four years old at the time of the appraisal. The Original Appraisal states that there were comparable sales in the Subject Property neighborhood that ranged from $180,000 to $265,000. There was nothing in the work file to support Mr. Hormes's statement that there had been a $265,000 sale. The Original Appraisal states that there were listings available for $175,000 to $260,000 in the Subject Property neighborhood, meaning that potential buyers could chose a less expensive alternative to the Subject Property. There was no explanation in the Original Appraisal why a potential buyer would choose the higher priced Subject Property over the less expensive listing. Mr. Hormes testified that the listing for $175,000 was undesirable because of impact fees, but there is no mention in the work file to support this assertion. Mr. Hormes incorrectly listed the view of the Subject Property as residential. The Subject Property was located across the street from a Carrabas restaurant and a strip mall. Although Mr. Hormes did note in the Original Appraisal that there were some external inadequacies due to the Subject Property being located directly behind a restaurant, strip mall, and commercial stores, he did not adjust or analyze for external obsolescence of the Subject Property. Mr. Hormes stated in the Original Appraisal that the cost of the three comparables was weighted equally in determining the $240,000 value of the Subject Property. However, Mr. Hormes determined that the adjusted sale prices of the three comparables were $241,500; $239,200; and $249,000. Based on these adjusted sale prices, the value of the Subject Property would have been $243,233. Mr. Hormes made a positive adjustment to Comparable Sale 1 of $21,500 for location, but no adjustments were made for Comparable Sales 2 and 3 for location. The Original Appraisal did not state why the positive adjustment was made for Comparable Sale 1, why no positive adjustments were made for Comparable Sales 2 and 3, and why a positive rather negative adjustment was made. At the final hearing, Mr. Hormes stated that he used a paired sales analysis for his locational adjustments; however, there was nothing in the work file to indicate that he used a paired sales analysis. Mr. Hormes stated in the Original Appraisal that property values in the neighborhood of the Subject Property were stable. However, based on documentation in Mr. Hormes's work file, the property values were declining. There were also inconsistencies within the Original Appraisal. On page 1 of the Original Appraisal, Mr. Hormes stated that the marketing time for one-unit housing was over six months. In the addendum to the Original Appraisal, Mr. Hormes stated that the marketing time was typically from three to six months. Cirrus Mortgage is a correspondent lender; thus, it was no surprise to Mr. Hormes that he received a letter from Chase Home Lending (Chase) dated January 29, 2009, concerning the Original Appraisal. Chase advised Mr. Hormes that a field review of the Original Appraisal had been done and that, based on the review, Mr. Hormes's "appraiser status has been changed to Ineligible for Chase Home Lending and we will not accept appraisal reports performed in whole or in part by you effective immediately." A copy of the appraisal field review report was enclosed with the letter. Chase advised Mr. Hormes that it would consider a written response to the appraisal field review report. By letter dated January 7, 2009, Mr. Hormes responded to Chase concerning the appraisal field review report. He pointed out errors that he felt were in the appraisal field review report. Mr. Hormes stated that, at the time the appraisal was done, the appraisal was $234,000. By letter dated January 29, 2009, Chase filed a complaint with the Department concerning the Original Appraisal. Martin Straw (Mr. Straw), an investigator with the Department, notified Mr. Hormes by letter dated March 3, 2009, that a complaint had been filed against him concerning the Original Appraisal. By a separate letter dated March 3, 2009, Mr. Straw requested that Mr. Hormes provide "a true and accurate copy of the appraisal as delivered to the client" and "a complete copy of your entire working file and supporting data for this appraisal." By March 19, 2009, the investigation had been reassigned to Mike McKinley (Mr. McKinley), an investigator for the Department, and Mr. McKinley wrote Mr. Hormes, advising of the transfer. By June 5, 2009, Mr. McKinley had not received a copy of the appraisal sent to the client and a copy of Mr. Hormes's entire working file, and Mr. McKinley wrote Mr. Hormes and again requested that the documentation be provided to the Department. By letter dated March 10, 2009, Mr. James R. Mitchell of Baker & Hostetler LLP wrote Mr. Straw, advising that the law firm would be representing Mr. Hormes. By letter dated June 26, 2009, Mr. Jacob R. Stump of Baker & Hostetler LLP sent a response to the Department concerning the complaint filed by Chase and enclosed what purported to be Mr. Hormes's work file and "a copy of the Original Appraisal as sent to Mr. Hormes' client." Mr. Hormes claims that he signed and sent the Original Appraisal to the client on the morning of September 7, 2007. He testified that he was looking over the Original Appraisal in the afternoon and discovered some errors that his computer software review program did not catch. He further testified that on the afternoon of September 7, 2007, he corrected the errors, prepared an Amended Appraisal, signed the Amended Appraisal, and sent the Amended Appraisal to the client. Mr. Hormes's testimony concerning the preparation of an Amended Appraisal on September 7, 2007, is not credible for many reasons. In the Amended Appraisal, Mr. Hormes added three additional comparable sales and a short sale. He states that the source of the data for Comparable Sales 5 and 6 came from public records and that the effective date of the sources is September 17, 2007, which is ten days after he claims that he prepared, signed, and communicated the Amended Appraisal. The work file of Mr. Hormes contains a list of properties that he looked at to determine comparables for the Original and Amended Appraisals. Some of the sales are dated a week to two weeks after the Amended Appraisal supposedly was signed and communicated. The work file contains supporting data for the comparable sales that are dated January 7, 2009, which is the date that Mr. Hormes responded to Chase's letter declaring him ineligible to prepare appraisals for Chase. Mr. Hormes claims that he just consulted the public records and multiple listings for the information at the time that he prepared the Original and Amended Appraisals and did not place them in the work file. There is supporting data for the information concerning the Subject Property dated September 4, 2007; therefore, it is not logical that Mr. Hormes did not place in the work file data concerning the comparable sales used in the Original and Amended Appraisals that was obtained contemporaneously with the preparations of the two appraisals on September 4 and 7, 2007. There were numerous corrections to the Original Appraisal in the Amended Appraisal, including zoning, ages of the comparable sales, additional comparable sales, the correct average of the comparable sales, adjustments made to the comparable sales, and changing the view to residential/busy. It is difficult to understand how Mr. Hormes could have sent out the Original Appraisal with so many errors which he did not recognize while preparing the Original Appraisal, particularly with his many years of experience as an appraiser. The error concerning the zoning is an error that even an inexperienced appraiser likely would not make. Mr. Hormes's explanation is that the computer software that he used to check his appraisals was not working properly. His explanation is not credited. It is just as difficult to understand how Mr. Hormes could go through the Original Appraisal in the short span of an afternoon, make all the corrections, and communicate the Amended Appraisal to his client. The inevitable conclusion is that Mr. Hormes did not prepare an Amended Appraisal on the afternoon of September 7, 2007, and that the Amended Appraisal was prepared sometime after Chase notified Mr. Hormes that Chase would no longer consider Mr. Hormes eligible to do appraisals for Chase. Mr. Hormes did not provide the Department with a copy of the Amended Appraisal when the Department requested the entire working file concerning the appraisal at issue. When Mr. Hormes's attorney responded to the Department, he did not mention the Amended Appraisal and did not send the Amended Appraisal to the Department. Mr. Hormes testified that he gave the work file to his assistant and asked the assistant to copy the work file and send it to the Department. He testified that his assistant must have failed to send the Amended Appraisal. Mr. Hormes's testimony is not credited. When Chase made its complaint to the Department, no mention was made of an Amended Appraisal, and no Amended Appraisal was sent to the Department. It is inferred that Chase did not have a copy of the Amended Appraisal. There is a letter dated October 6, 2008, from Mr. Hormes to Mr. Straw concerning the appraisal at issue in the work file, which was provided to the Department by Mr. Hormes's attorney. The letter was not in the Department's files prior to its receipt from Mr. Hormes's attorney. The letter predates the complaint filed by Chase against Mr. Hormes and predates the assignment of the case to Mr. Straw. Assuming, arguendo, that the date was incorrect and the year should have been 2009, the letter rings false because Mr. Straw was no longer investigating the case and Mr. McKinley had been in contact with Mr. Hormes concerning the complaint. It is concluded that Mr. Hormes was doctoring his file to make it appear that he had notified the Department early on that an Amended Appraisal had been prepared. In the Original Appraisal, Mr. Hormes stated that the neighborhood boundary that he used was Nicholas Parkway to the east, Chiquita Boulevard to the west, Embers Parkway to the north, and Southwest 10th Street to the south. The Department claimed that one of the properties used as a comparable sale, 636 Southwest 10th Street, was not located within the neighborhood boundary. The evidence establishes that the property is on the boundary line and is considered to be within the neighborhood boundary lines. Mr. Hormes stated in the Original Appraisal: This appraisal report complies with the Uniform Standards of Professional Appraisal Practice that were adopted and promulgated by the Appraisal Standards Board of The Appraisal Foundation and that were in place at the time this appraisal report was prepared. The Uniform Standards of Professional Appraisal Practice (USPAP) contains the governing standards for appraisers throughout the United States. The following portions of the 2006 USPAP are applicable to the instant case: Ethics Rule-Conduct An appraiser must perform assignments ethically and competently, in accordance with USPAP and any supplemental standards agreed to by the appraiser in accepting the assignment. An appraiser must not engage in criminal conduct. An appraiser must perform assignments with impartiality, objectivity, and independence, and without accommodation of personal interests. * * * An appraiser must not communicate assignment results in a misleading or fraudulent manner. An appraiser must not use or communicate a misleading or fraudulent report or knowingly permit an employee or other person to communicate a misleading or fraudulent report. Ethics Rule-Recordkeeping An appraiser must prepare a workfile for each appraisal, appraisal review, or appraisal consulting assignment. 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 documentation.[3/] An appraiser must retain the workfile for a period of a least five (5) years after preparation or at least two (2) years after final disposition of any judicial proceeding in which the appraiser provided testimony related to the assignment, whichever period expires last. An appraiser must have custody of his or her workfile, or make appropriate workfile retention, access, and retrieval arrangements with the party having custody of the workfile. Standards Rule 1-1 In developing a real property appraisal, an appraiser must: be aware of, understand, and correctly employ those recognized methods and techniques that are necessary to produce a credible report. not commit a substantial error or omission or commission that significantly affects an appraisal; and not render appraisal services in a careless or negligent manner, such as by making a series of errors, that although individually might not significantly affect the results of an appraisal, in the aggregate affects the credibility of those results. Standards Rule 1-4(a) In developing a real property appraisal, an appraiser must collect, verify, and analyze all information necessary for credible assignment results. (a) When a sales comparison approach is necessary for credible assignment results, an appraiser must analyze such comparable sales data as are available to indicate a value conclusion. Standards Rule 2-1 Each written or oral property appraisal report must: clearly and accurately set forth the appraisal in a manner that will not be misleading; contain sufficient information to enable the intended users of the appraisal to understand the report properly; Standards Rule 2-4(b)(viii) (b) The content of a Summary Appraisal Report must be consistent with the intended use of the appraisal and, at a minimum: (viii) summarize the information analyzed, the appraisal methods and techniques employed, and the reasoning that supports the analyses, opinions, and conclusions; exclusion of the sales comparison approach, cost approach, or income approach must be explained. The appraisal attached to the Administrative Complaint is designated as 0708-248 org. Dennis Black, who testified as the Department's expert, reviewed Mr. Hormes's appraisal which has a designation of 0708-248. Both appraisals are identical except for the designation and both appraisals constitute the Original Appraisal, which is at issue.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered finding that Mr. Hormes violated sections 475.622(1) and 475.624(15) and rule 61J1-7.001(2); finding that Mr. Hormes did not violate sections 475.622(2) and 475.624(2); suspending his license for six years followed by two years of probation; and imposing an administrative fine of $5,000. DONE AND ENTERED this 19th day of May, 2011, in Tallahassee, Leon County, Florida. S SUSAN B. HARRELL 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, 2011.
The Issue The issues are whether Respondent violated Sections 475.624(2), 475.624(14), and 475.624(15), Florida Statutes, and if so, what penalty should be imposed.
Findings Of Fact Petitioner is the agency charged with the duty of licensing and regulating real estate appraisers in the State of Florida. Respondent is and was at all times material here a state-certified residential real estate appraiser. In January 1998, Petitioner issued Respondent residential real estate appraiser certificate number RD-0002524, with a business location of 2607 South Woodlawn Boulevard, No. 271, Deland, Florida, 32720. On or about March 5, 1998, Deborah Jeane Palfrey, as the buyer, and United Capital of Central Florida, Inc. (UCCF), as the seller, entered into a contract for sale and purchase of residential property ("the property") located at 236 Steward Terrace, Deltona, Florida. The contract lists the purchase price of the property as $54,500. Testimony developed at hearing indicates that UCCF did not own the property in fee simple. Instead, UCCF had an assignable contract to purchase the property. UCCF eventually assigned this contract to Ms. Palfrey. In March 1998, John E. Parrot owned both UCCF and Realnet USA. Both companies were located at the same address in Orlando, Florida. Both companies were involved to some extent in the real estate investment business. Competent evidence indicates that Realnet USA was a mortgage broker. Michael Mullvain was vice-president of UCCF and, as such, had signature authority for that company. Mr. Mullvain, a licensed real estate broker, also was the general manager of Realnet USA. On or about March 5, 1998, Mr. Mullvain and/or his assistant at Realnet USA, Tammie Wright, faxed a request for an appraisal of the property to Certified Appraisal Service (CAS), which was located in Winter Park, Florida. The appraisal request was made on behalf of USCCF and directed to the attention of Cecil and Teresa Wright. UCCF and Realnet USA were frequent clients of CAS. Realnet USA had requested CAS to provide as many as 200 similar appraisals in the past. The appraisal request for the property stated that the projected sale price was $79,000. The request contained the following comments: "House to be brought up to FHA specifications with central A/C, new kitchen, and baths." The request also included the following statement: "Cecil: Paul said you have already done some research on the property for him. Please go ahead with drive-by appraisal as usual." In requesting a drive-by appraisal, Mr. Mullvain intended for the appraiser to take note of needed repairs. He wanted an estimate of what the property would be worth based on the repairs being requested. At the time that the appraisal request was made, Mr. Mullvain knew that the property was distressed. His purpose in requesting the appraisal was to determine what the property would be worth if it was brought up to minimum Federal Housing Administration (FHA) standards. These standards require that all surface areas be serviceable. They also require anything that functions to function properly. FHA specifications take into consideration paint, carpet, kitchen, central air conditioning, windows, etc. In other words, the house must be habitable to pass an FHA appraisal inspection. Mr. Mullvain understood that he was ordering a proposed appraisal based on a comparable market analysis of the property's future value after repairs. He did not expect an appraisal based on a cost approach and an income approach, as well as a sales comparison approach. When Mr. Mullvain ordered the appraisal, he did not intend for it to be used by anyone other than UCCF. However, Mr. Mullvain testified that a salesperson would have given the appraisal to potential buyers upon request or in a package to provide additional information about the property. According to its normal business practice, Realnet USA prepared a rehabilitation summary for the property, showing the expected cost of repair. This document listed the following repair items and costs: (a) landscape, $100; (b) roof, $0.00; (c) exterior, $600; windows/doors, $100; (d) kitchen, $200; (e) plumbing-bath, $200; (f) paint & ceilings, $650; (g) carpet, $200; (h) subcontractors, $500; (i) central A/C, $100; (j) termite, $100; (k) appliances, $250; and (l) other, $0.00. The total expected repair cost was $3,000. Realnet USA kept this rehabilitation summary in its file for the property. No one provided a copy of the document to Respondent. Respondent occasionally worked for CAS as an independent contractor. Cecil Wright would call Respondent and ask her to prepare appraisals for Realnet USA. Respondent understood that all appraisal reports for Realnet USA should produce a proposed estimate of value based on the assumption that improvements were to be "better than new" when repairs and renovations were complete. Respondent prepared these reports on forms specified by Mr. Wright and sent them to him without signing her name under her typed signature and without identifying her state-certified residential appraiser number. In March 1998, Mr. Wright requested Respondent to prepare an appraisal report on the property for Realnet USA. He asked her to use a Federal Home Loan Mortgage Corporation (Freddie Mac) form contained in his computer software. Respondent understood that she would be using the forms to prepare a "restricted appraisal," showing the estimated market value of the property as it would exist after improvements were made to bring the house up to FHA specifications, including central air conditioning, a new kitchen, and new baths. Respondent also understood that the appraisal was intended only for Realnet USA's use. After accepting the assignment, Respondent went to the property. She observed the neighborhood and the exterior and interior of the house. She took pictures of the property. As to the exterior of the house, Respondent observed wood damage. She concluded that the damage was probably the result of termites or some other kind of pest infestation. There were little holes in the back of the house. As to the interior of the house, Respondent noted that the kitchen needed new cabinets and appliances. One of two baths needed repairs because the toilet shared plumbing with the kitchen refrigerator's icemaker, which was located on the other side of the wall. The other bathroom had a brick shower stall. Respondent saw that someone had renovated a one-car garage, changing it into living space, but leaving the supporting roof beams exposed. After visiting the property, Respondent performed the necessary research to complete her assignment. This research included performing a computer search of the local multiple listing service and public records to find comparable properties. Respondent did not make and file copies of documents that supported any of her research results. She did take pictures of the properties that she chose as comparable. On March 9, 1998, Respondent produced the report described below. The computer-generated cover page identifies Realnet USA as the entity requesting the appraisal and provides a file number. The following is the only other information on the cover page: In accordance with your request, I have personally made an exterior inspection from the street in front of the real property at: 235 Steward Terrace Deltona, Florida 32738 The purpose of this report is to estimate the market value of the subject property observed. In my opinion, the estimated market value of the property as of March 7, 1998, is: $79,000 Seventy-Nine Thousand The attached report contains the description, analysis, and supportive data for the conclusions, final estimate of value, descriptive photographs, limiting conditions and appropriate certifications. Next, Respondent filed in the two-page Freddie Mac form. The form states as follows at the top: "This form may be used if the second mortgage will not exceed $15,000 and value is based on 'as is' condition." On the form, Respondent typed in UCCF as the borrower. She indicated that the 1,556 square-foot house had six rooms, including three bedrooms, two baths, a family room, and no garage/carport. She noted that the house had central air conditioning. In the Field Report section of the form, Respondent provided information regarding the neighborhood, adding the following comments: "The subject is located in well-established neighborhood conveniently located to schools, shopping, employment, places of worship, and major arteries. There are no apparent adverse factors which would affect the subject's marketability." Respondent also typed information about the property, indicating that it was a detached, rambler-style, building with frame/siding exterior walls and a composite shingle roof material. In the section for favorable or unfavorable comments including any deferred maintenance, Respondent stated as follows: "When renovated to meet FHA/HUD standards, the subject will be a well built dwelling that projects good eye appeal. Functional utility will be average. The subject will meet expectations of purchases in this price range." In a section of the form labeled "Market Comparable Analysis Prior to Improvement," Respondent used the data she had collected from the local multiple listing service and public records to describe four pieces of property that she considered comparable. The four houses that Respondent listed as comparable were located one to fifteen miles from the subject property. Respondent listed the sale price of each house all of which sold between September 1997 and December 1997. Comparable one through four sold for $79,000; $77,700; $85,700; and $77,200, respectively. Respondent included the following general comments about her sales comparable approach: "Sale 3 is located more than one mile from the subject but was included for support purposes to the report. Depreciation is based on the subject being renovated and having an effective life of 3 years. Depreciation is calculated using 1% per year of effective age." Under the general comments in very fine print, the form states as follows: The information shown in this report is derived from an inspection of the neighborhood and exterior inspection of the subject property and market comparisons. The estimated market value is based upon this information and the knowledge of the undersigned. This report is not to be construed as an appraisal report. Respondent filled in the blank for the estimated value of the subject property as $79,000 as of March 7, 1998. She typed in her name as the person completing the report without signing her name under her typed signature and without identifying her state-certified residential appraiser number. Respondent attached the following to the report before she sent it to Cecil Wright at CAS: (a) subject property photo addendum containing three pictures that Respondent took of the property; (b) comparable property photo addendum containing pictures that Respondent took of the four comparable houses described in the report; (c) sketch/area table addendum of the subject property that Respondent prepared. Respondent testified that she also attached some certification pages to her report. However, the record contains no such documents. Respondent expected Mr. Wright to complete the report and sign his name as her supervising/review appraiser. Respondent did not keep a copy of the report she sent to Mr. Wright. The record contains two copies of Respondent's report, the first of which was eventually sent to Realnet USA. The first report contains the following alterations from the work personally prepared by Respondent: (a) An unidentified individual added Respondent's alleged hand-written initials under her typed name at the end of the Freddie Mac form; and (b) An unidentified individual added the alleged signature of Cecil Wright and his alleged state-certified residential appraiser number at the end of the Freddie Mac form. The first copy of the report includes only the cover page and the Freddie Mac form described above that Respondent prepared. It does not include the pictures or sketch prepared by Respondent or any other addendum. Respondent copied the second copy of the report from CAS's files after the initiation of Petitioner's investigation in this case. The second copy of the report includes the pictures and sketch prepared by Respondent but does not contain hand-written initials under Respondent's typed name or Mr. Wright's alleged signature and appraiser number at the end of the Freddie Mac form. Instead, it contains the following additions: (a) three maps prepared by an unidentified individual showing the location of the subject property and the four comparable properties; (b) a CAS certification page, attached by an unidentified individual; and (c) a page setting forth a certification and statement of limiting conditions together with contingent and limiting conditions, attached by an unidentified individual. The first certification page, attached to the second copy of the report, states as follows in relevant part: CERTIFIED APPRAISAL SERVICE CERTIFICATION * * * The appraiser has inspected all improvement on this property, but does not warrant the condition of the roof, floors, appliances, plumbing, electrical, heating and air conditioning. Only a visual inspection has been made and it is assumed that all are in serviceable condition for the purpose of this appraisal. Unless noted, it is assumed the subject property is free from termite infestation. * * * The value estimate is -as is- unless otherwise stated. Certification of Appraiser/Review Appraiser (If applicable) As of the date of this report, Cecil Wright, SRA has completed the requirement of the continuing education program of the Appraisal Institute. Cecil Wright is a State-Certified Residential Appraiser-No.RD 0000219. Additional Certification of the Appraisal Institute The appraisal analysis and opinion were developed and this appraisal report has been prepared in conformity with the Uniform Standards of Professional Appraisal Practice, as promulgated by the Appraisal Standards Board of the Apraisal [sic] Foundation, and the requirements of the code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute. * * * Definition of Client Neither all nor any part of the contents of this report shall be conveyed to any person or entity, other than the appraiser's or firm's client (the client is defined as the person or firm ordering the appraisal from the appraiser), through advertising, solicitation materials, public relations, news, sales, or other media without the written consent or approval of the authors, particularly as to valuation conclusions. . . . Termite information The appraiser makes a cursory inspection of the exterior wood on the dwelling for the purpose of determining whether there is wood rot, possible termite damage or any other wood related problems. The appraiser is not qualified to determine if any damage is caused by termites as this is beyond our expertise. Should we find any rotted wood damage that requires attention it will be mentioned in the appraisal report. . . . The last certification page attached to the second copy of the report, states as follows in relevant part: CERTIFICATION AND STATEMENT OF LIMITING CONDITIONS Certification: The drive-by inspector certifies and agrees that: * * * The drive-by inspector has inspected the exterior of the property only and that inspection may be limited to what can be seen from the street. To the best of the drive-by inspector's knowledge and belief, all statements and information in this report are true and correct and that the drive-by inspector has not knowingly withheld any significant information. It is assumed that the interior is in good condition but it must be noted that a more complete exterior inspection and/or an interior inspection could produce a substantial change in value from that value indicated in this report. All contingent and limiting conditions are contained herein (imposed by the terms of the assignment or by the undersigned affecting the analyses opinion, and conclusions contained in this report). All conclusions and opinions concerning the real estate that are set forth in the report were prepared by the drive-by inspector whose signature appears on the report, unless indicated as 'reviewer.' No change of any item in the report shall be made by anyone other than the appraiser or the reviewer whose names appear on the report, and the appraiser, the reviewer, or their firm shall have no responsibility for any such unauthorized change. CONTINGENT AND LIMITING CONDITIONS The certification of the drive-by inspector is subject to the following conditions in addition to any other specific and limiting conditions as are set forth by the drive-by inspector in the report: * * * 5. The inspector assumes that there are no hidden or unapparent conditions of the property, subsoil, or structures, which would render it more or less valuable. The inspector assumes no responsibility for such conditions, or for engineering which might be required to discover such factors. * * * Disclosure of the contents of the report is governed by the Bylaws and Regulations of the professional appraisal organization with which the inspector is affiliated. Neither all, not any part of the content of the report, or copy thereof (including conclusions as to the property value . . .) shall be used for any purposes by anyone but the client specified in the report, the mortgagee or its successors and assigns . . . without the previous written consent of the inspector, nor shall it be conveyed by anyone to the public . . . without the written consent and approval of the inspector. On all reports, subject to satisfactory completion, repairs, or alteration, the report and value conclusion are contingent upon completion of the improvements in a professional workmanlike manner. At the end of this last certification page, an unidentified individual signed Respondent's alleged initials as the drive-by inspector. Mr. Wright's alleged signature and appraiser number also appears at the bottom of the page. Respondent's three-page appraisal report did not include the following or state why these factors were not considered: (a) a label or title indicating that the report was restricted in scope as opposed to a conventional summary report; (b) an accurate statement regarding the report's intended use or purpose; (c) a statement regarding the property's highest and best use; (d) a cost approach analysis including an estimate of site value and an estimate of the value of the improvement, together with comments describing the sources used to compute the cost estimate, site value, and square footage; (e) an income approach analysis; (f) a history of prior sales or listing information for the property even though Respondent knew it had been on the market for 18 months for $61,500 and had not sold for that price; (g) an addenda explaining relevant information and including any departures from USPAP not otherwise included in the report; (h) a standard language explaining the scope of appraisal and the appraisal process; (i) a standard language of additional comments, explanations and limiting conditions; (j) a statement of contingent and limiting conditions and appraiser's certification, including the supervisory appraiser's certification; and (k) the signature of appraiser and/or supervisory appraiser, together with their respective state certification numbers. On or about August 12, 1998, William Wynn, inspected the subject property. He prepared a Uniform Residential Appraisal Report on August 17, 1998. Mr. Wynn's report lists Deborah Palfrey as current owner and borrower. It lists Pinnacle Financial Corp. as lender/client. Mr. Wynn's report describes the neighborhood of the property. The report includes comments describing market conditions and factors that affect the marketability of the properties in the neighborhood. Mr. Wynn's report described the property's site, stating that its highest and best use was its present use. It also includes a description of improvements on the property, indicating that the interior floors, walls, trims/finish, bath floor, bath wainscot, and doors were in good condition. Mr. Wynn added the following comments about the condition of the improvement: "The improvements are of average quality construction maintained in good condition. No repairs required at the time of inspection. The garage has been converted into living area." Mr. Wynn's report provides an estimate of the property's value using the cost approach. Regarding the cost approach, Mr. Wynn made the following comments: See attached sketch. Cost calculations are based on Marshall and Swift Guidelines and information for local contractors. Physical depreciation is based on observed conditions and estimated by the age/life method. Land [is] valued by abstraction, sales comparison, and typical ratio of land to improvement for the area. The estimated remaining economic life is 49 years. Mr. Wynn's report provides an estimate of the property's value using a sales comparison analysis. In making this analysis, Mr. Wynn compared the subject property to three comparables. Regarding the sales comparison approach, Mr. Wynn made the following relevant comments: The subject and the three comparable sales are located in Deltona Lakes. See the addendum for additional comments explaining the adjustments for the differences in gross living area and explanation for sales dated over six months. The three closed sales used in the sales comparison approach provide a reliable range of value for the appraiser property. *See Addendum. * * * The subject was listed at $57,500, in the first part of 1998. The subject sold for $50,000 March 1998. Mr. Wynn's report states that the appraisal was made "as is" and not subject to repairs. As part of the final reconciliation, the report states as follows: Emphasis is on the sales comparison approach because it reflects current market trends for similar properties. Typically homes in the subject's neighborhood are not purchased for income; therefore, the income approach was not applied. Cost approach is not required. Mr. Wynn concluded in his report that the property's estimated value was $60,000 as of August 12, 1998. He then signed his name and identified his state certification number. Mr. Wynn attached a General Text Addendum to his report, which states as follows: The comparables are closed sales in the subject's market area. All three sales are considered to be reasonable substitutes for the appraised property. Sale #2 and #3, although dated over six months is [sic] considered a reliable value indicator due to stable market conditions for the time period covered. The subject has a family room 19.9 x 19.8 that is a garage converted to heated and air-conditioned living area. The adjustments for the differences in living area are made at a lower than typical amount ($20 per sq. foot) because the ceiling in the family room has exposed roof trusses (painted). There is no finished drywall ceiling in the family room to cover the roof trusses. The appraiser was not able to bracket the subject in gross living area with a similar comparable sale. Mr. Wynn attached the following additional information to his report: (a) two maps showing the location of the subject property and the comparables; (b) three pictures of the subject property and pictures of the comparables; (c) a sketch/area table addendum; (d) a copy of his curriculum vitae; (e) a definition of market value; (f) a statement of contingent and limiting conditions; (g) an appraiser's certification; and (h) a supervisory appraiser's certification. Mr. Wynn then signed his name to the report and identified his state certification number. Mr. Wynn did not have a supervisory appraiser in making his report. In September 1998, Peter T. Woods, a state-certified general appraiser, requested his employee, Walter A. Drumb, a state-certified residential appraiser, to perform an appraisal of the subject property. Subsequently, Mr. Drumb prepared a Summary Appraisal Report using the form for a Uniform Residential Appraisal Report. The report lists Jean Palfrey as the borrower and Pinnacle Financial Corp. as the lender/client. Mr. Drumb's report states that "[t]he intended use of the appraisal is to aid in mortgage loan negotiations." Mr. Drumb's report also comments that "[t]he dwelling appears to be of average quality construction and in good physical condition with no functional inadequacies noted." In making his report, Mr. Drumb used two approaches: (a) the cost approach; and (b) the sales comparison analysis. The report states that the income approach was not used "due to a lack of reliable market rental data in the subject neighborhood." Regarding the cost approach, Mr. Drumb included the "as is" value of site improvements and made the following comments: "No functional or external obsolescence noted. Cost approach was prepared using Marshall and Swift Residential Cost Handbook and local cost estimates. See attached addendum for measurements. Estimated remaining economic life: 52 years." Regarding the sales comparison analysis, Mr. Drumb made the following comments: "The subject conveyed in March 1998 for $50,000. The public records reveal no prior sales of the comparable sales within the past year." Mr. Drumb concluded that the property had an estimated market value of $63,000 as of September 11, 1998. His report indicates that the appraisal was made "as is" and not subject to repairs and alterations. Mr. Drumb signed his report and identified his state-certified residential appraiser number. Mr. Woods also signed the report as the supervising appraiser and identified his state-certified general appraiser number. Mr. Drumb included an addendum to his report that explained his choice of comparables. He included a floor plan, pictures of the subject property and the properties used as comparables, a map showing the locations of the subject property and comparables, and a subdivision plat. Mr. Drumb included a page in his report that explained the scope of the appraisal and the appraisal process in detail. Finally, Mr. Drumb attached three pages to his report, setting forth additional comments, explanations, and limiting conditions. Included in these comments was a statement of limiting conditions and appraiser's certification. Mr. Drumb and his supervisory appraiser, Mr. Woods, signed the final certification page and identified their state-certified appraiser numbers. Petitioner's investigator, Robert Baird, has personal knowledge of the property as he resided on the same street as the property at all times material here. In late 1997 or early 1998, prior to investigating the complaint, Mr. Baird viewed the property and thought that it was in a state of disrepair. Mr. Baird inspected the property for second time on or about May 17, 1999, as part of his investigation. At that time, the property appeared to have been renovated as compared to its condition in early 1998. In the course of the investigation, Mr. Baird interviewed Respondent. During the interview, Respondent stated that her estimated value of the property included "with improvements." Respondent later admitted that she "could understand how individuals could misunderstand her estimate of value if they were not aware that it was based on proposed renovations." In either case, Respondent was unable to furnish Mr. Baird with documentation to support her estimated value of the property with or without improvements. Respondent admitted in the hearing that the cost of renovating the house could have been more than the renovated house would have been worth. She admitted that, based on her personal experience, the proposed renovations could cost in excess of $20,000, excluding any termite or wood rot. Respondent knew Realnet USA wanted the appraisal to help it "determine whether the house was worth it to purchase or not." If Respondent's estimated value of the property was $79,000 as it existed on March 7, 1998, and as stated on the cover page of her report, then her estimated value was substantially higher than the property's "as is" market value. If Respondent's estimated value of the property was $79,000, taking into consideration the appraisal request for an estimate of the market value after proposed renovations to meet minimum FHA standards, then Respondent failed to place a stated value on the estimated cost for each proposed renovation. During the hearing, Respondent admitted that USPAP required her to prepare an addendum to include necessary information such as prior sales history when the restricted form she was using did not include that information. She acknowledged that she was required to comply with 1998 USPAP even if she was unfamiliar the publication's contents and despite her client's request for something less than a conventional appraisal. Competent evidence indicates that appraisal reports by state-certified residential appraisers are seldom, if ever, free of errors. Certain information is always subjective as it is based upon the appraisers' personal experience and expertise. Additionally, there appears to be some confusion in the profession as to the precise information that a "restricted appraisal" must include. Nevertheless, USPAP requires the all appraisal reports prepared by state-certified residential appraisers to contain certain basic information or an explanation as to any departures from those requirements. At times, a supervisory/review appraiser will make changes to an appraiser's report. Knowing that a supervisory appraiser has this prerogative, does not mean that an appraiser is allowed to submit an incomplete appraisal report with the expectation that the review appraiser will complete the report and sign the appraiser's name. Clear and convincing evidence in this case indicates that the three-page appraisal report prepared by Respondent and submitted to Mr. Wright was substantially deficient and resulted in Realnet USA's receipt of an ambiguous, contradictory, and misleading appraisal based on unverifiable data.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That Petitioner enter a final order, suspending Petitioner's certification for one year followed by one year of probation in which Respondent shall be required to complete 30 hours of continuing education courses in addition to the courses required to maintain licensure and imposing an administrative fine in the amount of $2,000. DONE AND ENTERED this 20th day of July, 2001, in Tallahassee, Leon County, Florida. SUZANNE F. HOOD 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 20th day of July, 2001. COPIES FURNISHED: Steven W. Johnson, Esquire Steven W. Johnson, P.A. 1801 East Colonial Drive Suite 101 Orlando, Florida 32803 Sunia Y. Marsh, Esquire Department of Business and Professional Regulation Division of Real Estate 400 West Robinson Street, Suite N-308A Orlando, Florida 32801-1772 Herbert R. Fisher, Chairperson Florida Real Estate Commission 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 Northwood Centre 1940 North Monroe Street Tallahassee, Florida 32399-2202
The Issue Should the Florida Real Estate Appraisal Board (the Board) take action against Respondent, a certified residential appraiser (appraiser) for violations under Chapter 475, Part II, Florida Statutes (2005).
Findings Of Fact Respondent holds certificate no. RD-3933, as a certified residential appraiser issued by the Department of Business and Professional Regulation in accordance with Chapter 475, Part II, Florida Statutes (2005). Respondent's certificate is in an active status. His business address is 2302 Mitchell Place, Jacksonville, Florida, according to Petitioner's records. Kadrina E. Jackson owned property at 4409 Moncrief Road, Jacksonville, Florida, in Washington Heights Estates. A town home was located on the property. James F. Love attempted to purchase the property from Ms. Jackson. As part of the transaction Respondent performed a residential appraisal in relation to the property and rendered a Uniform Residential Appraisal Report (report) for which he charged $300. On July 19, 2005, the report was signed. The sales price for the property was $27,000. The appraised value was $27,000. Mr. Love believed that the appraisal was incorrect and filed a complaint with Petitioner. James Pierce is Petitioner's investigator assigned to the case. He has worked with the agency for over 12 years. His background includes several instructional courses sponsored by the Division of Real Estate. He has taken the approved AB-1 appraisal course and successfully completed the program. The AB-1 appraisal course is for persons who wish to become licensed trainee appraisers. He has conducted approximately 50 appraisal investigations. As part of the investigation of the complaint by Mr. Love, Investigator Pierce interviewed Respondent and others. Mr. Pierce conducted a physical inspection of the property in question from the outside and did research concerning the underlying information within the report. Investigator Pierce requested Respondent to provide a true and complete copy of the report under consideration, in addition to a complete copy of the work file of the work done in completing that report. Mr. Pierce also requested Respondent to provide the investigator a complete copy of previous reports that have been conducted by River City Appraiser Services, Inc. (River City) where Respondent worked. As requested, Respondent provided information for the Moncrief property associated with the July 9, 2005 report but not previous reports as completed by River City. In relation to the section of the report dealing with the cost approach, it was commented: Due to the age of the subject improvements, development of reproduction costs (an exact replica) or replacement costs (new construction) could be misleading because the building codes have changed and building labor and material costs fluctuate. This section was used to determine land value only. Estimated remaining economic life: 40 years. The cost approach did not lead to a determination of the appraised value as $27,000. It referred to site value at $5,000 and the "as is" value of site improvements as $5,000. When Mr. Pierce reviewed materials submitted by Respondent, he did not find separate calculations that would support the land value and site improvement estimates listed in the cost approach section found in the report. Three comparable sales are listed in the report. Comparable sale one dates from February 2005. Comparable sale two dates from January 2005. Comparable sale three dates from May 2005. All comparable properties in the report were in the same subdivision where the Subject Property is found. The sale prices ranged from $23,000 to $27,000, with the median sales price being $24,500. Investigator Pierce did not find documentation designed to support a $500 negative adjustment for the screen porch in comparable sale three within the sales comparison section to the report. The report indicates that predominate occupancy in the neighborhood is owner-occupancy with 0 to 5% vacancy. Respondent told Mr. Price that no research had been done in relation to that determination and no supporting documentation was found in the work file that would indicate the predominant occupancy as being owner occupancy. The report indicates information about single-family housing sales and a price range from $12,000 to $216,000, whereas Respondent's work file provided information on several properties that were available and had been sold recently as being a range between $12,000 and $69,000, excluding the $216,000 reference. The report under general description indicated that the house is attached. From his most recent observation Mr. Pierce considered the townhouse to be detached. Investigator Pierce's prior knowledge of the neighborhood is that individual housing units have exterior walls, which when originally built were approximately one inch in separation from the next unit. He is not sure whether that condition (one inch separation) exists today. He cannot attest to it with certainty. The report refers to four window a/c units in the townhouse. Mr. Pierce in his physical inspection of the property from the outside of the property and based upon photos of the property found within the report, believes that there are only three window air-conditioning units. The neighborhood where the subject home is found has several types of property: two-story town home properties with two to four bedrooms; single-story units that have two bedrooms and one bath; and properties that are designed as duplexes with common walls. With the exception of the duplexes, the lots are zero lot line properties. The reference to zero lot line in this case refers to the lot line beginning and ending at the exterior walls of an individual unit. Respondent's reason for describing the property as an attached unit is based upon his observation that the unit exterior wall touches the next door property wall. He observed that when you stand in front of the property you cannot see between those two buildings. In deciding that the property was a townhouse, Respondent used the Marshall and Swift Residential Cost Handbook. The definition within that reference source considers townhouses to be single-family attached residences. Respondent determined that the predominant occupancy in the neighborhood was owner-occupancy based upon by driving through the neighborhood. The determination of predominant occupancy involved looking at some public records and the Multiple Listing Service (MLS). When someone let Respondent in the home that is at issue, he asked the question "Hey are there a lot of renters in here or people own." That person believed that most people in the neighborhood owned the homes. He arrived at an occupancy rate by that same process of driving around the neighborhood. Following the inspection of the Subject Property, Respondent looked into comparables through information pulled from the MLS. The Subject Property had not been renovated. It had not be updated. It had no central heating or air. In trying to locate comparables, Respondent looked for properties that were similar in their condition. The first comparable was half a mile from the Subject Property. In comparing comparable two with the Subject Property, Respondent recognized that each had two bedrooms and a single bath. The reference to the minus $500 within the report for comparable three and the screen porch, was to reflect the fact that the Subject Property did not have a screen porch. It is inferred that Respondent was attempting to reflect similarities for comparison purposes by deleting a feature that is found in the comparable, not found in the Subject Property. The value of the screen porch was determined on the basis of Respondent's experience and use of the Marshall and Swift Handbook. Concerning the lack of documentation in Respondent's work file, Respondent did not believe that it was necessary to do anything other than utilize the reference book to arrive at his determination. As he explained, Respondent determined the $12,000 to $216,000 range of prices in his report by resort to the MLS. The reference source reflected a $216,000 amount at the extreme. The range of prices for sales in neighborhoods like the Washington Heights subdivision were from $12,500 through the $216,000 according to the MLS. The next highest was $69,000. The reference to $216,000 for a sale in the MLS seemed "odd" to Respondent. He did not double check to verify that the sale of the home was $216,000 through a review of public records, not believing that this was necessary in the conduct of his business. The basis for indicating that four a/c units were located at the townhouse, was Respondent's observation that there were two in the front and two in the back. Whether three or four units were found at the home would not affect the appraisal from Respondent's perspective. The a/c units were not part of his determination of $27,000 appraised value. In preparing the report Respondent did not utilize the cost approach. The only reason for referring to the cost approach in the report was that the lender had requested an opinion of the land value for insurance purposes. There was an earlier version of the report on the Subject Property that did not reflect the site value or land value which had been requested to be included later on. The earlier version without the indication of the site value with improvements was not provided to Investigator Pierce. With the change requested by the lender, to include the site value with improvements, Respondent did not maintain the earlier report that did not reflect the site value. The determination of the appraised value did not utilize the income approach either. The basis for determination was the sales comparison approach. Given that there was no determination utilizing the cost approach or income approach, Respondent had no documentation available to explain those approaches. In the addendum to the report under the final reconciliation Respondent did comment, "Investors are active in the area with possible unrecorded sales."
Recommendation Based upon the facts found and the conclusions of law reached, it is RECOMMENDED: That a final order be entered dismissing the Administrative Complaint against Respondent. DONE AND ENTERED this 3rd day of May, 2007, in Tallahassee, Leon County, Florida. S CHARLES C. ADAMS 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 3rd day of May, 2007.
