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, Jason Dwight Walker, prepared a preconstruction appraisal report that was in violation of the Uniform Standards of Professional Appraisal Practice (USPAP), and thus section 475.624(4), Florida Statutes, and Florida Administrative Code Rule 61J1-9.001, as alleged in the First Amended Administrative Complaint and, if so, the sanctions to be imposed.
Findings Of Fact The Department is the agency of the State of Florida having authority, among its other duties and responsibilities, to regulate the practice of real estate. The Division of Real Estate is a legislatively-created division of the Department. The Board is established within the Division of Real Estate and is vested with the authority to administer chapter 475, Part II, Florida Statutes, and to enforce the provisions thereof. Respondent holds a license as a state-certified residential real estate appraiser, No. RD 3588. On or about June 20, 2012, Respondent contracted to perform a preconstruction appraisal report for a residential home (the Proposed Home) to be constructed at 14682 Northwest Pea Ridge Road, Bristol, Florida. The prospective owners were Thomas Ryan Cherry and Jessica Rogers Cherry (the Owners). The Proposed Home’s internal area was to be 3,458 square feet in size. The issue that forms the basis for the Administrative Complaint is the amount of that area that was to be built-out as the Gross Living Area (GLA) of the home. Petitioner has alleged that Respondent failed to consider the entire eight-page construction contract that governed the construction of the Proposed Home. As will be discussed in greater detail herein, the contract between the building contractor, Stephen Newman, and the Owners consisted of four numbered pages, the fourth page of which contained only a statutorily-required notice regarding construction defect claim procedures and the signature blocks. The contract also included a separately styled, numbered, and signed five-page Description of Materials. Page five of the Description of Materials included a provision that “[s]econd story will be framed and left unfinished. Owner to complete at future date. One 36” exterior door to be installed at head of stairs.” Respondent was retained to perform a preconstruction appraisal by the appraisal management company, StreetLinks Lender Solutions (StreetLinks), which was acting as the agent for First Federal Bank of Florida (Lender). The Lender was the client for the appraisal, but Respondent’s selection was performed at the sole discretion of StreetLinks. The appraisal agreement prohibited Respondent from contacting the Lender prior to delivery of the final appraisal report, or from attempting to obtain value or loan information from the Owners. Thus, of the parties to financing, StreetLinks was the sole allowable point of contact. The only plausible inference is that the information provided to Respondent in aid of the appraisal was provided by StreetLinks, or at StreetLinks’ direction. Respondent was provided with the first three pages of the contract. The Contract provided that the Proposed Home was to be constructed “from Owner provided plans,” that “[t]he owner provided plans and Builder’s Description of Materials are part of this contract,” and that “[o]wner agrees to not inhabit the dwelling until all construction is complete, certificate of occupancy is obtained, and all funds to builder have been paid.” Respondent included the construction contract provided to him in his work file. Respondent was provided with two floor plan sheets that depicted the two-story home at issue in its fully built-out and completed form. The floor plans included the layout of the Proposed Home, and general depictions of fixtures, counters and cabinets, lighting, fans and wiring. Respondent included the floor plan sheets in his work file. In order to confirm the nature of the building to be constructed, Respondent called the contractor, Mr. Newman, and had a conversation with him that lasted approximately 30 minutes. Mr. Newman testified that he provided Respondent with the dimensions of the second floor and the location of the various rooms, information that Respondent sought in order to confirm information contained in the floor plans. Respondent made an accurate sketch of the configuration of the second floor based on his conversation with Mr. Newman. Furthermore, access to the attic was described on Respondent’s specification sheet notes as “scuttle,” and not “stairs,” information that could only have been gathered from either Mr. Newman or the floor plans. Mr. Newman did not have a firm recollection of whether he provided Respondent with information regarding the materials, appliances, and finishes to be used in the Proposed Home. Nonetheless, a preponderance of the evidence, including Respondent’s testimony and contemporaneous notes of the conversation, indicates that Mr. Newman provided Respondent with that information, though the evidence also suggests that Mr. Newman understated the high quality of some of the finishes. At no time during the conversation did Mr. Newman indicate that the second floor was not going to be finished as depicted in the plans, and would instead be considered “attic space.” Mr. Newman denied that he had any responsibility to advise Respondent that it was not his intent to build-out the second floor in accordance with his described configuration, despite the fact that floor plans depicting a completed second floor were sent to the Owners under his signature, and were thereafter provided to Respondent. It is simply not credible that such would not have been disclosed over the course of a lengthy and in-depth conversation under the excuse that “it’s not my job to,” unless there was an intent to convince Respondent that the Proposed Home would be built in accordance with the plans. Respondent included specification sheet notes and his second floor sketch from his conversation with Mr. Newman in his work file. Using the plans, contract, and other information as to the property independently obtained by Respondent, and taking into account the information received from Mr. Newman, Respondent developed and communicated an appraisal report, No. 7393A, with an effective date of June 29, 2012. The appraised value of the Proposed Home was $250,000. That amount was consistent with and supported by properties of a size comparable to a 3,458 square foot home in the area. The house was constructed in accordance with the contract and Description of Materials. The second floor was framed and floored, and plumbing was stubbed out, but it was not finished so as to be considered GLA. The house as constructed contained a GLA of 2,014 square feet.1/ However, due to the very high quality (and expense) of cabinets, flooring, and fixtures, the cost of construction of the 2,014 square foot GLA home was $232,645, an amount very close to the $250,000 appraised (and financed) value. It is surprisingly (or not so surprisingly) serendipitous that the cost of the smaller home was so close to the appraised value of the larger home. It seems more than a happy coincidence that the Owners and the contractor had sufficient financing to account for the luxurious finishes. Respondent was not retained to do the draw inspections or the final inspection. Thus, he could not have known that the home as constructed was not consistent with the plans provided to him by StreetLinks, or with the description of the Proposed Home as discussed with Mr. Newman. On or about June 14, 2013, the Lender filed a complaint with the Division of Real Estate alleging misfeasance in the preparation of the appraisal.2/ The documents submitted to the Division with the complaint did not include the two floor plan sheets that had been provided to Respondent, but did include the contract signature page and the Description of Materials that had not been provided to Respondent. By letter dated August 14, 2013, the Lender, through its counsel, advised Respondent that it believed Respondent to have negligently prepared the appraisal, with the negligent act being Respondent’s failure to recognize that the second floor of the home was to remain unfinished. The letter provided, in part, that: Via the appraisal, you represented that you reviewed the construction contract between the builder and the Property owner. I have attached a copy of that contract for your ease of reference as Exhibit “B” hereto. However, the construction contract clearly indicates that the second story of the home would be left unfinished. Your appraisal failed to recognize this fact and now the home, as built, is nowhere near your appraised value. The letter did not include Exhibit “B.” Respondent kept the letter and other communication with the Lender in his work file. On September 4, 2013, Respondent sent an email to the Lender’s counsel, asking that “Exhibit B” of the Lender’s letter be provided to him. In response, the letter with all of the exhibits was sent to Respondent by email that same day. Exhibit “A” of the Lender’s letter consisted of a Certificate of Compliance from the Lender’s agent, StreetLinks, and a complete copy of Respondent’s appraisal report. Exhibit “B” of the Lender’s letter included the same three-page construction contract that was contained in Respondent’s work file. It contained the same letter from Mr. Newman to the property owners. Finally, it contained floor plans for the home but, surprisingly (or not so surprisingly), it included only the floor plan sheet for the first floor of the Proposed Home. The Lender’s Exhibit “B” did not include the floor plan for the second floor of the Proposed Home that had been originally provided to Respondent by or on behalf of its agent, StreetLinks. Exhibit “B” of the Lender’s letter to Respondent did not include the Description of Materials with the provision that the second story of the home would be left unfinished. At the hearing, Petitioner offered what was represented to be the complete contract as an exhibit. The contract offered was four pages and, but for the statutorily required notice regarding construction defect claim procedures and the signature blocks, was identical to the contract in Respondent’s workfile. The exhibit also included the separately styled and signed Description of Materials. As set forth herein, the Description of Materials was not provided to Respondent by or at the direction of StreetLinks, or otherwise. In analyzing the issues in this case, the undersigned paid close attention to the opinion of Petitioner’s expert witness, Mr. Rogers. Mr. Rogers opined that Respondent should have engaged in greater inquiry that would have revealed that the second floor was to remain unfinished, and as a result the GLA was stated, melodramatically, to be “tragically overstated.” In his testimony, and his report which was received in evidence, Mr. Rogers noted that Mr. Newman’s cover letter to the Owners referenced a description of materials, estimate, and legal description. He noted that “it is actually atypical for the owner or lender to supply all of the information about the subject property the appraiser will need to produce credible assignment results.” In instances of insufficient documentation, Mr. Rogers testified that among the options for dealing with that occurrence is for the appraiser “to go find that documentation and complete the assignment.” Mr. Rogers believed that Respondent should have made “a request to the lender” for the referenced materials, apparently being unaware that the terms of Respondent’s engagement with StreetLinks prohibited such contact. He further opined that Respondent’s communication with Mr. Newman “was insufficient . . . to an accurate description of the proposed home,” and that “[e]xpansion of the conversation with the builder . . . was necessary.” How he was able to determine the sufficiency of a conversation to which he was not privy was not explained, and his opinion in that regard is given no weight. Based on the totality of the evidence in this case, Respondent obtained information that was reasonably calculated to identify the relevant characteristics of the subject property. The contract, the complete floor plans for the first and second floors of the home, and the lengthy conversation with the builder were sources that were objectively reasonable and reliable, and consistent with USPAP and the Department’s statutory and regulatory authority. Mr. Rogers acknowledged that complete floor plans are an appropriate source for information regarding the characteristics of an appraised property. However, he discounted Respondent’s reliance on such floor plans in this case. His explanation for doing so was not compelling or persuasive, and is not accepted. Rather, the information used by Respondent, as described herein, was sufficient to identify the extent and character of the proposed improvements.
Recommendation Upon consideration of the facts found and conclusions of law reached, it is RECOMMENDED that the Department of Business and Professional Regulation, Real Estate Appraisal Board, enter a final order dismissing the First Amended Administrative Complaint. DONE AND ENTERED this 31st day of August, 2016, in Tallahassee, Leon County, Florida. S GARY EARLY 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 31st day of August, 2016.
The Issue Whether Fred Catchpole and Gwendolyn Barker (Respondents) should be subject to disciplinary action as licensed residential real estate appraisers by the Department of Business and Professional Regulation, Division of Real Estate (Petitioner) for failure to exercise reasonable diligence in developing an appraisal report in violation of Section 475.623(15), Florida Statutes (2004).1/
Findings Of Fact Petitioner is the licensing authority for real estate appraisers in Florida with revocation and disciplinary authority over its licensees pursuant to Section 20.165 and Chapter 475, Florida Statutes. On or about September 16, 2004, Respondents Fred Catchpole and Gwendolyn Barker prepared, signed and communicated an appraisal report (Report) for the property, including a manufactured home, located at 209 Ponderosa Pine Court, Georgetown, Florida 32139 (Subject Property). At the time of the Report, Respondent Catchpole was licensed by Petitioner as a State Licensed Real Estate Appraiser, and Respondent Barker was licensed by Petitioner as a State Certified Residential Real Estate Appraiser. Both Respondents are currently licensed by Petitioner as State Certified Residential Real Estate Appraisers. The Report was prepared for Pass and Associates in connection with refinance of a loan secured by the Subject Property. Respondents issued a corrected version of the Report (Corrected Report) with changes and additions requested by the client in 2004, prior to refinancing the loan on the Subject Property. In October 2004, a One-Unit Residential Appraisal Field Review (Field Review) of the Report was conducted on behalf of Chase Manhattan Mortgage Corp., who was listed in the Field Review as the “Lender/Client.” Between 2004 and 2009, Respondents provided rebuttal and rebuttal materials to address the Field Review. In 2009, Chase Home Lending (Chase Manhattan Mortgage Corp. and Chase Home Lending are both referred to herein as “Chase”) filed a complaint with Petitioner regarding the Report. The complaint consisted of a cover letter from Larry Handley with Chase Home Lending, a copy of the Report, and a copy of the Field Review. The complaint was found legally sufficient and forwarded to Petitioner’s investigator. Petitioner’s investigator did not receive a copy of the Corrected Report. T. 15, 204. Following the investigation, the Administrative Complaints were filed against Respondents. Count I of the Administrative Complaints relies on a number of alleged problems with the Report or the supporting workfiles (Workfiles), as detailed in the “Essential Allegations of Material Fact” section of the Administrative Complaints. After dismissing Counts 2 through 12 of the Administrative Complaints at the beginning of the hearing, Petitioner did not provide an Amended Administrative Complaint for either Respondent. Count I of the Administrative Complaints is based solely upon Respondents’ alleged failure “to exercise reasonable diligence in developing an appraisal report in violation of Section 475.624(15).” Instead of providing Amended Administrative Complaints, during the final hearing and in its proposed recommended order, Petitioner addressed the following alleged problems with the Report or Workfiles: The address of comparative sale 2, listed in the Sales Comparison Analysis section of the Report, was incorrect. The Subject Property has a zoning classification of R-2, which is mixed residential, which was incorrectly stated in the Report. The Workfiles for comparable sales 1, 2, 3, 4, 5 and 6 listed in the Sales Comparison Analysis section of the Report are not supported by documentation contemporaneous to the effective date of the Report. Multiple Listing Services (MLS) is listed as a data source in the Sales Comparison Analysis section of the Report for comparable sales 3, 5 and 6, but the Workfiles lack MLS documentation for those comparative sales. The Sales Comparison Analysis section of the Report failed to identify features for comparable sale 2 that were noted in the Workfiles. The Workfiles lack data to support the gross living area for comparable sale 6 noted in the Sales Comparison Analysis of the Report. The Report failed to note fences on the comparable sales, failed to make adjustments for the fences in the Sales Comparison Analysis section of the Report, and failed to address whether the fences had an influence on the price. The Report contains inconsistent Cost Approach data. The Workfiles lack documentation supporting the Estimated Site Value, Lump Sum, and As-Is Value data for the Subject Property in the Cost Approach sections of the Report. The Workfiles lack documentation supporting the Site Value for the Subject Property listed in the Cost Approach sections of the Report. The Workfiles lack documentation supporting the market trends outlined in the Sales Comparison Analysis section of the Report. The Report lacks internal consistency. At the final hearing, Respondents addressed each of the above-listed allegations. Alleged Incorrect Address in Comparable Sale 2 The incorrect address was a minor typographical error. The address listed for comparable sale 2 was only one number off the actual street address. The Report listed the street address as 815 CR 309B instead of the correct street address of 815 CR 308B. [underlines added]. The Corrected Report corrected the typographical error in the street address. Alleged Wrong Zoning Classification for the Subject Property The Subject Property is zoned “R-2, mixed residential” in the public records of Putnam County. Page one of the Report, consisting of the first page of the Uniform Residential Appraisal Report, Freddie Mac Form 70, revised 6-93, the Report lists as the specific zoning classification and description, “single family residential R-2.” At the final hearing, Respondent’s investigator, who pointed out the alleged error in the Report, admitted that he had not had training in filling out the Freddie Mac Form 70. The description used in the Report is consistent with the public tax record information on the web, which describes the Subject Property as “residential” with a zoning of “R-2.” Exhibit R-18. In addition, the One-Unit Residential Appraisal Field Review Report of the Report, which was prepared to determine the correctness of the procedures used by the original appraisal, specifically stated, “The zoning is correct.” Exhibit R-37. Alleged Lack of Contemporaneous Documentation Supporting Comparative Sales Petitioner’s witness, Francois K. Gregoire, a real estate appraiser who reviewed the Report, provided testimony to support a number of the factual allegations in the Administrative Complaints. Based upon his credentials, Mr. Gregoire was allowed to offer opinions on the Report as an expert in residential real estate appraisals. An appraiser’s workfile must be contemporaneous with the development and communication of the appraisal report. In addressing this allegation, Mr. Gregoire referenced comparable sales data in the Workfiles taken from Win2Data and Putnam County tax rolls in 2008, approximately four years after the effective date of the Report, which was issued in September 2004. Although Petitioner’s expert opined that since the data was retrieved in 2008, it could not be contemporaneous, the 2008 data included comparable sales contemporaneous with the Report. The fall 2004 issue of the Florida Real Estate Appraisal Board News & Report included a question and answer from the Appraisal Standards Board (ASB) relating to the Uniform Standards of Professional Appraisal Practice (USPAP). The question and pertinent parts of the answer stated: Question: Recently I have considered maintaining only electronic workfiles (i.e. saving only electronic versions of my reports and supporting data, and scanning any paper documents used so that copies may be stored on electronic media). Is this prohibited by USPAP? Response: No. There is nothing in USPAP that would prohibit an appraiser from maintaining only electronic versions of workfiles. The Record Keeping section of the ETHICS RULE states, in part: The workfile must include: the name of the client and the identity, by name or type, of any other intended users; true copies of any written reports, documented on any type of media; summaries of any oral reports or testimony, or a transcript of testimony, including the appraiser’s signed and dated certification; and all other data, information, and documentation necessary to support the appraiser’s opinions and conclusions and to show compliance with this Rule and all other applicable Standards, or references to the location(s) of such other documentation. As long as an electronic workfile contained these items, it would be sufficient. An appraiser must also be mindful of the requirement to have access to the workfile for the applicable required time period. The appraiser must ensure that the proper software is maintained to allow access to the electronic files. (Italics in original.) October 2008, the ASB issued a sequel its 2004 opinion, in the following response to the following question: Question: In the course of preparing my appraisals, I often research Multiple listing Service (MLS) and other data sources. I use this information to develop conclusions regarding neighborhood value ranges and market trends. Is it necessary for me to include copies of this information in my workfile? Alternatively, can I simply reference the data sources in my workfile. Response: References in the workfile to the location of documentation used to support an appraiser’s analysis, opinions, and conclusions can be adequate. It is not always necessary for the appraisal workfile to include all the documentation provided the referenced material is retrievable by the appraiser throughout the workfile retention period. Care should be exercised in the selection of the format and location of documentation. The Workfiles reflect that Respondents used MLS, Win2Data, and MLS public records to support the Report. While contemporaneous paper copies may not have been maintained of all the data, they were retrievable as reflected in the workfiles. Alleged failure to include MLS Listings in the Workfiles When Listed as a Source for Comparative Sales 3, 5 and 6 As noted in Finding of Fact 21, supra, while MLS and other supporting data contemporary with comparative sales 3 and 5 listed in the Report may not have been kept in the Workfiles, they were retrievable. See, e.g., Exhibit R-20, pp. 74-75 (listing 2009 tax data showing comparative sale 5 on 6/8/2004 for $92,000 and MLS data retrieved on 2/28/10 showing subsequent sale of the property on 7/20/05 for $110,000). Moreover, contrary to the allegation, the Report does not list MLS as a data source for comparative sale 6. Rather, the Sales Comparison Analysis section of the Report lists “WINDAT/PUB REC/DRIVEBY” as the data and/or verification source for comparative sale 6. See Exhibit P-2, p. 3. Alleged Failure of Report to Identify Features for Comparable Sale 2 Noted in the Workfiles Paragraphs 6(R) and 6(S) of the Administrative Complaints allege that the Report failed “to note that comparable sale 2 had a hot tub,” and failed “to note the renovated status of comparable sale 2, as outlined in workfile documentation.” According to Mr. Gregoire, “in Comparable Sale Number 2, the MLS printout indicates some features that were not described in the appraisal report. There’s inconsistency between the work file data and what was reported in the appraisal.” T. 93-94. While the MLS listing in the Workfiles provided additional information, there is no indication that the information was “inconsistent” with the Report. At the final hearing, Respondent Catchpole explained their rating in the Report of comparative sale 2 as “good,” accurately reflected recent renovations in that sale when compared to the “good” rating given to the Subject Property, which, at the time of the Report, had new floors, new carpets, and a new AC system. T. 202. Alleged Lack of Data in the Workfiles to Support Gross Living Area Listed in Report for Comparable Sale 6 The gross living area reported in the Report for comparable sale 6 is 840 square feet. At the final hearing, Petitioner’s expert, Mr. Gregoire, testified that there is no contemporaneous data to support that figure, and noted that the contemporaneous Win2Data in the Workfiles lists the square footage for comparable sale 6 as 2,380 square feet. In making his observation, however, Mr. Gregoire conceded that Win2Data sometimes rolls non-living areas into the reported living area. T. 99. The 2008 tax data in Respondents’ Workfiles for comparative sale 6 shows that the “base” square footage for the mobile home on comparative sale 6 was 840 square feet, which is the same square footage reported in the Report. Exhibit P-3, p. 60 While the tax data print-out is not contemporaneous with the sale, the tax data on that print-out reflects the 2003 sale for $89,000 listed in the Report, and provides a basis for the reported 840 square feet for comparable sale 6. As noted above, electronic data that has retrievable information contemporaneous with the Report is acceptable. Alleged Failure of the Report to Note or Make Adjustments for Fences on the Comparable Sales Respondent Catchpole explained at the final hearing that, in addition to reviewing public sources and MLS listings, Respondents based their Report on actual drive-bys of the comparative sales. According to Mr. Catchpole, as memory served him from six years before when the Report was written, only one fence was visible from the road. Mr. Catchpole further explained that they did not add any value to the comparative sales for the fences which they saw because they considered them to be personal property and were not a 100 percent sure that the fences they observed belonged on the comparative sale property, as opposed to adjacent land. According to Mr. Gregoire, whether or not comparative sales had fences should have been reported in the Report, “because to some buyers, that may have had an influence on the price.” T. 101. Mr. Gregoire conceded, however, that “I can’t say whether or not there should have been an adjustment, because I haven’t done an appraisal in this area.” Id. Alleged Inconsistent Cost Approach data in the Report Petitioner’s expert witness, Mr. Gregoire, noted during his direct examination that there were inconsistent values between the Estimated Site Value of $15,000 set forth on page 2 of the Report and the Market Value of Subject Site reported as $10,000 on page 5 of the Report. He also noted that the value for “Lump Sum” of $8,000 set forth on page 2 of the Report was different from the $5,000 value for “Lump Sum” reported on page 5 of the Report. Finally, he noted that the “As is” value of $15,000 for site improvements set forth on page 2 of the Report was different from the $10,000 value reported on page 5 of the Report for “other depreciated site improvements.” Exhibit P-2, pp. 2, 5. According to Mr. Gregoire, these internal inconsistencies made the Report misleading and demonstrated a lack of due diligence in its preparation. T. 107-110. Mr. Gregoire’s observations, however, did not take into account the fact that Respondents issued a Corrected Report with changes and additions requested by the client in 2004, prior to refinancing the loan on the Subject Property. T. 15; Exhibit R-1. The Corrected Report corrected the inconsistencies pointed out by Mr. Gregoire. Exhibit R-1, pp. 2, 9 (the Corrected Report lists both “Estimated Site Value” and “Market Value of Subject Site” as $15K; reports the “Lump Sum” value consistently as $8K; and consistently reports both “As is Value of Site improvements” and “Market Value of Subject Site” as $15K). Alleged lack of documentation in Workfiles supporting the Estimated Site Value, Lump Sum, and As-Is Value data for the Subject Property in the Cost Approach sections of the Report. The record citations provided in the Proposed Recommended Order submitted by Petitioner do not clearly indicate the alleged problem with the estimated site value, other than the inconsistency, which was corrected in the Corrected Report. Petitioner’s PRO, ¶ 22. Nevertheless, there were six comparable sales listed in the Report, and Corrected Report, with supporting data in the Workfiles from which estimated site cost data could be derived. As further noted by Respondent Catchpole, site data was addressed in an addendum to the Workfiles noting: Where difference in the size of the site did not afford additional utility, there was no adjustment taken, it was considered excess land. (P-3, p. 4) Mr. Gregoire also stated that there was no identification as to what “lump sum” is, either in the Report or the Workfiles. T. 109. At the final hearing, in his cross- examination of Mr. Gregoire, Respondent Catchpole indicated that the lump sum figure included porches and the air-conditioning system. In response, Mr. Gregoire stated that, if that was the case, it should have been disclosed. T. 139. There is no evidence, however, in the Field Review, that the “lump sum” category was criticized. In fact, the Field Review reported that “the data in the improvements section [is] complete and accurate.” Exhibit R-37, p. 1, § II, ¶ 4. Further, there is no evidence that the lender asked for further explanation prior to refinancing the loan on the Subject Property. As far as the alleged failure of supporting documentation for the “as is” value of site improvements on page 2 of the Report, although noting that it was not specifically identified in the report, Mr. Gregoire conceded that the value “easily corresponds with the way it’s described on Page 5 of [the Report] as Other Depreciated Site Improvements. But there is no explanation as to why in one - - it goes from $15,000 [on page 2] to $10,000 [on page 5 of the Report].” T. 110. As noted above, however, the Corrected Report, which Mr. Gregoire did not review, corrected the inconsistency between the two “as is” values set forth in the Report. Alleged Lack of Support for the Site Value for the Subject Property listed in the Cost Approach sections of the Report As noted in Finding of Fact 30, supra, the Workfiles contain comparable sales supporting the site value for the Subject Property, with an explanation in an addendum in the Workfiles. In addition, the Field Review of the Report prepared in 2004 marked “Yes” to the inquiry, “Did the appraisal report contain the appropriate prior sale(s) and/or prior listings(s) of the subject property and comparable sales?” Exhibit R-37, p. 1. Aside from the comparative sales, there was also data in the Workfiles showing other land sales in the area. Exhibit P-3, pp. 64-65. Alleged lack of documentation supporting the Market Trends outlined in the Sales Comparison Analysis section of the Report. The Neighborhood section of the Report indicates that the subject property is in a suburban area with 25 to 75 percent build-up and stable growth, and with stable property values, demand and supply in balance, and a marketing time of three to six months. Exhibit P-3, p. 1 (top third); T. 110. The Report finds that the following factors affect the marketability of the properties in the neighborhood: MSA 3600 the area located in south Putnam County, is convenient to major transportation routes which offer easy access to employment opportunities, schools, and most residential services. The homes in the area exhibit average to good quality and appeal and are typically frame, manufactured or masonry construction and are generally well maintained. P-3, p. 1. The Report states as market conditions in the subject neighborhood: The market is currently stable with mortgage funds available to qualified buyers at competitive rates. There is no evidence of concessions, buydowns, or discounts which would affect market value. Property values are relatively stable with no changes expected in the market in the near term. Recent fluctuations in mortgage lending rates do not appear to have affected market values in the subject market. Exhibit P-3, p. 1. According to Mr. Gregoire, referring to the Workfiles, he “couldn’t develop any trend here based on the way it’s maintained, whether it’s stable or not.” In addition, Mr. Gregoire opined that the Workfiles contain poor support for the reported single-family price range. T. 111. Mr. Gregoire acknowledged, however, that the Workfiles include, “in addition to the comparable sales that we discussed, some what I call on-line printouts.” Mr. Gregoire also acknowledged that the Workfiles contained several sales in the above $200,000 price which are indicated as being the high price. According to Mr. Gregoire, however, “it doesn’t necessarily show a predominant value there.” T. 110-111. The on-line printouts referenced by Mr. Gregoire appear on pages 26 through 30 of the Workfiles for improved property, and pages 64 and 65 of the Workfiles for land sales. Exhibit P-1, pp. 26-30, 64-65. The on-line printouts were derived from Win2Data, which Mr. Gregoire admitted was a recognized service for extracting market data. While Mr. Gregoire suggested that the “RealQuest” data source he utilizes was superior because it has updated on-line data, on- line Win2Data is also available and was utilized by Respondents. T. 150. The evidence did not show that the market data utilized by Respondents was deficient. Respondent Catchpole is also expert in real estate appraisal. He has a master’s degree in business administration, has testified as an expert before Congress, the United States District Courts in Georgia and Florida, and before the United States Bankruptcy Court in the Middle District of Florida. He has testified in numerous circuit courts in Florida. He has been a member of the Appraisal Institute. He has appraised nuclear power plants, been an advisor for real estate investment trusts, and has been an appraiser for Whirlpool, Citi Corp and Shearson Lehman. In the exchange during Mr. Gregoire’s cross- examination by Respondent Catchpole, it was clear that they had a difference of opinion as to how to best support an appraisal. See T. 115-167; see also T. 196-198. The evidence was insufficient to show that Mr. Gregoire’s approach was superior to the method utilized by Respondents in conducting the appraisal reflected in the Report or that Respondents did not use reasonable diligence in its preparation. Alleged Failure of Respondents to Maintain Internal Consistency in the Report In support of this allegation, Petitioner cites to Mr. Gregoire’s testimony at the final hearing that “it is the appraiser’s responsibility to ensure internal consistency and to ensure that the report reflects their opinions and conclusion before they affix their name to the report or certification. Petitioner’s PRO, p. 12; T. 135. Aside from the fact that Mr. Gregoire’s opinion did not reflect the Corrected Report, it is apparent his opinion did not consider other information provided by Respondents in support of the Report. While the Field Review was critical of a number of aspects of the Report, Respondents provided rebuttal to that Field Review prior to the complaint by Chase initiating this action. Some of the rebuttal included information indicating that the reviewer who prepared the Field Review had used comparable sales that were not arm’s length transactions. Although Petitioner’s investigator saw the information provided by Respondent Catchpole indicating that the reviewer’s comparables were not arm’s length transactions (T. 53), Mr. Gregoire did not review that information. Mr. Gregoire admitted that he was aware that Respondents provided a written rebuttal with documentation to Chase to the Field Review conducted in 2004. At the time of his testimony in this case, however, Mr. Gregoire had not reviewed any correspondence related to the rebuttal. T. 117-118. One document in particular, Exhibit R-30, that was provided to Petitioner’s investigator from Respondents’ Workfiles, contained notes from Respondent Catchpole contemporaneous to the Report indicating that Respondent Catchpole had contacted the property appraiser’s office to resolve differences in comparable sale 2 between the MLS listing and public records. T. 65-66. Mr. Gregoire was not provided this further evidence of Respondents’ diligence prior to his testimony. T. 121-122. In addition, the Workfiles submitted as Exhibits P-3 and P-7, were offered as the same documents. T. 25. It is clear, however, that a number of documents in P-7 were not in P-3. P-3 consists of 78 pages, whereas P-7 has 94 pages. It is apparent from Mr. Gregoire’s testimony and reference to Exhibit P-3, that his opinions were based upon his review of P-3. There was also evidence that there were a number of documents provided to Petitioner’s investigator, but not placed in Exhibit P-3 for review by Mr. Gregoire for his analysis. Exhibits RA-1 through RA-12, RB-1, and RC-1 through RC-8. While ultimately not used as comparative sales, the documents are additional evidence of Respondents’ efforts and diligence in preparing the Report. In addition, the refinanced loan for which the Report was provided has never gone into default. In sum, the evidence adduced at the final hearing was far less than convincing that Respondents did not use reasonable diligence in preparing the Report.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Business and Professional Regulation, Division of Real Estate, enter a Final Order dismissing the Administrative Complaints. DONE AND ENTERED this 19th day of May, 2010, in Tallahassee, Leon County, Florida. S JAMES H. PETERSON, III Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 19th day of May, 2010.
