The Issue The issue is whether either Respondent committed the violations alleged in Counts I through VIII of their respective Administrative Complaints.
Findings Of Fact The Florida Real Estate Appraisal Board is the state agency charged with regulating real estate appraisers who are, or want to become, licensed to render appraisal services in the State of Florida. At all times pertinent, Ms. Green was licensed as a certified residential real estate appraiser. Ms. Green held license number 3236 in accordance with Chapter 475, Part II, Florida Statutes. Ms. Moody was licensed as a registered trainee appraiser. Ms Moody held license number 16667 in accordance with Chapter 475, Part II, Florida Statutes. In October 2008, Ms. Moody received a license as a certified residential appraiser, license number RD 7444. On March 8, 2007, Ms. Moody signed an appraisal of real property located at 11735 Chanticleer Drive, Lot 16, Block B Grand Lagoon, in Pensacola, Florida. She signed as appraiser. Ms. Green signed the report as supervisory appraiser. The listed borrower was James W. Cobb, and the lender was Premier Mortgage Capital. Respondents developed, signed, and communicated this report. Subsequently, the borrower, Mr. Cobb, who was also the buyer, complained to the Division with regard to the appraisal on the property, and the Division investigated the matter. The investigation resulted in an investigative report dated December 21, 2007. According to the appraisal, the property was listed for $1,030,000 in the multiple listing service, and the contract price was $790,000. The appraisal report valued the property using both the sales comparison approach and the cost approach. Both approaches resulted in a value of $1,030,000. These facts were reported in a six-page Uniform Residential Appraisal Report, Fannie Mae Form 1004 March 2005. At the time of the hearing, the property was the subject of a foreclosure action. The USPAP provides guidance to those involved in the business of conducting real estate appraisals. Real estate appraisers typically use both a "sales comparison approach" and a "cost approach" in attempting to arrive at a value. A "sales comparison approach" uses data obtained from sales of similar properties and adjusts for differences. A "cost approach" starts with the cost of an empty building site and adds to that the cost of building an identical structure and adjusts for enhancements and depreciation. Both approaches were used by Respondents and were reported on the Form 1004. The Division's expert witness, Sylvia G. Storm, reviewed the Form 1004 and all of the available supporting data. She did not make an appraisal herself and did not visit the property in question. Ms. Storm was accepted as an expert as provided by Section 90.702, Florida Statutes, because she had "specialized knowledge" regarding real estate appraisals. This was the first time that Ms. Storm testified as an expert witness in a case involving appraisals. The same was true in the case of the expert witness presented by Respondents, Victor Harrison. It is noted that these experts were only minimally qualified, and their testimony is given little weight. Ms. Storm commented on the fact that the property was called "new" in the improvements section yet on the following sales comparison approach it was listed under actual age, "27/E New-2." This suggests the property with improvements is 27 years old, but has an effective age of new to two years. In fact, in the improvements section it was noted that the property has been completely reconstructed. It is clear from the Form 1004, and the hearing record, that the property was essentially destroyed during Hurricane Ivan and was rebuilt above the surviving foundation. It is found that the house was essentially new at the time of the appraisal. Ms. Storm believes some of the deficiencies she noted in the Form 1004, discussed in more detail below, and the supporting documentation contained in the work file, affect the credibility of the report. She believes that some of these deficiencies amounted to a violation of USPAP. Ms. Storm stated that an appraiser should do a complete analysis of the contract and that if it is not done the appraiser is not being reasonably diligent. She also testified that an appraiser, who failed to discuss the large difference between the contract price and appraised value, and who failed to document the analysis, is not being reasonably diligent. Mr. Harrison, on the other hand, testified that after his analysis of the report he found no indication at all of a lack of reasonable diligence. Ms. Storm opined that two or more appraisers, appraising the same property may arrive at two or more numbers and that there is nothing unusual when that occurs. Ms. Moody testified under oath that the supporting information contained in the work file was adequate and that references to other documents, such as public records, were plentiful and complied with the requirements of USPAP. This testimony was adopted by Ms. Green. In order to provide clarity, actual allegations contained in the Administrative Complaints will be discussed in seriatim. As will be addressed more fully in the Conclusions of Law, the Division must prove its factual allegations by clear and convincing evidence. In evaluating the evidence presented, that standard will be used below. The factual allegations will be presented in bold face type, and the discussion of the proof will be in regular type: Respondent made the following errors and omission in the Report:"Failure to discuss or explain why the Subject Property was listed for sale for $1,030,000 and the contract price was $790,000." Ms. Storm opined that the discussion of the contract price did not go into the details as to the history of the property, or list price history, or who the contracting parties were or any fees to be paid by either party. She believes the Form 1004 should have reported when the property was listed and how many days it had been on the market. She believes that USPAP requires the appraiser to analyze the contract completely. She believes the Form 1004 should have commented on the large difference between the sales price and the appraised price. The Form 1004 states, "I did analyze the contract for sale for the subject purchase transaction." Ms. Moody testified under oath that they analyzed the difference between the appraisal price and the selling price. She stated that there was no requirement to discuss it in the Form 1004. Ms. Green adopted this testimony. Ms. Moody also stated that the contract price of a piece of property does not affect the value of the property as reported in the Form 1004. This factual allegation was not proven. "Use of an outdated FEMA map for the Subject Property." Respondents used a FEMA flood map that was outdated. This occurred because the computer program Respondents were using, InterFlood.com, presented an out-of-date map. The map used in the appraisal was dated February 23, 2000, but the most current edition of the map available at the time of the appraisal was dated September 26, 2006. The later map was no different from the map Respondents used. The Form 1004 notes, with regard to the flood status, "It appears to be located in FEMA Flood Zones X and AE. A survey would be needed to confirm flood zones." In sum, there is nothing incorrect or misleading with regard to flooding potential. The Division's expert witness, Ms. Storm, concluded that Respondents did not err with regard to the FEMA flood map. This factual allegation was not proven. "Misstatement of PUD Homeowner's Association Fees for the Subject Property." Respondents asserted the homeowner's association fee to be $100 annually. The by-laws of the Grande Lagoon Community Association, Inc., in effect during all times pertinent, state unequivocally that annual dues of the Association are $100. The Division's investigator stated that he learned through a telephone call with a "Mr. Broome," who was possibly an officer in the homeowner's association, that at the time of the appraisal there was an annual assessment by the homeowner's association of $250 for canal maintenance, and that this amount was to increase to $500 annually in 2008. Information about this assessment was not readily available to Respondents. An assessment is different from a homeowner's fee. The Division's expert witness stated that if there is a homeowner's fee it should be stated on the Form 1004, but that it is not a USPAP requirement. This factual allegation was not proven. "Failure to differentiate view of Subject Property and comparable sale 2, when the Subject Property is located on a canal and the comparable had an open water location." Comparable Sale 2 is located on Star Lake, a small, lagoon- like body of water with access to Pensacola Bay, similar to the location of the appraised property, which is on a canal with access to open water on Big Lagoon. The views on these properties are sufficiently similar that no adjustment is required. This factual allegation was not proven. "Failure to note financial assistance in the sales contract, where seller was to pay all closing costs." The agreement whereby seller would pay $20,000 in closing costs was not made until March 28, 2007, 20 days after the appraisal was completed. This factual allegation was not proven. "Failure to note consulting fee to Investor's Rehab in the sales contract." This allegation is true in that the consulting fee was not mentioned. Ms. Storm opined that it should be analyzed in the appraisal report. She asserted that persons who were not privy to the contract might make decisions in reliance upon the appraisal report and, therefore, the Form 1004 should mention the consulting fee. However, Ms. Moody pointed out that the consulting fee had no effect on the value of the property and stated that it was intentionally omitted. This factual allegation was proven to the extent that the consulting fee was not mentioned, but this omission did not affect the accuracy or credibility of the appraisal report. "Failure to explain range of effective age dates for the Subject Property and comparable sale 1." As discussed in Finding of Fact 8, the subject property was essentially new at the time it was appraised. As pointed out by Mr. Harrison, the effective age was new. Effective age is an estimate of the physical condition of a building. The actual age of the building may be shorter or longer than the effective age. The determination of effective age is largely a matter of judgment. In the case of Comparable Sale 1, it was built in 1980 and last sold in August 2005. Respondents reported the age in 2007 as 26 years with an effective age of 1-5 years. The Form 1004, therefore, presented a one year error as to actual age, which is insignificant. The allegation is that Respondents failed to explain the range of effective age dates. However, it is found that the Form 1004 adequately informs anyone reading it. Accordingly, this factual allegation is not proven. "Failure to make an adjustment or provide an explanation for no adjustment on comparable sale 1 for its effective age difference." No evidence supporting this allegation was presented. The unrebutted testimony of Ms. Moody, adopted by Ms. Green, was that there was no market data suggesting that there was a need for adjustment. There was no evidence that an explanation for no adjustment was required. Accordingly, this factual allegation is not proven. "Incorrect site size adjustment for comparable sale 1; the $17,000 should be in the positive direction." The site size adjustment for Comparable Sale 1 is in the amount of $40,000. It appears that the intentions of the Administrative Complaints were to allege an error in gross living area. The result is that the record provides no proof of this allegation. "Adjustment for both the room count and square footage, without explanation of its necessity or market support of its accuracy, for comparable sale 1." The Division's expert found this to be inconsequential. There was no proof adduced indicating that this was a violation of any standard. "Incorrect actual age for comparable sale 1." In the case of Comparable Sale 1, it was built in 1980 and last sold in August 2005. Respondents reported the age in 2007 as 26 years with an effective age of 1-5. The Form 1004 therefore presented a one-year error. This error is insignificant. "Failure to explain inconsistent site size adjustments made to comparable sale 1, comparable sale 2, and comparable sale 3." The subject property was located on a site (or lot) that was .3 acres. Comparable Sale 1 was located on a site that was .52 acres. Respondents subtracted $40,000 from the sale price of Comparable Sale 1. Comparable Sale 2 was located on a site that was .7 acres. Respondents subtracted $60,000 from the sale price of Comparable Sale 2. Comparable Sale 3 was located on a site that was .44 acres. Respondents added $25,000 to the sale price of Comparable Sale 3. It is the appraiser's duty to value a comparable in such a way that differences between the comparable and the subject property are accounted so that a common denominator may be found. For example, Comparable Sale 1 was approximately .2 of an acre larger than the subject property and thus more valuable solely because it is on a larger site. To equalize the situation, the price of Comparable Sale 1 must be reduced, and it was. Comparable Sale 2 also was reduced, but Comparable Sale 3 that was on a larger lot than the subject property, was credited with a $25,000 addition to its price. Nothing in Respondents' work file provides how the figures for the comparables were found. Moreover, if two of the comparables experienced a downward adjustment because of a larger lot size, then the third comparable, having a larger lot size, should have been adjusted downward also. Therefore, there were inconsistencies requiring explanation, and no explanation was found in the file. "Failure to note that comparable sale 1 has a fireplace." The Division's expert witness said that the failure to adjust for the fireplaces was of no consequence. No evidence was adduced to demonstrate that the failure to adjust for fireplaces was necessary. Accordingly, this factual allegation was not proven. "Failure to make an adjustment or provide an explanation for no adjustment on comparable sale 1 for its fireplace." The Division's expert witness said that the failure to adjust for the fireplaces was of no consequence. No evidence was adduced to demonstrate that the failure to adjust for fireplaces was necessary. Accordingly, this factual allegation was not proven. "Incorrect actual age for comparable sale 2." Comparable Sale 2 was built in 1990. At the time of the appraisal, it was approximately 17 years old. It last sold November 2006. It was reported to be 16 years of age with an effective age of five years on the Form 1004. This is both incorrect and insignificant. "Adjustment for both room count and square footage, without explanation of its necessity or market support of its accuracy, for comparable sale 2." The Division's expert found this to be inconsequential. There was no proof adduced indicating that this was a violation of any standard. "Incorrect actual age for comparable sale 2." This allegation repeats that stated in "O" above. "Failure to not [sic] that comparable sale 2 has three fireplaces." The Division's expert witness said that the failure to adjust for the fireplaces was of no consequence. No evidence was adduced to demonstrate that the failure to adjust for fireplaces was necessary. Accordingly, this allegation was not proven. "Failure to make an adjustment or provide an explanation for no adjustment on comparable sale 2 for its multiple fireplaces." The Division's expert witness said that the failure to adjust for the fireplaces was of no consequence. No evidence was adduced to demonstrate that the failure to adjust for fireplaces was necessary. Accordingly, this allegation was not proven. "Failure to make an adjustment or provide an explanation for no adjustment on comparable sale 2 for its lake view." Comparable Sale 2 is located on Star Lake, a lagoon-like body of water with access to open water, similar to the location of the appraised property, which is on a canal with access to open water on Big Lagoon. The views on these properties are sufficiently similar that no adjustment is required. This allegation was not proven. "Incorrect actual age of comparable sale 3." Comparable Sale 3 was built in 1989. At the time of the appraisal, it was approximately 18 years old. It last sold in August of 2005. It was reported to be 16 years of age with an effective age of 10 years on the Form 1004. This age was reported incorrectly. "Use of comparable sale 3 which sold 19 months prior to the Report." The Form 1004 noted that finding comparables was difficult due to market disruption caused by Hurricane Ivan. As noted by Ms. Storm, the change in the real estate market during the years 2004, 2005, and 2006, have been profound everywhere. Primarily, market prices have declined during those years. She was of the opinion that the August 18, 2005, sale date of Comparable Sale 3 was too remote. She stated, correctly, that a market condition adjustment should have been made to the price reported for Comparable Sale 3. Ms. Storm found in the work file analyst listings of the comparables that were utilized, and pages from the Marshall and Swift, but did not see any actual paired sale analyses for any of the adjustments that were used in the report. She could not determine from where they obtained these sales and the adjustments for differences. She opined that this made the report less credible. According to Ms. Storm, the insufficient analysis runs afoul of USPAP. The opinion of Ms. Storm, however, fails to take into account the insufficient data in the Pensacola area that resulted from hurricane-induced market disruption and the consequent lack of sales. Because of the lack of viable alternatives, using this property as a comparable was necessary. This factual allegation was not proven. "Adjustment for both room count and square footage, without explanation of its necessity or market support of its accuracy, for comparable sale 3." The Division's expert found this to be inconsequential. There was no proof adduced indicating that this was a violation of any standard. "Failure to calculate and list the net adjustment and gross adjustment totals for comparable sale 1, comparable sale 2, and comparable sale 3." The Division's expert found this to be inconsequential. There was no proof adduced indicating that this was a violation of any standard. "Failure to utilize current Marshall & Swift information for the Cost Approach section of the Report." Marshall and Swift is a reference service that is used to develop information in the cost approach analysis. It provides "local multipliers" to provide for cost differentials in various geographic areas, including differentials for garages and two-story houses. It also provides "local multipliers" for the cost per square foot for construction. The pages used by Respondents expired at the end of February 2007, eight days before the Form 1004 issued. Respondents receive quarterly updates. The issue after February 2007 showed no change. To the extent Respondents failed to get the most current information, it had no impact on the appraisal amount. "Failure to complete the PUD information section of the Report, when Subject Property, as noted by Respondent in Report, is located in a PUD." The Division acknowledged during the hearing that there was no support for this allegation, and withdrew it. AA) "Failure to date when Respondent inspected the Subject Property and comparable sales listed in the Report." (This allegation was made in the case of Ms. Green, but not in the case of Ms. Moody.) In the blocks on the Form 1004, below the Supervisory Appraiser's signature, Ms. Green signed statements indicating that she inspected the interior and exterior of the subject property and that she inspected the exterior of the comparable sales properties. She did not date either of these statements. There is no documentation in the work file to support the $40,000 "site size" adjustment made to comparable sale 1 in the Sales Comparison section of the Report. Respondents' work file, attached as Exhibit 1 to the Administrative Complaints, does not contain documentation for this adjustment to the "site size" of Comparable Sale 1. There is no documentation in the work file to support the $60,000 "site size" adjustment made to comparable sale 2 in the Sales Comparison section of the Report. Respondents' work file, attached as Exhibit 1 to the Administrative Complaints, does not contain documentation for this adjustment to the "site size" of Comparable Sale 2. There is no documentation in the work file to support the $25,000 "site size" adjustment made to comparable sale 3 in the Sales Comparison section of the Report. Respondents' work file, attached as Exhibit 1 to the Administrative Complaints, does not contain documentation for this adjustment to the "site size" of Comparable Sale 3. There is no documentation in the work file to support the $50,000 "view" adjustment made to comparable sale 1 in the Sales Comparison section of the Report. Comparable Sale 1 is on Big River. The Form 1004 notes that Big River is similar to Big Lagoon. A $50,000 downward adjustment was made in the "view" category. Ms. Storm stated that she had searched for documentation and did not find it. The work file does not have documentary support for the adjustments. Respondents and Ms. Storm agreed that the lack of sales in the area made such adjustments like this problematic. As Ms. Storm said, "I know there haven't been that many sales of waterfronts so it's really difficult to arrive at that data." Nevertheless, the lack of any information in the work file to support the adjustment means that this factual allegation is proven. There is no documentation in the work file to support the $5,000 "age" adjustment made to comparable sale 2 in the Sales Comparison section of the Report. Respondents' work file, attached as Exhibit 1 to the Administrative Complaints, does not contain documentation for this adjustment to the "age" of Comparable Sale 2. There is no documentation in the work file to support the $10,000 "age" adjustment made to comparable sale 3 in the Sales Comparison section of the Report. Respondents' work file, attached as Exhibit 1 to the Administrative Complaints, does not contain documentation for this adjustment to the "age" of Comparable Sale 3. There is no documentation in the work file to support the $3,000 "triple garage" adjustment made to comparable sale 3 in the Sales Comparison section of the Report. A downward adjustment of $3,000 was made to Comparable Sale 3 because of its triple garage. No testimony supporting this allegation was presented. Respondents' work file, attached as Exhibit 1 to the Administrative Complaints, includes Marshall and Swift data for garages. Although exactly how the $3,000 adjustment was calculated is not clear, the Marshall and Swift information was in the file and provided a method for making the calculation. There is no documentation in the work file to support the $10,000 "dock/pier" adjustment made to comparable sale 1 in the Sales Comparison section of the Report. A downward adjustment of $10,000 was made to Comparable Sale 1 because of the presence of a "dock/pier." No testimony supporting this allegation was presented. Respondents' work file, attached as Exhibit 1 to the Administrative Complaints, does not contain documentation for this adjustment. There is no documentation in the work file to support the $15,000 "pool" adjustment made to comparable sale 2 in the Sales Comparison section of the Report. A downward adjustment of $15,000 was made to Comparable Sale 2 because of the presence of a pool on the property. No testimony supporting this allegation was presented. Respondents' work file, attached as Exhibit 1 to the Administrative Complaints, does not contain documentation for this adjustment. There is no documentation in the work file to support the $39/square foot adjustment for gross living area made tocomparable sale 1, comparable sale 2, and comparable sale 3 in the Sales Comparison section of the Report. No testimony supporting this allegation was presented. The Division has not directed the attention of the Administrative Law Judge to any reference in the record to a "$39/square foot adjustment for gross living area." An independent search of Respondents' work file, attached as Exhibit 1 to the Administrative Complaints, did not reveal documentation for this adjustment or any documentation mentioning it. Accordingly, this allegation is not proven. The work file lacks current Marshall and Swift pages for the time frame that the Reports were completed, as well as any local builder information, to justify the dwelling square footage price in the Cost Approach section of the Report. Marshall and Swift is a reference service that is used to develop information for use in the cost approach. It provides "local multipliers" to provide for cost differentials in various geographic areas, including differentials for garages and two-story houses. It also provides information used to calculate the construction cost per square foot. The pages used by Respondents expired at the end of February 2007, eight days before the report issued. Respondents receive quarterly updates. The issue subsequent to February 2007 showed no change. To the extent Respondents failed to get the most current information, it had no impact on the appraisal amount. The work file lacks any documentation to support the $30,000 As-Is Value of Site Improvements adjustment in the Cost Approach section of the Report. As-is value of site improvements adjustment, in the cost approach section, is a positive value of $30,000. There is no explanation in the record as to what an "as-is value of site improvements adjustment" is or from what source came the $30,000 value. The work file lacks any documentation to support the $60,000 Porches/Appliances adjustment in the Cost Approach section of the Report Respondents' work file, attached as Exhibit 1 to the Administrative Complaints, contains Marshall and Swift information for porches and appliances. Thus, documentation is present.
Recommendation RECOMMENDED that the Florida Real Estate Appraisal Board find Respondents guilty of violating Subsection 475.624(14), Florida Statutes, by failing to document adjustments made to comparable sales and reprimand Respondents. DONE AND ENTERED this 27th day of January, 2009, in Tallahassee, Leon County, Florida. S HARRY L. HOOPER 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 27th day of January, 2009. COPIES FURNISHED: Thomas M. Brady, Esquire 3250 Navy Boulevard, Suite 204 Post Office Box 12584 Pensacola, Florida 32591-2584 Robert Minarcin, Esquire Department of Business & Professional Regulation 400 West Robinson Street, N801 Orlando, Florida 32801-1757 Ned Luczynski, General Counsel Department of Business and Professional Regulation Northwood Centre 1940 North Monroe Street Tallahassee, Florida 32399-0792 Thomas W. O'Bryant, Jr., Director Division of Real Estate Department of Business and Professional Regulation 400 West Robinson Street Suite 802, North Orlando, Florida 32801 Frank K. Gregoire, Chairman Real Estate Appraisal Board Department of Business and Professional Regulation 400 West Robinson Street, Suite 801N Orlando, Florida 32802-1900
The Issue Whether the allegations of the Administrative Complaint are correct and, if so, what penalty should be imposed.
Findings Of Fact The Petitioner is the state agency responsible for regulation of licensed real estate salespersons in the State of Florida. At all times material to this case, the Respondent was a licensed real estate salesperson, holding Florida license no. 0566297. Most recently, the Respondent's license identifies her as a salesperson with Robert E. Bartlett at Bartlett Realty, 3500 First Avenue North, St. Petersburg, Florida 33701. From July 11, 1995, to September 27, 1996, the Respondent was employed by Century 21, Grant Realty of Florida, 6450 Seminole Boulevard, Largo, Florida 34642. Steve and Janice Perry (the Perrys) owned a house located at 12907 Hickorywood Lane, Largo, Florida. On or about June 5, 1996, the Perrys listed the house for sale through execution of an Exclusive Right to Sell Listing Agreement with the Respondent and Grant Realty. The Perrys were very anxious to sell the house and contacted the Respondent almost daily to determine whether there was activity on the listing. In time, the Respondent presented to the Perrys a written and signed offer (the "first offer") to purchase the property. The Perrys declined the offer, but proposed a counteroffer, and executed the document. The Respondent did not provide a copy of the offer or counteroffer to the Perrys. The Respondent eventually told the Perrys that the purchasers had been unable to obtain financing. The Respondent has no documentation of the first offer. The Respondent is unable to recall the names of the prospective buyers or of any agent representing the buyers. The files of Grant Realty contain no records related to the first offer. At some time after the first offer had failed to close, the Respondent presented a second written and signed offer to the Perrys. The Respondent indicated to the Perrys that she knew the second buyer. On the Respondent's advice, Mr. Perry amended the second offer, initialed the changes, and signed the document. Mr. Perry told the Respondent that if the amendments were not acceptable to the buyer, he would accept the original offer. The Respondent did not provide a copy of the second offer to the Perrys. The Respondent has no documentation of the second offer. The files of Grant Realty contain no records related to the second offer. The day following execution of the second offer, the Perrys inquired about the status of the matter. The Respondent told Mr. Perry that the buyer was part of an "investment group" and that the group was being contacted about the Perrys' amendments. The Perrys continued to contact the Respondent about the status of the second offer, but she offered little new information. The Respondent eventually told the Perrys that the prospective buyer thought she was being "too pushy" and was refusing to discuss the matter with her. The Respondent told the Perrys that the buyer's agent would handle the sale, but stated that it would be improper for the Perrys to contact the buyer's agent and declined to identify the agent. The Perrys continued to contact the Respondent and request information. She eventually indicated that the buyer's agent was "Dave," another Century 21 agent, and suggested it could be Dave Sweet, another Grant Realty agent. The Perrys contacted Dave Sweet. Mr. Sweet had no knowledge of the second offer and was unable to provide any information. At this point, the Perrys contacted the Respondent's employer and spoke with Karen Selby, a broker at Grant Realty. Ms. Selby was unaware of any offer on the property. Conrad Grant, owner/broker of the agency, was also unaware of any pending offer on the Perry property. Ms. Selby took possession of the Perry listing file. There was no documentation in the file suggesting that any offers were received. Ms. Selby questioned the Respondent about the second offer. The Respondent stated that the offer came from "John," a man who had come through an open house a few weeks earlier, that she'd prepared a written offer according to his direction but that he had not signed it, that Mr. Perry counteroffered, and that the counteroffer had been declined. The Respondent further told Ms. Selby that the buyer had been working with "Dave," an agent in another Century 21 agency. Ms. Selby asked for the full names of the buyer and the agent, but the Respondent was unable to provide them. Ms. Selby asked the Respondent to consult her notes or the open house sign- in sheet for the information. The Respondent was unable to provide any additional information related to the offer. Ms. Selby contacted the agency's attorney and arranged a meeting with the Respondent. During this meeting, the Respondent was again asked for, but was unable to provide, additional information related to the alleged offers. Subsequent to the meeting, the Respondent provided a name and telephone facsimile number for the alleged buyer. Using the phone number, Ms. Selby attempted to contact the buyer, identified as "Brian John Edridge." Ms. Selby received a response from a business which stated that no one by that name was involved in the business. Ms. Selby discussed the matter with Dave Sweet. Mr. Sweet told Ms. Selby he was not involved in the purported offer and had no information about the situation. The Respondent's employment at Grant Realty was terminated. There is no credible evidence that the "offers" presented by the Respondent to the Perrys were real. There is no credible evidence that the prospective "buyers" identified to the Perrys by the Respondent existed. There is no credible evidence that anyone identified as "Brian John Edridge," or any variation of the name, was involved in any prospective purchase of the Perry property. There is no credible evidence that an agent identified as "Dave" was involved in any prospective purchase of the Perry property. At the hearing, the Respondent testified in her own behalf. Her testimony lacks credibility and is rejected.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is hereby recommended that the Department of Business and Professional Regulation, Division of Real Estate, enter a Final Order revoking the Respondent's real estate license. DONE AND ENTERED this 1st day of June, 1998, in Tallahassee, Leon County, Florida. WILLIAM F. QUATTLEBAUM 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 Filed with the Clerk of the Division of Administrative Hearings this 1st day of June, 1998. COPIES FURNISHED: James H. Gillis, Esquire 1415 East Robinson Street, Suite B Orlando, Florida 32801-2169 Christine M. Ryall, Esquire Division of Real Estate Department of Business and Professional Regulation Post Office Box 1900 Orlando, Florida 32802-1900 Lynda L. Goodgame, General Counsel Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-0792 Henry M. Solares, Division Director Division of Real Estate Department of Business and Professional Regulation Post Office Box 1900 Orlando, Florida 32802-1900
The Issue The issues in this case are whether Respondent violated Subsections 475.624(2), 475.624(14), and 475.624(15), Florida Statutes (2005),1 and, if so, what discipline should be imposed.
Findings Of Fact Mr. Sigmond is now and was, at all times material to this proceeding, a state-certified residential real estate appraiser in the State of Florida, having been issued license number 2479 in 1994. Mr. Sigmond has never had any prior disciplinary action taken against him. On January 2, 2006, Rels Valuation, an appraisal management company for Wells Fargo Bank, ordered an appraisal from Mr. Sigmond of a condominium unit located at 2740 Cypress Trace Circle, Unit 2715, Naples, Florida (Subject Property). The client for the appraisal was Wells Fargo Bank. The purpose of the appraisal was for mortgage lending. On or about January 6, 2006, Mr. Sigmond developed and communicated an appraisal report (Report) on the Subject Property valuing the Subject Property at $375,000. The Subject Property is a two-bedroom, two-bath unit with 1,171 square feet of gross living area. The unit is located on the first floor of the building and has a carport. At the time of the Report, the Subject Property was one year old. The unit was freshly painted, had ceramic floor tile in the foyer, living room, kitchen, and dining areas. The bedrooms were carpeted. The foyer, living room, dining, and kitchen areas had crown molding. The Subject Property was appraised as unfurnished and listed for sale as unfurnished; however, some furniture was left in the unit. Mr. Sigmond stated in his report: As stated in contract: “Property is being sold ‘turnkey.’ Furnishings have little or no value and are being left as a convenience to the seller.” Also buyer agrees to pay $1,500 for kitchen set at closing. The Subject Property was sold prior to the issuance of the Report. The first sale was a preconstruction purchase on December 2, 2004, for a purchase price of $213,900. The Subject Property was listed on September 27, 2005, for $342,900, and the Subject Property was under contract for sale by October 10, 2005. The second sale was closed on December 13, 2005, and the sale price was $335,000. The buyers in the second sale entered into a sale and purchase contract with John Schrenkel on December 20, 2005, to sell the Subject Property for $375,000. After the sale of the Subject Property on December 13, 2005, the buyers put crown molding in the unit, painted all the walls of the unit, put in ceiling fans, and upgraded some electrical fixtures. Mr. Sigmond valued the Subject Property for $40,000 more than the Subject Property sold on December 13, 2005. He considered the upgrades that were made to the Subject Property after the December 13, 2005, sale, and the amount of time that had elapsed from the listing of the Subject Property in September 2005 for the sale that closed on December 13, 2005, and the date of the appraisal. Mr. Sigmond testified that he did not know the actual execution date of the sales contract for the December 13, 2005, sale. However, in his response to the Department dated July 16, 2008, he acknowledged that the pending date for the December 13 sale was October 10, 2005. He did not include the pending sale date in his Report. Mr. Sigmond did not adequately explain in his Report the $40,000 difference in valuation from the last sale of the Subject Property and his appraisal valuation. He admitted in his letter dated July 16, 2008, to the Department’s investigator that that he did not include an analysis of the December 13 sale in his Report. He stated: The prior sales of the subject property were identified in the addendum to the appraisal, however, the analysis of the 12/13/05 sale was inadvertently omitted from the addendum. The following comment was originally in the appraisal report: “At the time of the inspection, the subject property had been renovated since its previous sale on 12/13/05. The subject improvements were: Custom crown molding throughout, updated/additional electrical repairs and/or replacement throughout the subject unit; the interior had been completely repainted; replaced and/or upgraded light fixtures and ceiling fans. The subject has been well maintained and is considered to be in good physical condition with no functional inadequacies noted. No external inadequacies were noted in the subject’s immediate area.” That comment should not have been omitted from the appraisal, however, it did not materially affect the reporting standards or the opinion of the market value as the condition of the subject was referred to as good throughout the report. The Subject Property is part of a condominium complex known as Terrace IV at Cypress Trace. Terrace IV consists of 60 units. Cypress Trace is a conglomerate of individual condominium projects that have banded together through an agreement to share certain common amenities. The total number of condominiums in the conglomerate is 799. There are three methods for valuing all forms of real estate: the cost approach, the sales comparison approach, and the income approach. Mr. Sigmond used the sales comparison approach, which is the appropriate method for valuating condominium units such as the Subject Property. The goal of a sales comparison approach is to find a set of comparable sales as similar as possible to the property being appraised. Mr. Sigmond selected and listed three properties in his Report, which he considered to be comparable to the Subject Property. The first property listed as a comparable sale was located at Veranda III at Cypress Trace (Comparable Sale 1), less than .01 mile northwest of the Subject Property. It is a two-bedroom, two-bath unit with 1,414 square feet of gross living area located on the second floor of the building. The unit has a detached garage. At the time of the Report, Comparable Sale 1 was two years old. A contract for sale was entered into on July 5, 2005, for $399,000. The sale of Comparable Sale 1, which included furniture, was closed on September 23, 2005. Mr. Sigmond adjusted the value of Comparable Sale 1 downward by $15,000 for the detached garage and by $17,000 for the additional square footage. He also made a positive time adjustment for Comparable Sale 1 of $15,900. A time adjustment is an adjustment for the amount of time that has elapsed since the property last sold. In a market which is climbing, an upward adjustment for appreciation would be appropriate, but, if the market has peaked and is declining, a positive adjustment would not be appropriate. Mr. Sigmond made time adjustments from the time that the contracts for sale were entered for the properties used as comparables. The time adjustments were 1 percent per month from the date of the pending sale. The second property listed as a comparable sale was located at Terrace II at Cypress Trace (Comparable Sale 2), approximately .35 miles northeast of the Subject Property. Comparable Sale 2 is a two-bedroom, two-bath unit consisting of 1,194 square feet of gross living area located on the third floor of the building. The unit was two years old at the time of the report. Comparable Sale 2 has a carport. Comparable Sale 2 was sold furnished in November 2005. The multiple listing for Comparable Sale 2 described the furnishings as follows: “This 3rd floor condo has over $20,000.00 in furnishings including Tommy Bahama style furniture and drapes.” Mr. Sigmond or his assistant contacted the listing agent for Comparable Sale 2 and was told that the value of the furniture was nominal. Mr. Dennis J. Black, expert for the Department, contacted the owner of Comparable Sale 2, who advised Mr. Black that one of the selling points of the unit was the furnishings. A contract for sale for Comparable Sale 2 was pending on October 3, 2005, and the sale closed on November 16, 2005, for $355,000. Mr. Sigmond made a $15,000 positive adjustment to Comparable Sale 2 for options and upgrades and a positive time adjustment of $7,100. Mr. Sigmond made no adjustments for differences in floor locations, feeling that the floor location is typically a personal preference of the buyer. He also made no adjustments for the furniture that was sold with the unit. Comparable Sale 2 was the most current sale of a basic unit exactly like the Subject Property; however, Comparable Sale 2 did not have crown molding, was not freshly painted, and had carpet as opposed to ceramic tile in the living areas. The multiple listing for Comparable Sale 2 did indicate that the unit had some ceramic tile, but did not specify in what areas the tile was located. The third property listed as a comparable sale was located at Carrington at Stonebridge (Comparable Sale 3), approximately 2.1 miles southwest of the Subject Property. Comparable Sale 3 is a two-bedroom, two-bath unit consisting of 1,184 square feet of gross living area located on the first floor of the building. The unit has a carport and, at the time of the Report, was nine years old. A contract for sale of Comparable Sale 3, unfurnished, was entered into on June 22, 2005, and the sale was closed on July 13, 2005, for $350,000. Mr. Sigmond chose Comparable Sale 1 to bracket the sale price in order to meet an underwriting guideline of Wells Fargo Bank, which requires that a similar unit be listed which has a value that is more than what the appraiser may value the property being appraised. Bracketing is a common and accepted appraisal practice in the Collier County area when doing appraisals for mortgage lenders. He felt that Comparable Sale 2 was the most recent similar sale in the project. He went out of the project for Comparable Sale 3, because he felt that the banks wanted to have a comparable sale out of the project. Mr. Sigmond’s Report contained a description of the general market conditions as follows: There are no loan discounts, interest buy downs or concessions noted in the marketplace at this time. Conventional financing is readily available and interest rates are at competitive levels. Demand outweighs supply at this time, and market values have been increasing. The marketing time for condominium[s] in this area has ranged from one to three months and is considered to be typical. Mr. Sigmond also discussed the increasing market in the Sales Comparison Approach section of the Supplemental Addendum of the Report. Time adjustments were necessary due to a market in which demands [sic] exceeds supply, and properties are commonly sold within 60 days of their listing. These adjustments were calculated at a conservative 1% per month from “pending” date. A 25%-40% increase in the Naples Real Estate market over the last 12 months has been well documented by MLS and local print media. Based on the overall evidence, the real estate market was not declining at the time the appraisal was done. There were other units which Mr. Sigmond considered, but did not use as a comparable sale. One such unit was located at Terrace IV at Cypress Trace, Unit 2738. Built in 2005, this unit has two bedrooms and two bathrooms and is located on the third floor of the building. The living area of the unit is 1,232 square feet. The freshly painted unit has crown molding and ceramic tile throughout the unit. Unit 2738 was a new listing on August 5, 2005, for $339,900. A pending sale on August 16, 2005, showed a selling price of $335,000. The sale was closed on October 4, 2005. Another unit which Mr. Sigmond considered but did not use as a comparable sale was located at 2730 Cypress Trace Circle, Unit 2813. This condominium is a first-floor two- bedroom, two-bath unit, which was built in 2004. It has ceramic tile and carpeting. The living area is 1,194 square feet. Unit 2813 was listed on August 18, 2005, for $339,000. On September 7, 2005, a sale was pending for $320,000. The sale closed on November 30, 2005. The evidence does not establish that Mr. Sigmond intentionally crafted his Report so that his valuation of the Subject Property would equal the contract price of the Subject Property. In his Report, Mr. Sigmond certified the following: I performed this appraisal in accordance with the requirements of 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) (2005), which were in effect at the time the Report was developed and communicated, provide the following: Standards Rule 1-1 (This Standards Rule contains binding requirements from which departure is not permitted.) 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 appraisal. not commit a substantial error of 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 1-2 (This Standards Rule contains binding requirements from which departure is not permitted.) In developing a real property appraisal, an appraiser must: * * * (e) identify the characteristics of the property that are relevant to the type and definition of value and intended use of the appraisal, including: * * * (iii) any personal property, trade fixtures, or intangible items that are not real property but are included in the appraisal; * * * Standards Rule 1-4 (This Standards Rule contains specific requirements from which departure is permitted. See the DEPARTURE RULE.) In developing a real property appraisal, an appraiser must collect, verify, and analyze all information applicable to the appraisal problem, given the scope of the work identified in accordance with Standards Rule 1-2(f). (a) When a sales comparison approach is applicable, an appraiser must analyze such comparable sales data as are available to indicate a value conclusion. * * * Standards Rule 1-5 (This Standards Rule contains binding requirements from which departure is not permitted.) In developing a real property appraisal, when the value opinion to be developed is market value, an appraiser must, if such information is available to the appraiser in the normal course of business: analyze all agreements of sale, options, or listings of the subject property current as of the effective date of the appraisal; and analyze all sales of the subject property that occurred within the last three (3) years prior to the effective date of the appraisal. * * * Standards Rule 2-1 (This Standards Rule contains binding requirements from which departure is not permitted.) Each written or oral real 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 2-2 (This Standards Rule contains binding requirements from which departure is not permitted.) 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. * * * (b) The content of a Summary Appraisal Report must be consistent with the intended use of the appraisal and, at a minimum: * * * (iii) summarize information sufficient to identify the real estate involved in the appraisal, including the physical and economic property characteristics relevant to the assignment. * * * clearly and conspicuously: state all extraordinary assumptions and hypothetical conditions; and state that their use might have affected the assignment results; * * * Standards Rule 2-3 (This Standards Rule contains binding requirements from which departure is not permitted.) Each written real property appraisal report must contain a signed certification that is similar in content to the following form: I certify to the best of my knowledge and belief: --the statements of fact contained in this report are true and correct. --the reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions and are my personal, impartial, and unbiased professional analyses, opinions, and conclusions. --I have no (or the specified) present or prospective interest in the property that is the subject of this report and no (or specified) personal interest with respect to the parties involved. --I have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment. --my engagement in this assignment was not contingent upon developing or reporting predetermined results. --my compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal. --my analyses, opinions, and conclusions were developed, and this report has been prepared in conformity with the Uniform Standards of Professional Appraisal Practice. --I have (or have not) made a personal inspection of the property that is the subject of this report. (If more than one person signs this certification, the certification must clearly specify which individuals did and which individuals did not make a personal inspection of the appraised property.) --no one provided significant real property appraisal assistance to the person signing this certification. (If there are exceptions, the name of each individual providing significant real property appraisal assistance must be stated.)
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered finding that Mr. Sigmond violated Subsections 475.624(2) and 475.624(15), Florida Statutes; dismissing Counts Three through Ten; issuing a public reprimand; and imposing a $5,000 administrative fine. DONE AND ENTERED this 12th day of January, 2010, 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 12th day of January, 2010.
The Issue The issues are essentially whether Respondent failed to use reasonable diligence on four appraisals of residential condominiums in Orlando done in 2007, and whether he failed to register his appraisal business with Petitioner; and, if so, how he should be disciplined.
Findings Of Fact Respondent is a certified Florida real estate appraiser, holding DBPR license 5422. In 2007, Respondent was appraising through Rush Realty Appraisal Services, LLC (Rush Realty), which he owned and operated. Rush Realty was registered with the Florida Department of State as a limited liability company, but it was not registered with DBPR. The Appraisals In 2007, Rush Realty, through Respondent and a trainee he supervised, appraised four condominium units in a residential complex in Orlando called the Residences at Millenia (Millenia). Three of the appraisals were done in January and the other in June. In January, Rush Realty appraised two of the condos at $279,500 and appraised the third at $258,500; in June, it appraised the fourth condo at $279,500. Respondent is responsible for these appraisals. One January appraisal was based on five comparables, three of which were sales of Millenia condos; one of those three was a pending sale. The other two January appraisals were based on four comparables, two of which were sales of Millenia condos, both of which were pending sales. One of the pending Millenia sales used for the January appraisals was for $290,000 ($282 per square foot, abbreviated psf). The other Millenia pending sale used for the January appraisals was for $279,500 ($272 psf). The closed sales used in the January appraisals included one at Millenia for $209,800 ($204 psf), another at Millenia for $207,400 ($202 psf), two at nearby Sunset Lake Condos for $275,900 ($265 psf), one at Sunset Lake for $259,900 ($251 psf), and one at Sunset Lake for $254,900 ($256 psf). According to the January appraisal reports, the sources of the comparables used by Respondent were the public records and the Multiple Listing Service (MLS) for the closed sales and the Millenia sales office for the pending sales. The June appraisal was based on two Millenia condo sales. These were the two sales that were pending at the time of the January appraisals. According to the June appraisal, those sales closed in March 2007, one at $280,000 and the other at $279,900. The June appraisal listed only the Millenia sales office as the source of the data on the two Millenia closed sales used as comparables for that appraisal. The June appraisal listed only the Millenia sales office as the source of the data on the two Millenia closed sales used as comparables for that appraisal. Respondent's January appraisal reports stated that the price range of properties similar to the subject property sold within the year prior to the appraisal report was from $100,000 to $400,000. In fact, according to MLS, the range was $25,000 to $313,000. Only seven of the 186 comparable sales were over $250,000. Respondent's June appraisal report also stated that the price range of properties similar to the subject property sold within the year prior to the appraisal report was from $100,000 to $400,000. In fact, according to MLS, the range was $102,000 to $313,900. Only four of the 88 comparable sales were over $250,000. Whether Respondent Used Reasonable Diligence The information provided by the Millenia sales office for the pending sales used as comparables for the January appraisals was unverifiable at the time. It was inappropriate for Respondent to use the Millenia sales office as the source of comparables for the January appraisals (or to use it to verify other sources) because Millenia was interested in the transaction for which the appraisals were done. Respondent testified that he and his trainee used a research tool called Microbase to obtain public records information on comparable sales for the appraisals. He testified that the information from the public records used for the January appraisals, and from the Millenia sales office for the June appraisal, was verified by the MLS, HUD-1 closing statements, and contracts. The use of MLS for verification for the closed sales in the January appraisals is indicated by the inclusion of MLS in the part of those appraisal report forms used to indicate data source(s). Although the data and verification sources other than the Millenia sales office and MLS were not indicated on the report forms for the January appraisals, and no source other than the Millenia sales office was indicated on the report form for the June appraisal, Respondent testified that his work files document the use of all of these sources for the closed sales used as comparables in the four appraisals. DBPR questions the veracity of Respondent's testimony regarding his work files and the use of these data and verification sources based on his failure to replicate his work files when asked to do by Petitioner's investigator. DBPR points to no requirement for Respondent to replicate his work files upon request. It appears from the evidence that Respondent understood he was being asked to produce the files, not to replicate (i.e., recreate) them. His response was in the negative based on his explanation that the files had been confiscated by and remained in the possession of the Federal Bureau of Investigation. The FBI has not returned Respondent's work files. Neither party attempted to subpoena the work files in this case, and the work files were not placed in evidence. DBPR also questions the veracity of Respondent's testimony regarding his work files and the use of these data and verification sources based on his failure to use any of the numerous other comparable sales that were available from those sources, most of which were sold for considerably less money than the comparables used by Respondent. For example, for the January appraisals, there were 37 comparable sales in the preceding six months available through MLS that ranged from $39,000 to $235,000; and, for the June appraisal, there were 16 comparable sales in the preceding six months available through MLS that ranged from $134,900 to $190,000. DBPR's expert utilized these comparables in MLS and reached value conclusions that were approximately $90,000 lower than Respondent's. According to MLS, other closed sales at Millenia between July 27, 2006, and January 27, 2007, ranged from $180,000 ($184.82 psf) to $205,000 ($207.49 psf), with an average of $198,472 ($196.96 psf) and a median of $205,000 ($199.42 psf). Comparable sales of condos within a mile from Millenia that closed between July 27, 2006, and January 27, 2007, ranged from $39,000 ($38.24 psf) to $306,000 ($275.93 psf), with an average of $187,279 ($183.82 psf) and a median of $188,500 ($189.95 psf). Comparable sales of condos within a mile from Millenia that closed between January 27, 2006, and January 27, 2007, ranged from $25,000 ($30.56 psf) to $317,900 ($256.28 psf), with an average of $168,468 ($152.69 psf) and a median of $169,650 ($159.49 psf). Respondent testified that he rejected the comparables he did not use based on the properties' relative poor condition, effective age, and lack of amenities. He also testified that, in some cases, the sellers appeared to be in financial distress and extremely motivated to sell, even at lower than market value; or, in other cases, the sellers did not raise their prices as the market rose. Taking all the evidence into account, DBPR did not prove that Respondent did not use any data and verification sources other than the Millenia sales office for the closed sales used as comparables in the four appraisals; however, Respondent inappropriately used pending sales instead of the available comparables and did not diligently review the available comparables before choosing the comparables he used. Instead, he quickly focused on sales at Millennia and Sunset Lakes that were significantly higher than the predominant prices of other comparable sales available to him through MLS and other sources. Respondent failed to exercise reasonable diligence in developing the appraisals and preparing the appraisal reports. If pending sales had not been used as comparables in the January appraisals, or if other available comparables had been used, the appraised values would have been significantly lower. The June appraisal would have been lower if other available comparables had been used. Other Errors in Appraisal Reports For two of the closed sales, in the part of the appraisal report form for describing sales and financing concessions, Respondent mistakenly entered MLS, with an official public records book and page number. This labeling error could have been confusing, but there was no evidence that anyone was misled by the error. The report forms used by Respondent included an addendum indicating that closed sales were used for comparables. This language was inconsistent with the indications elsewhere in the January appraisal reports that pending sales were used for that purpose. While potentially confusing, there was no evidence that anyone actually was misled by the addendum language. The addendum language also stated that all comparables were given equal consideration. Actually, in one of the January appraisals, the higher comparables were given greater weight. In that report, the property appraised for approximately $30,000 more than it would have if all comparables had been given equal consideration. This language was misleading in that computations would have been required to determine that it was in error. USPAP Rule 1-1(a) of the 2006 Uniform Standards of Professional Appraisal Practice (USPAP) requires a real property appraiser to be aware of, understand, and correctly employ those recognized methods and techniques that are necessary to produce a credible appraisal. Respondent violated this rule. Rule 1-1(b) prohibits substantial errors of omission or commission that significantly affect an appraisal. Respondent violated this rule. Rule 1-1(c) of USPAP prohibits rendering appraisal services in a careless or negligent manner, including making a series of errors that, although individually might not significantly affect the results of an appraisal, in the aggregate affects the credibility of the results. Respondent violated this rule. Rule 1-4(a) of USPAP requires that, when a comparable sales approach is necessary for a credible result, an appraiser must analyze such comparable sales data as are available. Respondent violated this rule. Rule 2-1(a) of USPAP requires that written and oral appraisal reports be set forth in a manner that is clear and accurate and not misleading. Respondent violated this rule. Aggravating and Mitigating Circumstances Respondent had not been disciplined and had not received a letter of guidance prior to the four appraisal reports at issue in this case. His license was in good standing at the time. When an appraiser does not exercise reasonable diligence in doing an appraisal and preparing the appraisal report and the result is an unreasonably high value conclusion, as happened in the four appraisal reports at issue in this case, and a lender relies and acts on the appraisal report, the lender is harmed ipso facto, and the borrower and public may also be harmed, notwithstanding that many residential loans defaulted after 2007 besides the loans made based on these four appraisals. There was no evidence as to the specific extent of the actual harm to this lender. Although DBPR filed a separate administrative complaint for each of the four appraisals, the conduct complained of in each administrative complaint was similar. Each administrative complaint has three counts: one for not using reasonable diligence in doing the appraisal and preparing the appraisal report; another for not registering Rush Realty; and a third for violating USPAP provisions. Respondent testified without contradiction that revocation or suspension of his appraisal license, and even a substantial fine, would be a devastating financial hardship to him and his family.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that DBPR enter a final order finding Respondent subject to discipline under sections 475.624(4) (through violations of section 475.623, USPAP, and rule 61J-9.001) and 475.624(15); suspending his license for three months, subject to probation upon reinstatement for such a period of time and subject to such conditions as the Board may specify; fining him $2,000; and assessing costs related to the investigation and prosecution of the cases in accordance with section 455.227(3)(a). DONE AND ENTERED this 26th day of October, 2012, in Tallahassee, Leon County, Florida. S J. LAWRENCE JOHNSTON 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 26th day of October, 2012.
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.
The Issue Whether Respondent committed the violations alleged in the Administrative Complaint in the manner specified therein and, if so, what penalty should be imposed.
Findings Of Fact Based on the evidence adduced at hearing, and the record as a whole, the following findings of fact are made: Respondent is now, and has been since March 25, 2004, a Florida-certified residential real estate appraiser, holding license number RD 4405. She has not been the subject of any prior disciplinary action. From 1998 until becoming certified as a residential real estate appraiser, Respondent was a Florida-registered trainee appraiser. At all times material to the instant case, the Subject Property was a single-family residential property, owned by Pablo Perez, housing the residents of an assisted living facility (ALF) operated by South Florida Home Services, Inc., pursuant to a license issued by the Agency for Health Care Administration (AHCA). At all times material the instant case, the Subject Property was zoned by the City of Miami for residential use. The ALF that operated on the premises of the Subject Property was inspected by Miami-Dade County Health Department Code Inspector Manuel Alzugaray on April 6, 2007. This was the only Miami-Dade County Health Department inspection of the premises conducted in April 2007. The "results" of Mr. Alzugaray's April 6, 2007, inspection were "unsatisfactory." The written "inspection report" that Mr. Alzugaray completed following the inspection contained the following "comments and instructions": Repair wall in the 2nd stall of the restroom across from Rm. #5. Repair all holes throughout the facility & floor tiles also. Maintain restrooms & facilities clean. Provide screen for kitchen restroom. Evidence of rodents in the kitchen. Evidence of termites in restroom across from Rm. 5. Mr. Alzugaray noted, during his inspection, that the doors of the residents' bedrooms had removable numbers displayed on them and that the "restroom across from Rm. #5" had two toilets separated by a "divider." Mr. Alzugaray returned to the Subject Property to conduct a follow-up inspection on May 17, 2007. The "results" of Mr. Alzugaray's May 17, 2007, inspection were "unsatisfactory." The written "inspection report" that Mr. Alzugaray completed following this May 17, 2007, inspection contained the following "comments and instructions": Evidence of rodent droppings in the kitchen. Provide screen for window in the kitchen bathroom. Remove mold & mildew from shower in the kitchen restroom. Repair restroom in the 2nd floor (toilet doesn't flush). During both the April 6, 2007, and May 17, 2007, inspections, there were, by Mr. Alzugaray's count, 14 ALF residents present on the premises. (The facility had a licensed capacity of 14 residents.) Mr. Alzugaray conducted two additional inspections of the ALF in 2007, one on September 12, 2007, and the other on November 2, 2007, with the former yielding "unsatisfactory" "results" (due to "drawers in [the] kitchen [not being] clean" and there being "evidence of roach droppings in the kitchen area") and the latter yielding "satisfactory" "results." In April 2007, Respondent was working as a residential real estate appraiser for Atlantic Appraisal Consultants Corporation, when she received an assignment to conduct a residential appraisal of the Subject Property for Affordable Finance Group (Affordable). Affordable was in the business of making residential mortgage loans, and only residential mortgage loans. It did not make commercial mortgage loans. Affordable had received an application from Adolfina Ortega for a residential mortgage loan to purchase the Subject Property from its owner, Mr. Perez. The purpose of the appraisal was to determine whether the market value of this single-family residential property justified Affordable's making the loan. Affordable had telephoned Respondent's secretary on April 10, 2007, to order the appraisal. Respondent's secretary inputted the information she had received from Affordable "in the [office] computer" and generated a printed appraisal order (Order), which she gave to Respondent. The Order indicated that Affordable was requesting an "SFA" (a shorthand reference to a "single family appraisal") of the Subject Property in connection with a mortgage loan sought by Ms. Ortega. This was an appraisal Respondent was competent and qualified to perform by herself as a Florida-certified residential real estate appraiser. The same day the appraisal was requested (April 10, 2007), Respondent telephoned Affordable and discussed the appraisal assignment with an Affordable representative. During this telephone conversation, Respondent was told that the Subject Property was owner-occupied and that its sale was "pending contract." She was also given the name of the owner/seller, Mr. Perez, and his telephone number. Nothing was said to Respondent to suggest that she was expected to perform anything other than the "SFA" indicated on the Order. No mention was made of any business that was part of the sale. Later in the day on April 10, 2007, Respondent telephoned Mr. Perez and made arrangements to visit the Subject Property on the morning of April 12, 2007, as part of the appraisal process. Before her visit, to find out more information about the Subject Property and to obtain possible "comparable sales" properties, Respondent performed internet-based research using generally accepted data sources (MLS, FARES, and RealQuest) that Florida-certified residential real estate appraisers typically employ for such purposes. According to the data her research uncovered, the Subject Property was a one-story, single-family residence, with three bedrooms and two bathrooms, that was owned by Mr. Perez and had R-4 zoning. There was nothing in any of the data sources that she used to indicate that an ALF or any other business was operating on the premises of the Subject Property. Respondent visited the Subject Property the morning of April 12, 2007, as scheduled. When she arrived (somewhere between 10:00 and 10:30 a.m.), she was greeted by a "gentleman."4 Respondent and this "gentleman" were the only persons present at the Subject Property during the entire time Respondent was there. After measuring the exterior of the structure, Respondent asked for and was granted permission to go inside to do a "very basic" "walk[] through," the purpose of which was to note the number and location of the rooms and the general condition of the residence. Respondent's "walk[] through" took approximately ten minutes, which was an adequate amount of time for her to accomplish what she needed to. As part of the "walk[] through," she "peek[ed] in" the bathrooms. The last thing that Respondent did during her visit was to take photographs outside the residence.5 Respondent witnessed nothing during her visit to suggest that the Subject Property was anything other than a single-family residential property. She had no reason to believe, based on the observations she made,6 that the property was being used as an ALF or to conduct any other business activity. She did discover, however, as a result of the observations she made during her visit, that the on-line information she had obtained about the Subject Property was inaccurate to the extent that it indicated that the Subject Property was a one-story structure with three bedrooms, not a two-story structure with five bedrooms. Appropriately, in completing her appraisal, she relied, not on this erroneous information, but on what she had actually observed during her visit. On her way back from the Subject Property, Respondent drove to, and parked on the street outside of, each of the three possible "comparable sales" properties she had selected before setting out that morning (all of which were located within 1.28 miles of the Subject Property). She looked at and took exterior photographs of each property, but did not go inside any of them. On the Order, which she had taken with her, she wrote notes recording her observations about each property. Thereafter, Respondent sought to verify the information she had gleaned from her internet-based research about these three "comparable sales" properties (as she was professionally required to do, if she wanted to use them for her appraisal). She did so, appropriately, by contacting individuals who had been involved in these "comparable sales" transactions (realtors, in the case of two of the transactions, and the purchasers, in the case of the other). Where there was a conflict between what her research had revealed and what she was told by these individuals, she, again appropriately, relied on the latter in completing her appraisal. Using a pre-printed Fannie Mae form, Respondent completed a Summary Appraisal Report (Report), dated April 30, 2007, containing her opinion that the market value of the Subject Property as of April 25, 2007 (the date Respondent started preparing the Report) was $590,000.00 (which was price Ms. Ortega had agreed to pay Mr. Perez for the Subject Property). Respondent arrived at her opinion by conducting a sales comparison analysis. (She conducted neither a cost analysis nor an income analysis.) As she indicated in the Report, Respondent, appropriately, appraised the Subject Property as a single-family residential property, as she had been asked to do by Affordable. The first page of Respondent's Report contained five sections: "Subject," "Contract," "Neighborhood," "Site," and "Improvements." The "Subject" section of the Report read, in pertinent part, as follows: Property Address: 140 NW 9 AVENUE City: MIAMI State: FL Zip Code: 33128 County: MIAMI DADE Borrower: ORTEGA Owner of Public Record: PEREZ Neighborhood Name: RIVERVIEW * * * Occupant: X Owner _ Tenant _ Vacant * * * Property Rights Appraised: X Fee Simple _ Leasehold _ Other (Describe) * * * Assignment Type: X Purchase Transaction _ Refinance Transaction _ Other (describe) Lender/Client: AFFORDABLE FINANCIAL GROUP . . . . . Report data source(s) used, offering price(s), and date(s): PUBLIC RECORDS, MLS TAX ROLLS, REALQUEST The "Contract" section of the Report read, in pertinent part, as follows: I _ did X did not analyze the contract for sale for the subject purchase transaction. Explain the results of the analysis of the contract for sale or why the analysis was not performed. SALE PRICE IS $590,000 AND 4/2007 CONTRACT DATE PER SALES CONTRACT. Contract Price: $590,000 Date of Contract: 4/2007 Is the property seller the owner of public record: X Yes _ No Data Sources: PUBLIC RECORDS Is there any financial assistance (loan charges, sale concessions, gift or down payment assistance, etc.) to be paid by any party on behalf of the borrower? X Yes _ No If Yes, report the total dollar amount and describe the items to be paid: 20,000 SELLER TO PAY $20,000 TOWARDS BUYER[']S CLOSING COST[s]. Respondent did not "analyze the contract for sale for the subject purchase transaction" because she was not in possession of a written contract at the time she prepared her Report. She had merely been told (by the Affordable representative) of the purported existence of such a contract and of its salient terms. It was not unreasonable, however, for her to have relied on these oral representations and included in the Report the information with she had been provided, as she did. Following the development and communication of the Report, Respondent received a copy of a written contract, dated May 11, 2007, signed by Mr. Perez, as the seller of the Subject Property, and Ms. Ortega, as the buyer. Respondent maintained this written contract in her work file.7 The contract was a "standard purchase and sale contract for the sale of a residential home." Consistent with the information contained in the "Contract" section of the Report, the "contract price" was $590,000.00, and provision was made in the contract for a $20,000.00 "seller contribution toward closing costs." The contract made clear that what was being purchased and sold was the Subject Property, "together with all improvements and attached items," as well as "all appliances in working condition[]," and nothing else (including any business enterprise that might have been operating on the premises or any items associated therewith).8 In the "Neighborhood" section of the Report, Respondent identified the boundaries of what she considered, in her judgment, to be the "neighborhood" in which the Subject Property was located. She identified these boundaries as follows: "US-1 TO THE SOUTH, I-95 TO THE EAST, SR 836 TO THE NORTH, AND SW 17TH AVENUE TO THE WEST." She then provided the following "Neighborhood Description" and "Market Conditions": Neighborhood Description: Subject is located in a typical neighborhood. Typical neighborhood amenities such as schools, shopping, parks, houses of worship and transportation are within a reasonable distance of the subject but do not intrude on residential areas. No unfavorable factors affect marketability. Subject is convenient to employment centers and is stable at present time. The predominate price for the area does not appear to [sic]. Market Conditions (including support for the above conclusions): Property values are stable along with supply and demand. Competitive listings are selling within 3-6 months. Typical sales are at 93-95% of listing price. Sellers need not negotiate financing related concessions as most sales are conventional or FHA/VA financed. Identifying the precise boundaries of a property's "neighborhood" is largely a subjective exercise.9 While Petitioner's expert, Mr. Spool, may have drawn different, narrower "neighborhood" boundaries had he been the one doing the appraisal (as he testified he would have at hearing), it cannot be clearly said that the boundaries identified by Respondent in her Report were "incorrect," as alleged in numbered paragraph 13A. of the Administrative Complaint's "Essential Allegations of Material Fact." Where the boundaries of the Subject Property's "neighborhood" lie is a matter of judgment about which reasonable people may disagree. The "Site" section of the Report read, in part, as follows: * * * View: RESIDENTIAL Specific Zoning Classification: R-4 (AS PER TAX ROLL). Zoning Description: MULTI-FAMILY HIGH- DENSITY RESIDENTIAL. Zoning Compliance: X Legal _ Legal Nonconforming (Grandfathered Use) _ No Zoning _ Illegal (describe) Is the highest and best use of subject property as improved (or as proposed per plans and specifications) the present use? X Yes _ No If no, describe. * * * In the "Improvements" section of the Report, Respondent indicated, among other things, that the Subject Property was a one-unit structure built in 1920, with an "effective age" of 30 years. Next to "# of stories," Respondent inadvertently entered, "One," but next to "Design (Style)," she put, "2 Story" (which, as the "Subject Front" photograph appended to the Report plainly showed, was, of these two conflicting entries, the correct one). Other information provided in this section included the following: Finished area above grade contains: 8 Rooms, 5 Bedrooms, 2 Bath(s) 1,971 Square Feet of Gross Living Area Above Grade. Additional features (special energy efficient items, etc.) THE SUBJECT HAS A COVERED ENTRY, TILE/WOOD FLOORS, CENTRAL AND UNIT A/C, CHAIN LINK FENCE, OPEN PARKING, ALUM. PATIO, AND GRAVEL DRIVEWAY. Describe the condition of the property (including needed repairs, deterioration, renovation, remodeling, etc.). NORMAL PHYSICAL DEPRECIATION FOR AGE. THE SUBJECT APPEARS TO BE IN OVERALL AVERAGE CONDITION. Are there any physical deficiencies or adverse conditions that affect livability, soundness, or structural integrity of the property? _ Yes X No If Yes, describe Does the property generally conform to the neighborhood (functional utility, style, condition, use, construction, etc.)? X Yes _ No If No, describe The second page of Respondent's Report contained two sections: "Sales Comparison Approach" and "Reconciliation." In the "Sales Comparison Approach" section of the Report, Respondent identified the three "comparable sales" properties ("comparables") that she initially examined to estimate (using a sales comparison analysis) the market value of the Subject Property, and she provided information about these "comparables," as well as the Subject Property. The following were the three "comparables" Respondent selected for her sales comparison analysis: Comparable Sale 1, located at 2805 Southwest 4th Avenue in Miami (1.28 miles from the Subject Property); Comparable Sale 2, located at 460 Southwest 18th Terrace in Miami (.92 miles from the Subject Property); and Comparable Sale 3, located at 1285 Southwest 16th Street in Miami (1.18 miles from the Subject Property). It is alleged in numbered paragraph 13D. of the Administrative Complaint's "Essential Allegations of Material Fact" that Respondent erred in using these "comparables" because none of them were "located in the Subject Property's defined market area."10 It is not at all clear from a review of the evidentiary record, however, what constituted the "Subject Property's defined market area," as that phrase is used in the Administrative Complaint,"11 and it therefore cannot be said, without hesitation, that any of these "comparables" were located outside of this "market area." The Report accurately reflected that the "comparables," as well as the Subject Property, were "Residential" properties. Contrary to the assertion made in numbered paragraph 13E. of the Administrative Complaint's "Essential Allegations of Material Fact," "Respondent's use of single family Comparable Sales was [not] inappropriate," given that the Subject Property was a single-family residential property (that, according to the information Respondent had obtained from the client, Affordable, was being sold to an individual seeking a mortgage loan from Affordable to finance the purchase transaction), and Affordable had requested, and Respondent was performing, appropriately, an "SFA" to determine the value of this single-family residential property. That an ALF (which was not part of the purchase transaction) was operating on the premises of this single-family residential property did not render "Respondent's use of single family Comparable Sales . . . inappropriate." Comparative information relating to the three "comparables" chosen by Respondent and the Subject Property was set forth in a grid (Sales Comparison Grid) in the "Sales Comparison Approach" section of the Report. On the "Design (Style)" line of the Sales Comparison Grid, Respondent indicated that the Subject Property was a "2 Story" structure. On the "Above Grade Room Count" line of the Sales Comparison Grid, Respondent entered the following with respect to the Subject Property and the three "comparables": Subject Property: 8 (Total); 5 (bdrms.); (Baths). Comparable Sale 1: 6 (Total); 3 (bdrms.); (Baths). Comparable Sale 2: 6 (Total); 3 (bdrms.); 1 (Bath). Comparable Sale 3: 7 (Total); 4 (bdrms.); 3 (Baths). The following "Adjusted Sale Price[s]" for the three "comparables" were set forth on the last line of the Sales Comparison Grid: Comparable Sale 1: $595,800.00; Comparable Sale 2: $571,400.00; and Comparable Sale 3: $628,700.00. At the end of the "Sales Comparison Approach" section (beneath the grid) was the following "Summary of Sales Comparison Approach" and "Indicated Value by Sales Comparison Approach": Summary of Sales Comparison Approach: SEE ATTACHED ADDENDUM. THE SUBJECT PROPERTY IS SIMILAR TO ALL THREE COMPARABLE CLOSED SALES WHICH WERE CAREFULLY SELECTED AFTER AN EXTENSIVE SEARCH IN AND OUT OF THE SUBJECT NEIGHBORHOOD. THIS SEARCH CONSISTED OF ANALYZING NUMEROUS CLOSED SALES AND NARROWING THIS LIST DOWN TO THE THREE MOST SIMILAR. AFTER CLOSE EVALUATION OF THE THREE COMPARABLE SALES UTILIZED, ADJUSTMENTS TO ALL COMPARABLES[S] WERE MADE ACCORDINGLY. Indicated Value by Sales Comparison Approach: $590,000. In the first part of the "Reconciliation" section of the Report, Respondent reiterated that $590,000.00 was the "Indicated Value by [the] Sales Comparison Approach," and she added that she used this approach in valuing the Subject Property because it "best reflect[ed] [the] action of buyers and sellers in the market place." The second and final part of the "Reconciliation" section of the Report read, in part, as follows: This appraisal is made x "as is," . . . . . Based on a complete visual inspection of the interior and exterior areas of the subject property, defined scope of work, statement of assumptions and limiting conditions, and appraiser's certification, my (our) opinion of the market value, as defined, of the real property that is the subject of this report is $590,000, as of APRIL 25, 2007, which is the date of inspection and the effective date of this appraisal. The "date of inspection" was actually April 12, 2007, not April 25, 2007. On the third page of the Report, Respondent indicated that the "income approach [was] not applied [to determine the Subject Property's value] due to lack of rental data." The fourth page of the Report contained pre-printed boilerplate, including the following: This report form is designed to report an appraisal of a one-unit property . . . . The appraisal report is subject to the following scope of work, intended use, definition of market value, statement of assumptions and limiting conditions, and certifications. Modifications, additions, or deletions to the intended use, intended user, definition of market value, or assumptions and limiting conditions are not permitted. The appraiser may expand the scope of work to include any additional research or analysis necessary, based on the complexity of this appraisal assignment. Modifications or deletions to the certifications are also not permitted. However additional certifications that do not constitute material alterations to this appraisal report, such as those required by law or those related to the appraiser's continuing education or membership in an appraisal organization, are permitted. SCOPE OF WORK: The scope of work for this appraisal is defined by the complexity of this appraisal assignment and the reporting requirements of this appraisal report form, including the following definition of market value, statement of assumptions and limiting conditions, and certifications. The appraiser must, at a minimum: perform a complete visual inspection of the interior and exterior areas of the subject property, (2) inspect the neighborhood, (3) inspect each of the comparable sales from at least the street, research, verify, and analyze data from reliable public and/or privates sources, and report his or her analysis, opinions, and conclusions in this appraisal report. INTENDED USE: The intended use of this appraisal report is for the lender/client to evaluate the property that is the subject of this appraisal for a mortgage finance transaction. INTENDED USER: The intended user of this appraisal report is the lender/client. DEFINITION OF MARKET VALUE: The most probable price a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently, knowledgably and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: (1) buyer and seller are typically motivated; (2) both parties are well informed or well advised, and each acting in what he or she considers his or her own best interest; (3) a reasonable time is allowed for exposure in the open market; (4) payment is made in terms of cash in U. S. dollars or in terms of financial arrangements comparable thereto; and (5) the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale. * * * STATEMENT OF ASSUMPTIONS AND LIMITING CONDITIONS: The appraiser's certification in this report is subject to the following assumptions and limiting conditions: The appraiser will not be responsible for matters of a legal nature that affect either the property being appraised or the title to it, except for information that he or she became aware of during the research involved in performing this appraisal. The appraiser assumes that the title is good and marketable and will not render any opinions about the title. The appraiser has provided a sketch in this appraisal report to show the approximate dimensions of the improvements. The sketch is included only to assist the reader in visualizing the property and understanding the appraiser's determination of its size. * * * The fifth and sixth pages of the Report contained additional pre-printed boilerplate in the form of an "Appraiser's Certification," wherein "the Appraiser [Respondent] certifie[d] and agree[d] that": I have, at a minimum, developed and reported this appraisal in accordance with the scope of work requirements stated in this appraisal report. I performed a complete visual inspection of the interior and exterior areas of the subject property. I reported the condition of the improvements in factual, specific terms. I identified and reported the physical deficiencies that could affect the livability, soundness or structural integrity of the property. I performed this appraisal in accordance with the requirements of 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. I developed my opinion of the market value of the real property that is the subject of this report based on the sales comparison approach to value. I have adequate comparable market data to develop a reliable sales comparison approach for this appraisal assignment. I further certify that I considered the cost and income approaches to value but did not develop them, unless otherwise indicated in this report. I researched, verified, analyzed, and reported on any current agreement for sale for the subject property, any offering for sale of the subject property in the twelve months prior to the effective date of this appraisal, and the prior sales of the subject property for a minimum of three years prior to the effective date of this appraisal, unless otherwise indicated in this report. I researched, verified, analyzed, and reported on the prior sales of the comparable sales for a minimum of one year prior to the date of sale of the comparable sale, unless otherwise indicated in the report. I selected and used comparable sales that are locationally, physically, and functionally the most similar to the subject property. I have not used comparable sales that were the result of combining a land sale with the contract purchase price of a home that has been built or will be built on the land. I have reported adjustments to the comparable sales that reflect the market's reaction to the differences between the subject property and the comparable sales. I verified, from a disinterested source, all information in this report that was provided by parties who have a financial interest in the sale or financing of the subject property. I have knowledge and experience in appraising this type of property in this market area. I am aware of, and have access to, the necessary and appropriate public and private data sources, such as multiple listing services, tax assessment records, public land records and other such data sources for the area in which the property is located. I obtained the information, estimates, and opinions furnished by other parties and expressed in this appraisal report from reliable sources that I believe to be true and correct. I have taken into consideration factors that have an impact on value with respect to the subject neighborhood, subject property, and the proximity of the subject property to adverse influences in the development of my opinion of market value. I have noted in this appraisal report any adverse conditions (such as, but not limited to, needed repairs, deterioration, the presence of hazardous wastes, toxic substances, adverse environmental conditions, etc.) observed during the inspection of the subject property or that I became aware of during research involved in performing this appraisal. I have considered these adverse conditions in my analysis of the property value, and have reported on the effect of the conditions on the value and marketability of the subject property. I have not knowingly withheld any significant information from this appraisal and, to the best of my knowledge, all statements and information in this appraisal report are true and correct. I stated in this appraisal report my own personal, unbiased, and professional analysis, opinions, and conclusions, which are subject only to the assumptions and limiting conditions in this appraisal report. I have no present or prospective interest in the property that is the subject of this report, and I have no present or prospective personal interest or bias with respect to the participants in the transaction. I did not base, either partially or completely, my analysis and/or opinion of market value in this appraisal report on the race, color, religion, sex, age, marital status, handicap, familial status, or national origin of either the prospective owners or occupants of the subject property or of the present owner or occupants of the properties in the vicinity of the subject property or on any other basis prohibited by law. 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 individual or 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.[12] 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. I identified the lender/client in this appraisal report who is the individual, organization, or agent for the organization that ordered and will receive this appraisal report. The lender/client may disclose or distribute this appraisal to the borrower; another lender at the request of the borrower; the mortgagee or its successors and assigns; mortgage insurers; government sponsored enterprises; other secondary market participants; data collection or reporting services; professional appraisal organizations; any department, agency, or instrumentality of the United States; and any state, the District of Columbia, or other jurisdictions; without having to obtain the appraiser's or supervisory appraiser's (if applicable) consent. Such consent must be obtained before this appraisal report may be disclosed or distributed to any other party, including, but not limited to, the public through advertising, public relations, news, sales, or other media. I am aware that any disclosure or distribution of this appraisal report by me or the lender/client may be subject to certain laws and regulations. Further, I am also subject to the provisions of the Uniform Standards of Professional Appraisal Practice that pertain to disclosure or distribution by me. The borrower, another lender at the request of the borrower, the mortgagee or its successors and assigns, mortgage insurers, government sponsored enterprises, and other secondary market participants may rely on this appraisal report as part of any mortgage finance transaction that involves any one or more of these parties. If this appraisal was transmitted as an "electronic record" containing my "electronic signature," as those terms are defined in applicable federal and/or state laws (excluding audio and video recordings), or a facsimile transmission of this appraisal report containing a copy or representation of my signature, the appraisal report shall be as effective, enforceable and valid as if a paper version of this appraisal report were delivered containing my original hand written signature. Any intentional or negligent misrepresentation contained in this appraisal report may result in civil liability and/or criminal penalties including, but not limited to, fine or imprisonment or both under the provisions of Title 18, United States Code, Section 1001, et seq., or similar state laws. Directly beneath the foregoing boilerplate was Respondent's signature. Appended to the Report was a "Supplemental Addendum," which read, in pertinent part, as follows: ALL SALES WERE CLOSED SALES AND CONSIDERED STRONG MARKET VALUE INDICATORS FOR THE SUBJECT PROPERTY. THEY ARE RELATIVELY SIMILAR TO THE SUBJECT IN TERMS OF LOCATION, QUALITY OF CONSTRUCTION, RELATIVE SIZE, ROOM COUNT AND MARKET APPEAL. THEY ARE LOCATED IN THE SUBJECT'S IMMEDIATE AREA AND ALL SHARE THE SAME IF NOT SIMILAR NEIGHBORHOOD AMENITIES. ADJUSTMENTS WERE REQUIRED FOR SITE CONDITION, BATH, GLA, CARPORT AND POOL. AFTER EXTENSIVE RESEARCH, THE THREE SALES USED WERE DEEMED GOOD INDICATORS OF MARKET VALUE. EQUAL EMPHASIS WAS PLACED ON ALL THREE SALES. * * * SCOPE OF APPRAISAL The appraisal is based on the information gathered by the appraiser from public records, other identified sources, inspection of the subject property and neighborhood, and selection of comparable sales within the market area. The original source of the comparables is shown in the Data Source section of the market grid along with the source of confirmation, if available. The original source is presented first. The sources and data are considered reliable. When conflicting information was provided, the source deemed most reliable has been used. Data believed to be unbelievable was not included in this report nor was used as a basis for the value conclusion. * * * HIGHEST AND BEST USE The Highest and Best Use of a site is that reasonable and probable use that supports the highest present value, as defined, as of the effective date of the appraisal. For improvements to represent[] the highest and best use of a site, they must be legally permitted, be financially feasible, be physically possible and provide[] more profit than any other use of the site would generate. SITE The improvements on the property are legal and conform to current zoning regulations. In the event of a loss by fire [] all improvements could be rebuilt without obtaining a zoning variance. The opinion of zoning compliance requirements expressed in this appraisal is based on the appraiser's inspections of the subject property and comparison to the appropriate zoning ordinance. This opinion does not represent a certification which can only be obtained from the proper jurisdictional authority. * * * ROOM LISTS The number of rooms, bedrooms, baths and lavatories is typical of houses in this neighborhood. Foyers, laundry rooms and all rooms below grade are excluded from the total room count. * * * CONDITION OF COMPONENTS Any opinion expressed in this appraisal pertaining to the condition of the appraised property's, or comparable property's components, is based on observation[s] made at the time of inspection. They rely on visual indicators as well as reasonable expectations as to adequacy and dictated by neighborhood standards relative to marketability. These observations do not constitute certification of condition, including roof or termite problems, which may exist. If certification is required, a properly licensed or qualified individual should be consulted. * * * DIRECT SALES COMPARISON APPROACH Direct Sales Comparison Approach is based on the comparison of the subject with sales of similar type properties. Adjustments are made to these sales for differences with the subject. [T]his is generally considered the best indicator of value. * * * CONDITIONS OF APPRAISAL PERSONAL PROPERTY/INTANGIBLE/NON-REALTY ITEMS Items of personal property and other non- realty items have not been included in the appraisal o[f] the subject property. The indicated Market Value for the subject property does not include items o[f] personal property or other non-realty property. * * * Via the "Supplemental Addendum," Respondent advised the reader of the Report that, where she had "conflicting information," she included in the Report only the data that was, in her view, "most reliable." While she did not, anywhere in the Report, specify or describe how this included data differed from the less reliable data she excluded, she was under no professional obligation to do so (contrary to the allegation made in numbered paragraph 13C. of the Administrative Complaint's "Essential Allegations of Material Fact"). Appended to the Report, in addition to the "Subject Front" photograph referenced above, were five other photographs: two additional photographs Respondent took when she was at the Subject Property on April 12, 2007 (a "Subject Rear" photograph and a "Subject Street" photograph); and an exterior photograph of each of the three "comparables." Also appended to the Report was a sketch of the Subject Property, showing it to be a two-story, five-bedroom, two-bath structure. Approximately two months after Respondent had developed and communicated the Report, Affordable asked her to examine two "additional comparables to support [the determination of] value" she had made. Respondent complied with this request. The two "additional comparables" she selected were Comparable Sale 4, located at 330 Southwest 29th Road in Miami (1.02 miles from the Subject Property), and Comparable Sale 5, located at 441 Southwest 29th Road in Miami (1.29 miles from the Subject Property). According to Respondent's calculations, Comparable Sale 4 had an "Adjusted Sale Price" of $603,800.00, and Comparable Sale 5 had an "Adjusted Sale Price" of $599,200.00. She further determined, and on or about June 25, 2007, reported to Affordable, that her analysis of these two additional comparables "support[ed] [her prior determination of] market value."13
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that the Board issue a Final Order finding the record evidence insufficient to support a finding of Respondent's guilt of any of the counts of the Administrative Complaint and, based upon such finding, dismissing the Administrative Complaint in its entirety. DONE AND ENTERED this 28th day of January, 2010, in Tallahassee, Leon County, Florida. S STUART M. LERNER 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 28th day of January, 2010.
The Issue Whether the Respondent committed the violations stated in the Administrative Complaint dated March 13, 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. 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 6950 Cypress Road, Suite 206, Plantation, Florida 33317. Subsequent to November 19, 2008, Mr. Facendo's business address was 13790 Northwest 4th Street, # 101, Sunrise, Florida 33325 From November 6, 2007, until the time of the final hearing in this case, Traci Lyn Trueman, a registered trainee real estate appraiser, was supervised by Mr. Facendo, and she worked full-time in Mr. Facendo's business office. Ms. Trueman registered with the Department her home address of 183 Southwest 3rd Street, Pompano Beach, Florida, 33060, rather than the business address of Mr. Facendo's office. As soon as Mr. Facendo learned that Ms. Trueman had registered her home address with the Department, he had her change the address to her business address. In 1988, Mr. Facendo moved to Fort Lauderdale, Florida. He obtained his real estate sales license, and he sold real estate in the Fort Lauderdale area until approximately 1990, when he moved to Port St. Lucie, Florida. Mr. Facendo sold real estate in the Port St. Lucie area for several years, and, because he lived and sold real estate in the Port St. Lucie area, Mr. Facendo became familiar with the real estate market in that area. In 1992, Mr. Facendo moved back to the Fort Lauderdale area and began training in order to become certified as a real estate property appraiser. Mr. Facendo received his certification in 1995, and he has appraised primarily residential real estate in Miami-Dade County, Broward County, Palm Beach County, and Port St. Lucie. In November 2006, Mr. Facendo's office received a request from South Florida Lending Group for an appraisal on the Palm Drive property, which is located in The Club at St. Lucie West Condominium. The Appraisal Report prepared by Mr. Facendo pursuant to the request had an effective date of November 30, 2006, and it was signed December 11, 2006. Mr. Facendo also compiled a workfile to support the information contained in the Appraisal Report. After receiving the request to prepare an appraisal of the Palm Drive property, Mr. Facendo consulted St. Lucie County public records and other online services available in his business office and verified that the Club at St. Lucie West Condominium was a condominium conversion project in which rental apartments built in 2003 were converted into condominium apartments in October 2005. Mr. Facendo did not include reference to the sources of the information or copies of the documentation from which he obtained the information because the sources were ones commonly used and were considered to be accurate. Mr. Facendo visited the Club at St. Lucie West Condominium sales office and met with Lori Bennett and a man named Jack. Mr. Facendo was taken to Unit 106 by Jack, where he took several pictures of the exterior of Unit 106 and inspected the unit's interior. As part of his inspection of Unit 106, Mr. Facendo looked at the floor plan and the condition of the property; made a count of the number of rooms and their functions; and noted the type of flooring, the type of amenities, and the upgrades in the unit. Mr. Facendo did not measure the floor space in Unit 106 because he had previously prepared appraisals of several units in the Club at St. Lucie West Condominium that were the same model as Unit 106, which was the Kingston model, and he had previously measured a unit whose floor plan and square footage were identical to those of Unit 106. Mr. Facendo included with the Appraisal Report a copy of the floor plan of the Kingston model, which showed both the total square feet and the square feet under air conditioning of the unit. It is not unusual, in appraisals of condominium units, to include a pre- printed sketch of the unit's floor plan rather than a sketch of the floor plan prepared by the appraiser. After inspecting the Palm Drive property, Mr. Facendo met with Ms. Bennett, who was the sales representative for Club at St. Lucie West Condominium who handled all of the appraisals for the project. Mr. Facendo and Ms. Bennett met in the Club at St. Lucie West Condominium's sales office, and Ms. Bennett gave Mr. Facendo access to a log book maintained in the sales office listing individual buyers and information regarding each unit of Club at St. Lucie West Condominium. The Club at St. Lucie West Condominium property was purchased by SunVest, LLC, in or about September 2005. The property consisted of rental apartments built in 2003 that the new owner converted into condominium apartments in October 2005. At the times pertinent to this matter, the developer was offering the condominium units for sale, and Mr. Facendo noted in the Subject section of the Appraisal Report that Unit 106 had been offered for sale during the twelve months prior to November 30, 2006, the effective date of Mr. Facendo's appraisal of the unit. Mr. Facendo did not include in the Appraisal Report any data source, offering price, or dates related to the sales history because there was no sales history on Unit 106. According to the information obtained by Mr. Facendo from the Club at St. Lucie West Condominium sales office and by checking the online version of the multiple listing services available in Mr. Facendo's business office, the developer was directly marketing and selling the condominium units and had not listed them with a multiple listing service. Mr. Facendo, therefore, stated in the sales history portion of the Appraisal Report only that "subject has been offered for sale by the developer of the condo development." Mr. Facendo reviewed the log book for the condominium units maintained in the Club at St. Lucie West Condominium sales office, and he reviewed the sales and purchase contract for Unit 106. From this information, he verified the name of the buyer, as well as the contract price of $282,990.00. Mr. Facendo also verified that the sales and purchase contract provided that the buyer was to receive $4,500.00 in sales concessions on Unit 106.4 Ms. Bennett did not allow Mr. Facendo to make a copy of the contract, and, as a result, Mr. Facendo did not include a copy of the sales and purchase contract for Unit 106 in the workfile he prepared for the appraisal. Mr. Facendo did not define the neighborhood boundaries in the Neighborhood section of the Appraisal Report by reference to streets, highways, or landmarks. Rather, in the neighborhood boundaries portion of the Neighborhood section, Mr. Facendo described the neighborhood as being "located in a residential neighborhood with good access to family amenities," and he referenced the location map attached to the Appraisal Report. The location map showed the Palm Drive property and three of the comparables grouped around an arrow located east of U.S. Interstate Highway 95.5 Mr. Facendo noted in the Present Land Use % portion of the Neighborhood section of the Appraisal Report that one-unit residences composed 60 percent of the present land use in the neighborhood. He did not include any documentation in the workfile for the Appraisal Report to support this information. In the Project Information section of the Appraisal Report, Mr. Facendo noted that, in the Club at St. Lucie West Condominium, 160 units were offered for sale, 220 units had been sold, five percent of the units were rented, and 95 percent of the units were occupied by the owners. There is no documentation in Mr. Facendo's workfile for this appraisal to support this information. Mr. Facendo noted in the Appraisal Report that there were 20 comparable properties currently offered for sale in the subject neighborhood, ranging in price from $210,000.00 to $300,000.00. He obtained this data from information provided by the developer that he reviewed in the condominium sales office. He did not include in his workfile any documentation related to these properties and their offering prices. Mr. Facendo chose four properties as comparable sales to determine the value of the Palm Drive property through a comparable-sales analysis. The four properties chosen as comparable to the Palm Drive property were located in the Club at St. Lucie West Condominium and were virtually identical to Unit 106. The Palm Drive property and three of the four comparable-sales properties were located on the first floor of the condominium project, and one comparable-sales property was located on the second floor of the condominium project. All four comparable-sales properties were the Kingston Model, the same model condominium unit as Unit 106, and the comparable-sales properties were virtually identical to the Palm Drive property. Mr. Facendo noted in the Appraisal Report, however, that Unit 106 had been upgraded with granite countertops, stainless steel appliances, and new flooring. The sales price of the Palm Drive property was noted in the Appraisal Report as $282,990.00; the sales prices of the three first-floor comparable-sales properties were $272,990.00, 285,990.00, and $291,990.00, and the sales price of the second- floor comparable-sales property was $254,990.00. Mr. Facendo verified these sales prices by reviewing the log book maintained in the Club at St. Lucie West Condominium sales office and by information obtained from the HUD-1 Settlement Statements prepared for the sales transaction for each of the comparable-sales properties. The workfile contained copies of the HUD-1 Settlement Statements. Mr. Facendo also noted in the Prior Sale History section of the Appraisal Report that there was no sales history on the comparable-sales properties because they were all located in the Club at St. Lucie West Condominium. Mr. Facendo made a $10,000.00 adjustment for the view in the sales price of comparable sale # 3, a unit on the second floor of the Club at St. Lucie West Condominium, raising its adjusted sale price to $264,990.00. Mr. Facendo also made a $10,000.00 adjustment for the view in the sales price of comparable sale # 4, the unit next to Unit 106, raising its adjusted sale price to $295,990.00. Mr. Facendo did not include any documentation in the workfile to support these adjustments. Mr. Facendo looked at comparable sales outside the Club at St. Lucie West Condominium, but he decided not to use these properties as comparable-sales properties. Mr. Facendo chose four comparables in the same condominium project because the Club at St. Lucie West was a condominium conversion and was unique in the area. In his opinion, the sales prices of units in the Club at St. Lucie West Condominium would be most reliable in gauging the value of Unit 106. Based on his analysis of the four comparable-sales properties, Mr. Facendo valued the Palm Drive property at $283,000.00. Documentation was included in the workfile for the Appraisal Report that identified a sales incentive program offered to buyers by the developer of the Club at St. Lucie West Condominium. The sales incentives for buyers included payment by the developer of a three percent contribution at closing; the cost of documentary stamps and recording of the deed; owners title insurance; one year's homeowners' association fees; a one year's warranty; and a decorator's credit within 30 days of closing, the amount depending on the type of unit purchased. The page in the workfile listing the sales incentives was not dated and appeared to be part of sales literature provided by the developer. Mr. Facendo did not note, discuss, or analyze the sales incentives for the Palm Drive property in the Appraisal Report. The definition of "market value" contained in the Appraisal Report requires that the price of the property that is the subject of the appraisal reflect the "normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale." To this end, appraisers must make adjustments to the comparable-sales properties, but the dollar amount of the adjustments "should approximate the market's reaction to the financing or concessions based on the appraiser's judgment." Mr. Facendo did not make any adjustments to the price of the comparable-sales properties in determining the value of the Palm Drive property. 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. The Competency Rule of the USPAP (2006) provides as follows: Prior to accepting an assignment or entering into an agreement to perform any assignment, an appraiser must properly identify the problem to be addressed and have the knowledge and experience to complete the assignment competently; or alternatively, must: disclose the lack of knowledge and/or experience to the client before accepting the assignment; take all steps necessary or appropriate to complete the assignment competently; and describe the lack of knowledge and/or experience and the steps taken to complete the assignment competently in the report.[6] USPAP (2006) Standards Rule 1-1(b) and (c) provides: In developing a real property appraisal, an appraiser must: * * * not commit a substantial error of 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. USPAP (2006) Standards Rule 2-1(a) and (b) 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; contain sufficient information to enable the intended users of the appraisal to understand the report properly[.] 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 Administrative Complaint dated March 13, 2009. DONE AND ENTERED this 30th 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 30th day of March, 2010.
The Issue Whether the Respondent, Andrew S. Meltzer, committed the violations alleged in the Administrative Complaint involving the standards for the development of or the communication of real estate appraisals and, if so, what penalty should be imposed.
Findings Of Fact The Petitioner (Department) is the state agency charged with the responsibility of regulating persons holding real estate appraisers' licenses in Florida. At all times material to the allegations of this matter the Respondent has been a State-certified residential real estate appraiser holding license number 3190. He is 38 years old and has been a real estate appraiser for approximately seventeen years. During that time, he has never been disciplined nor has he been removed from a bank's approved list of appraisers. On or about October 23, 2006, the Respondent prepared a Uniform Residential Appraisal Report for property located at 9900 Southwest 72nd Avenue, Pinecrest, Florida ("the subject property"), for the F S Lending Group. In September 2007, an investigator for the Department received a copy of an appraisal report (Report One) from a closing agent. The report showed that "Aida Martinez" was the name of the buyer. Based on his investigation and her admissions, the investigator found that Martinez was a "straw buyer" and was paid $10,000 for the use of her name and credit report. The person who is alleged to have paid her was not available to talk to investigators due to possible criminal proceedings, but the Department's investigator made it clear that he found no evidence of a connection between that person and the Respondent. A copy of the contract, also provided by the closing agent, showed a different name for the buyer, "Aida Barrero" or "Aida Barren," as best the handwriting and poor quality of the copy could be read. In addition, an addendum to the contract for a purchase price of $999,000, provided that "seller will contribute [provide concessions in the amount of] $173,000 at closing with (sic) to the buyer (for repair of subject property and buyer closing costs). The amount that seller will receive for the property will be $825,000 less seller (sic) closing costs and mortgage payoff if any." Report One has the Respondent's digital signature on it. A mortgage loan on the subject property is now in foreclosure, but no one from the Department contacted the lender to see what appraisal was the basis for making the loan. Based on the fact that the property was listed for sale, Report One has an incorrect "no" answer on page 1 to a question regarding a current or other sales listings in the last 12 months. Based on the provisions in the contract, it also has an incorrect "no" answer to whether there are seller's concessions. When an investigator showed Report One to him, the Respondent immediately retrieved what has been designated "Report Two" from his computer files. Report Two on page 1 named the buyer as "Barren" using only the last name as is customary for the Respondent, and using the same name that was on the appraisal order form sent to the Respondent. Report Two has what appears to be a signed transmittal page to F S Lending Group. It also has a correct "yes" answer on page 1 to the question regarding a current or sales listings in the last 12 months, unlike Report One. Like Report One, it erroneously has a "no" answer on page 1 regarding seller's concessions and is, in all other respects, the same as Report One. The witnesses agreed that the most likely explanation for Report One is that page 1 was altered fraudulently after Report Two was no longer within the Respondent's control. The Respondent's appraisal work file for the subject property included another report (Report Three) that also listed "Barren" as the buyer, but had no signature on it, and was an earlier draft of Report Two. Although the Department's expert said an oral communication of its contents could make Report Three an appraisal, he and the Department's investigator had no evidence of that and agreed that it was not an appraisal. A three-page excerpt of the contract in the Respondent's work file did not include and did not refer to the addendum to the contract with concessions that indicated work needed to be done on the house and that the purchase price was reduced. The three pages were clearly not the entire sales contract, based on missing page and item numbers on the standard form. The Respondent admitted that he only instructs clients to send the "first page, signature pages, addendum pages, and anything that would [a]ffect the purchase price." He said that he only asks for pertinent pages and he could not survive in the industry if he reviewed seventy or a hundred page construction contracts, although he checked the box on the appraisal from that says, "I did analyze the contract for sale of the subject property." The Department's expert prepared a One-Unit Residential Appraisal Field Report (field report) to evaluate Report One that is, except for the name of the buyer and the answer regarding the sales listing, applicable to Report Two. He cited numerous errors and omissions in Report One. He admitted, however, that his work was "sloppy" because he listed the incorrect property address as 12745 Southwest 72 Avenue, the address for the subject property, not 9900 Southwest 72nd Avenue. In his review, the Department's expert found that the Respondent incorrectly categorized the pool on the subject property as a structural improvement rather than a site improvement. Comparable one in Report Two was a superior property, so the Respondent used matched paired sales data that he keeps in his office among other reference material, including the Marshall and Swift publication on cost estimates. He made adjustments for square footage and room count accordingly. The Department's expert testified that USPAP required documentation for any adjustments, and, regarding where the records had to be kept, responded as follows: Q. Now, and again I'm referring to comp number, report number two, comp number one. What documentation does he need in his file to support his adjustment for the site square footage? A. Either -- I would say the best support would be a paired, p-a-i-r-e-d, sales analysis. Q. Does that have to be in the work file? A. Yes. No-no-no-no. It does not have to be in the work file. It could be somewhere in your office readily accessible . . . Adjustments to comparable two were reasonable based on the Respondent's observation that it was "a lot more superior," and his determination, after talking to the realtor that it was completely "renovated like new" which he wrote in his notes. The MLS listing also reported that the renovations were made in 2006. The Respondent received conflicting information from two different data sources concerning the square footage for comparable two, so he called the realtor and used the figure that the realtor verified in his analysis, as the Department's expert testified he should have done. No adjustment was made based on his note that the comparable was "similar in square footage" and less than a 100-square foot difference. The Department's expert differed with the selection and adjustment of comparables three and four due to lot sizes and bedroom/bathroom counts. The subject property is on a lot of 15,832 square feet, or less than half an acre, has four bedrooms and two and a-half baths, with 2,639 square feet of livable, air conditioned space. Comparable three has a lot size of 32,670 square feet, although the living area is similar, and it has only one half bath more than the subject. Although comparable three has a much larger site, the sales price was only $25,000 difference, because of its condition. So the Respondent reasonably made a consistent negative adjustment based on sales history. Comparable four is within a half mile of the subject property, in the Pinecrest area, but it has a lot size of 33,541 square feet, has five bedrooms and four full baths, and has 4,283 square feet of livable space. The Respondent agreed that, as a rule, comparables should have not more than a ten percent adjustment, and that, as the Department's expert noted, lenders require only three comparables. To provide as much information as possible, the Respondent included a fourth comparable with a greater adjustment down because it had a tar and gravel roof, and because the realtor told him "it needed updating." He made it the fourth comparable because it was the least desirable one, but he did not include the fact that it had a tennis court, as he should have. He failed to note that it was gated property, although the Department's expert agreed that whether a gate adds or does not add value to property is "a matter of professional opinion." He also agreed that the differences between a tar and gravel roof and a tile roof would not usually be documented in a work file. It was appropriate to make adjustments based on the condition of the property. As USPAP required, the Respondent inspected the comparables from the street. In reviewing the Respondent's work, the Department's expert observed only the subject property from the street, but not the comparables and testified as follows: Q. But you did not inspect each of the comparable sales at least from the street? A. Correct, correct. * * * Q. -- you testified that you did not inspect the comparables? A. I agree. * * * Q. Correct. And that goes to the whole point where you were earlier discussing that it's hard to verify what he did because you actually didn't go out and see the comparables? A. Correct. Q. Which is contrary to what you were supposed to do? A. Correct. The Respondent made a mathematical error in the calculation of the depreciation at 22% when it should have been 20%, resulting in an underestimate of $8,541. Although he correctly noted that the subject property was listed for sale for $999,000, the Respondent failed to include the Multiple Listing Service (MLS) history, including,". . . data source(s), offering price(s), and date(s)" of listings in the twelve months prior to the effective date of the appraisal. The sales prices for the subject property were listed as $885,000 in June 2006; reduced to $875,000 in July 2006, reduced again to $849,990 in August 2006; and increased to $999,000 on October 14, 2006. The Department's investigator testified that the listing broker said she raised the price based on an appraisal that was faxed to her, but he agreed that it could not have been based on the Respondent's appraisal since the price increase took effect on October 14, 2006, and the Respondent's appraisal report was dated October 23, 2006. Concerning the MLS listings, the Respondent said he called and asked the realtor why the listing price was increased. He accepted the realtor's explanation that improvements in the last six months, a new roof and a new garage door, would justify the increase in the sales price. In his notes, the Respondent wrote "property renovated" and "big realtor" because the realtor was well-known and he believed he could rely on her representations. He also saw the new roof himself, and it made sense to him that a million dollar house could have a 10% increase in value because of those improvements. While this may have been a logical explanation, the Respondent failed to document it in his work file despite the fact that the MLS fluctuations were a "red flag," possibly indicating fraud. The Department's expert found no support in the work files for the Respondent's allocation of 61% of the total value of $903,100, or $550,000 ($34.74), to the site value, but agreed that differences in value based on what buyers might pay for additional land is a matter of legitimate differences in "appraiser opinion." In summary, the Department's expert established that Report Two was inaccurate and misleading because it (1) did not include the terms of the entire contract that affected the price; (2) did not show the value of the pool in the appropriate category; (3) did not report the MLS listings history for the subject property for the past year; (4) had an incorrect value for depreciation; and (5) did not show the tennis court on comparable four. Based on the evidence, the Department did not show, as alleged in paragraph 7 (A) through (D) of the Administrative Complaint, that the Respondent made errors and omissions on Report One other than those carried over from Report Two, before it was altered. Report One was not alleged or proven to be the document communicated by the Respondent's client. Based on the evidence, Report Two is the only accurate representation of the Respondent's work appraising the subject property. Paragraph 8 (A) of the Administrative Complaint alleging that the name of the borrower was incorrect is not supported by the evidence. The Department's assertion in paragraph 8 (B) that the MLS listing history is incomplete is clearly and convincingly supported by the evidence. Paragraph 8 (C) of the Administrative Complaint, alleging that the Respondent failed to review all agreements for sale, and paragraph 8 (D), regarding the misstatement on seller's concessions, are clearly and convincingly established by the evidence. The Department's allegations in paragraphs 9 (A)-(D), related to Report Three, are not established by clear and convincing evidence based on the witnesses' agreement that Report Three was not an appraisal report. With regard to Report Two, the only appraisal report for the subject property that was shown to have been developed and communicated by the Respondent, the evidence is not clear and convincing that the Respondent made the following errors and omissions: as alleged in paragraph 10 (A) and (B), that adjustments for room count and square footage were not explained for comparable sales one and that discrepancies were not resolved for comparable sale two; in paragraph 10 (C), that room count and square footage adjustments for comparable three are not accurate and supported; and in paragraph 10 (D), that room count and square footage adjustments for comparable four are not accurate and supported. With regard to Report Two, the evidence is clear and convincing, as alleged, in paragraph 10 (E) and (F), that the Respondent omitted the tennis court on comparable four and showed no adjustment or reasonable explanation for not doing so. The evidence was not clear and convincing, as alleged in paragraph 10 (G), that different comparables should have been used. The evidence is clear and convincing that the Respondent made a mathematical error in determining the amount of depreciation in Report Two, as alleged in paragraph 11 (A). Depreciation of improvements, as alleged in paragraph 11 (b), is not clearly and convincingly shown to be erroneous. The comparisons of Reports One, Two, and Three in paragraph 12 are rejected as irrelevant, because Report One is altered except for the mistakes carried over from Report Two, and Report Three was a draft. Charges related to Report Three are also not proved for the same reason. Paragraph 13 is established by clear and convincing evidence because the entire sales contract is not in the working files for the subject property. 32. Paragraphs 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25 and 26, all related to the absence of documentation for comparable adjustments, the square footage price, value of improvements, and condition are not supported by clear and convincing evidence based on the testimony of Department's expert regarding the required documentation and his incomplete review of the comparables. Paragraph 27, alleging that Aida Martinez was a "straw buyer" is supported by the undisputed evidence presented by the Department.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered by the Florida Real Estate Appraisal Board: Finding the Respondent guilty on Counts I, II, III, IV, V, VI, VII, IX, X and XI. Recommending suspension of the Respondent's appraisal license for a period of 30 days, followed by probation for a period of six months. Requiring the Respondent to pay an administrative fine of $7,500; and Requiring the Respondent to pay the investigative costs of $1,501.50. DONE AND ENTERED this 17th day of March, 2009, in Tallahassee, Leon County, Florida. S ELEANOR M. HUNTER 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 March, 2009. COPIES FURNISHED: Robert Minarcin, Esquire Department of Business & Professional Regulation 400 West Robinson Street, N801 Orlando, Florida 32801-1757 Daniel Villazon, Esquire Daniel Villazon, P.A. 1420 Celebration Boulevard, Suite 200 Celebration, Florida 34747 Thomas W. O'Bryant, Jr., Director Division of Real Estate Department of Business & Professional Regulation 400 West Robinson Street, N802 Orlando, Florida 32801-1757 Ned Luczynski, General Counsel Department of Business and Professional Regulation Northwood Centre 1940 North Monroe Street Tallahassee, Florida 32399-0792
