01-000385PL Department Of Business And Professional Regulation, Florida Real Estate Appraisal Board vs. Kathy F. Augustine Status: Closed Recommended Order on Friday, July 20, 2001.

Summary: Respondent prepared a restricted appraisal report without designating it as such and without signing her name and state certification number; she also violated multiple provisions of the Uniform Standards of Professional Appraisal Practice.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF BUSINESS AND )

PROFESSIONAL REGULATION, )

FLORIDA REAL ESTATE APPRAISAL )

BOARD, )

)

Petitioner, )

)

vs. ) Case No. 01- 0385PL

)

KATHY F. AUGUSTINE, )

)

Respondent. )

)

RECOMMENDED ORDER

A formal hearing was conducted in this case on May 11,

2001, in Deland , Florida, before the Division of Administrative

Hearings by its Administrative Law Judge, Suzanne F. Hood.

APPEARANCES

For Pe titioner : Sunia Y. Marsh, Esquire

Department of Business and

Professional Regulation

Division of Real Estate

400 West Robinson Street, Suite N-308A

Orlando, Florida 32801-1772

For Respondent : Steven W. Johnson, Esquire

Steven W. Johnson, P.A.

1801 East Colonial Drive, Suite 101

Orlando, Florida 32803

STATEMENT OF THE ISSUES

The issues are whether Respondent violated Sections

475.624(2), 475.624(14), and 475.624(15), Florida Statutes, and

if so, what penalty should be imposed.

PRELIMINARY STATEMENT

On March 6, 2001, Petitioner Department of Business and

Professional Regulation, Division of Real Estate (Petitioner)

filed an Administrative Complaint against Respondent Kathy F.

Augustine (Respondent). Said complaint alleged as follows:

(a) in Count I, that Respondent was guilty of culpable

negligence or breach of trust in a business transaction in

violation of Section 475.624(2), Florida Statutes; (b) in Count

II, that Respondent was guilty of having failed to exercise

reasonable diligence in developing an appraisal report in

violation of Section 475.624(15), Florida Statutes; and (c) in

Counts III and IV, that Respondent had violated Section

475.624(14), Florida Statutes, by violating certain standards

for the development or communication of a real estate appraisal

or other provisions of the 1998 Uniform Standards of

Professional Appraisal Practice ( USPAP ).

On or about March 22, 2000, Respondent filed an Election of

Rights form with Petitioner requesting an administrative hearing

to contest the allegations in the Administrative Complaint. On

April 14, 2000, Respondent filed an Answer to Administrative

Complaint and Request for a Formal Hearing. Petitioner referred

this case to the Division of Administrative Hearings on

January 29, 2001.

On January 6, 2001, Administrative Law Judge Charles C.

Adams issued a Notice of Hearing, scheduling the hearing for

April 10, 2001, together with an Order of Pre-hearing

Instructions.

On March 30, 2001, Petitioner filed an unopposed Motion to

Take Deposition by Telephone and Motion to Use Deposition as

Evidence at Formal Hearing. An Order dated April 2, 2001,

granted this motion.

On March 30, 2001, Petitioner filed an unopposed Motion to

Continue. Judge Adams issued an Order Granting Continuance and

Re-scheduling Hearing on April 3, 2001. Said order rescheduled

the hearing for May 11, 2001.

On April 23, 2001, Petitioner filed an unopposed Motion for

Telephonic Witness Testimony. Judge Adams issued an Order

Granting Telephonic Witness Testimony on April 26, 2001.

The parties filed a Joint Pre-hearing Stipulation on May 4,

2001.

On May 10, 2001, the Division of Administrative Hearings

transferred this case to Administrative Law Judge Suzanne F.

Hood.

During the hearing, Petitioner presented the testimony of

four witnesses and offered nine exhibits (P1-P6 and P8-P10) ,

which were accepted into evidence. Respondent testified on her

own behalf and presented the testimony of one additional

witness. Respondent's Exhibits R1 and R2 were accepted into

evidence.

During the hearing, the parties stipulated that the 1998

USPAP should be officially recognized. They also agreed that

Petitioner could file a copy of that publication as a

post-hearing submission. On May 18, 2001, Petitioner filed a

copy of the 1998 USPAP publication.

A copy of the Transcript was filed on June 7, 2001.

Respondent filed a Proposed Recommended Order on June 20, 2001.

Petitioner filed a Proposed Recommended Order on June 22, 2001.

FINDINGS OF FACT

1. Petitioner is the agency charged with the duty of

licensing and regulating real estate appraisers in the State of

Florida.

2. Respondent is and was at all times material here a

state-certified residential real estate appraiser. In January

1998, Petitioner issued Respondent residential real estate

appraiser certificate number RD-0002524, with a business

location of 2607 South Woodlawn Boulevard, No. 271, Deland,

Florida, 32720.

3. On or about March 5, 1998, Deborah Jeane Palfrey, as

the buyer, and United Capital of Central Florida, Inc. (UCCF),

as the seller, entered into a contract for sale and purchase of

residential property ("the property") located at 236 Steward

Terrace, Deltona, Florida. The contract lists the purchase

price of the property as $54,500.

4. Testimony developed at hearing indicates that UCCF did

not own the property in fee simple. Instead, UCCF had an

assignable contract to purchase the property. UCCF eventually

assigned this contract to Ms. Palfrey.

5. In March 1998, John E. Parrot owned both UCCF and

Realnet USA. Both companies were located at the same address in

Orlando, Florida. Both companies were involved to some extent

in the real estate investment business. Competent evidence

indicates that Realnet USA was a mortgage broker.

6. Michael Mullvain was vice-president of UCCF and, as

such, had signature authority for that company. Mr. Mullvain,

a licensed real estate broker, also was the general manager of

Realnet USA.

7. On or about March 5, 1998, Mr. Mullvain and/or his

assistant at Realnet USA, Tammie Wright, faxed a request for an

appraisal of the property to Certified Appraisal Service ( CAS),

which was located in Winter Park, Florida. The appraisal

request was made on behalf of USCCF and directed to the

attention of Cecil and Teresa Wright.

8. UCCF and Realnet USA were frequent clients of CAS.

Realnet USA had requested CAS to provide as many as 200 similar

appraisals in the past.

9. The appraisal request for the property stated that the

projected sale price was $79,000. The request contained the

following comments: "House to be brought up to FHA

specifications with central A/C, new kitchen, and baths." The

request also included the following statement: "Cecil : Paul

said you have already done some research on the property for

him. Please go ahead with drive-by appraisal as usual."

10. In requesting a drive-by appraisal, Mr. Mullvain

intended for the appraiser to take note of needed repairs. He

wanted an estimate of what the property would be worth based on

the repairs being requested.

11. At the time that the appraisal request was m ade ,

Mr. Mullvain knew that the property was distressed. His purpose

in requesting the appraisal was to determine what the property

would be worth if it was brought up to minimum Federal Housing

Administration (FHA) standards. These standards require that

all surface areas be serviceable. They also require anything

that functions to function properly. FHA specifications take

into consideration paint, carpet, kitchen, central air

conditioning, windows, etc. In other words, the house must be

habitable to pass an FHA appraisal inspection.

12. Mr. Mullvain understood that he was ordering a

proposed appraisal based on a comparable market analysis of the

property's future value after repairs. He did not expect an

appraisal based on a cost approach and an income approach, as

well as a sales comparison approach.

13. When Mr. Mullvain ordered the appraisal, he did not

intend for it to be used by anyone other than UCCF. However,

Mr. Mullvain testified that a salesperson would have given the

appraisal to potential buyers upon request or in a package to

provide additional information about the property.

14. According to its normal business practice, Realnet USA

prepared a rehabilitation summary for the property, showing the

expected cost of repair. This document listed the following

repair items and costs: (a) landscape, $100; (b) roof, $0.00;

(c) exterior, $600; windows/doors, $100; (d) kitchen, $200;

(e) plumbing-bath, $200; (f) paint & ceilings, $650; (g) carpet,

$200; (h) subcontractors, $500; ( i ) central A/C, $100;

(j) termite, $100; (k) appliances, $250; and (l) other, $0.00.

The total expected repair cost was $3,000. Realnet USA kept

this rehabilitation summary in its file for the property. No

one provided a copy of the document to Respondent.

15. Respondent occasionally worked for CAS as an

independent contractor. Cecil Wright would call Respondent and

ask her to prepare appraisals for Realnet USA. Respondent

understood that all appraisal reports for Realnet USA should

produce a proposed estimate of value based on the assumption

that improvements were to be "better than new" when repairs and

renovations were complete. Respondent prepared these reports on

forms specified by Mr. Wright and sent them to him without

signing her name under her typed signature and without

identifying her state-certified residential appraiser number.

16. In March 1998, Mr. Wright requested Respondent to

prepare an appraisal report on the property for Realnet USA. He

asked her to use a Federal Home Loan Mortgage Corporation

(Freddie Mac) form contained in his computer software.

Respondent understood that she would be using the forms to

prepare a "restricted appraisal," showing the estimated market

value of the property as it would exist after improvements were

made to bring the house up to FHA specifications, including

central air conditioning, a new kitchen, and new baths.

Respondent also understood that the appraisal was intended only

for Realnet USA's use.

17. After accepting the assignment, Resp ondent went to the

property. She observed the neighborhood and the exterior and

interior of the house. She took pictures of the property.

18. As to the exterior of the house, Respondent observed

wood damage. She concluded that the damage was probably the

result of termites or some other kind of pest infestation.

There were little holes in the back of the house.

19. As to the interior of the house, Respondent noted that

the kitchen needed new cabinets and appliances. One of two

baths needed repairs because the toilet shared plumbing with the

kitchen refrigerator's icemaker, which was located on the other

side of the wall. The other bathroom had a brick shower stall.

Respondent saw that someone had renovated a one-car garage,

changing it into living space, but leaving the supporting roof

beams exposed.

20. After visiting the property, Respondent performed the

necessary research to complete her assignment. This research

included performing a computer search of the local multiple

listing service and public records to find comparable

properties. Respondent did not make and file copies of

documents that supported any of her research results. She did

take pictures of the properties that she chose as comparable.

21. On March 9, 1998, Respondent produced the report

described below. The computer-generated cover page identifies

Realnet USA as the entity requesting the appraisal and provides

a file number. The following is the only other information on

the cover page:

In accordance with your request, I have

personally made an exterior inspection from

the street in front of the real property at:

235 Steward Terrace

Deltona, Florida 32738

The purpose of this report is to estimate

the market value of the subject property

observed. In my opinion, the estimated

market value of the property as of March 7,

1998, is:

$79,000

Seventy-Nine Thousand

The attached report contains the

description, analysis, and supportive data

for the conclusions, final estimate of

value, descriptive photographs, limiting

conditions and appropriate certifications.

22. Next, Respondent filed in the two-page Freddie Mac

form. The form states as follows at the top: "This form may be

used if the second mortgage will not exceed $15,000 and value is

based on 'as is' condition."

23. On the form, Respondent typed in UCCF as the borrower.

She indicated that the 1,556 square-foot house had six rooms,

including three bedrooms, two baths, a family room, and no

garage/carport. She noted that the house had central air

conditioning.

24. In the Field Report section of the form, Respondent

provided information regarding the neighborhood, adding the

following comments: "The subject is located in well-established

neighborhood conveniently located to schools, shopping,

employment, places of worship, and major arteries. There are no

apparent adverse factors which would affect the subject's

marketability."

25. Respondent also typed information about the property,

indicating that it was a detached, rambler-style, building with

frame/siding exterior walls and a composite shingle roof

material. In the section for favorable or unfavorable comments

including any deferred maintenance, Respondent stated as

follows: "When renovated to meet FHA/HUD standards, the subject

will be a well built dwelling that projects good eye appeal.

Functional utility will be average. The subject will meet

expectations of purchases in this price range."

26. In a section of the form labeled "Market Comparable

Analysis Prior to Improvement," Respondent used the data she had

collected from the local multiple listing service and public

records to describe four pieces of property that she considered

comparable. The four houses that Respondent listed as

comparable were located one to fifteen miles from the subject

property. Respondent listed the sale price of each house all of

which sold between September 1997 and December 1997. Comparable

one through four sold for $79,000; $77,700; $85,700; and

$77,200, respectively.

27. Respondent included the following general comments

about her sales comparable approach: "Sale 3 is located more

than one mile from the subject but was included for support

purposes to the report. Depreciation is based on the subject

being renovated and having an effective life of 3 years.

Depreciation is calculated using 1% per year of effective age."

28. Under the general comments in very fine print, the

form states as follows:

The information shown in this report is

derived from an inspection of the

neighborhood and exterior inspection of the

subject property and market comparisons.

The estimated market value is based upon

this information and the knowledge of the

undersigned. This report is not to be

construed as an appraisal report.

29. Respondent filled in the blank for the estimated value

of the subject property as $79,000 as of March 7, 1998. She

typed in her name as the person completing the report without

signing her name under her typed signature and without

identifying her state-certified residential appraiser number.

30. Respondent attached the following to the report before

she sent it to Cecil Wright at CAS : (a) subject property photo

addendum containing three pictures that Respondent took of the

property; (b) comparable property photo addendum containing

pictures that Respondent took of the four comparable houses

described in the report; (c) sketch/area table addendum of the

subject property that Respondent prepared.

31. Respondent testified that she also attached some

certification pages to her report. However, the record contains

no such documents. Respondent expected Mr. Wright to complete

the report and sign his name as her supervising/review

appraiser. Respondent did not keep a copy of the report she

sent to Mr. Wright.

32. The record contains two copies of Respondent's report,

the first of which was eventually sent to Realnet USA. The

first report contains the following alterations from the work

personally prepared by Respondent: (a) An unidentified

individual added Respondent's alleged hand-written initials

under her typed name at the end of the Freddie Mac form; and

(b) An unidentified individual added the alleged signature of

Cecil Wright and his alleged state-certified residential

appraiser number at the end of the Freddie Mac form. The first

copy of the report includes only the cover page and the Freddie

Mac form described above that Respondent prepared. It does not

include the pictures or sketch prepared by Respondent or any

other addendum.

33. Respondent copied the second copy of the report from

CAS's files after the initiation of Petitioner's investigation

in this case. The second copy of the report includes the

pictures and sketch prepared by Respondent but does not contain

hand-written initials under Respondent's typed name or

Mr. Wright's alleged signature and appraiser number at the end

of the Freddie Mac form. Instead, it contains the following

additions: (a) three maps prepared by an unidentified

individual showing the location of the subject property and the

four comparable properties; (b) a CAS certification page,

attached by an unidentified individual; and (c) a page setting

forth a certification and statement of limiting conditions

together with contingent and limiting conditions, attached by an

unidentified individual.

34. The first certification page, attached to the second

copy of the report, states as follows in relevant part:

CERTIFIED APPRAISAL SERVICE

CERTIFICATION

* * *

The appraiser has inspected all improvement

on this property, but does not warrant the

condition of the roof, floors, appliances,

plumbing, electrical, heating and air

conditioning. Only a visual inspection has

been made and it is assumed that all are in

serviceable condition for the purpose of

this appraisal. Unless noted, it is assumed

the subject property is free from termite

infestation.

* * *

The value estimate is -as is- unless

otherwise stated.

Certification of Appraiser/Review Appraiser

(If applicable)

As of the date of this report, Cecil Wright,

SRA has completed the requirement of the

continuing education program of the

Appraisal Institute. Cecil Wright is a

State-Certified Residential Appraiser- No.RD

0000219.

Additional Certification of the Appraisal

Institute

The appraisal analysis and opinion were

developed and this appraisal report has been

prepared in conformity with the Uniform

Standards of Professional Appraisal

Practice, as promulgated by the Appraisal

Standards Board of the Apraisal [sic]

Foundation, and the requirements of the code

of Professional Ethics and Standards of

Professional Appraisal Practice of the

Appraisal Institute.

* * *

Definition of Client

Neither all nor any part of the contents of

this report shall be conveyed to any person

or entity, other than the appraiser's or

firm's client (the client is defined as the

person or firm ordering the appraisal from

the appraiser), through advertising,

solicitation materials, public relations,

news, sales, or other media without the

written consent or approval of the authors,

particularly as to valuation

conclusions. . . .

Termite information

The appraiser makes a cursory inspection of

the exterior wood on the dwelling for the

purpose of determining whether there is wood

rot, possible termite damage or any other

wood related problems. The appraiser is not

qualified to determine if any damage is

caused by termites as this is beyond our

expertise. Should we find any rotted wood

damage that requires attention it will be

mentioned in the appraisal report. . . .

35. The last certification page attached to the second

copy of the report, states as follows in relevant part:

CERTIFICATION AND STATEMENT

OF LIMITING CONDITIONS

Certification: The drive-by inspector

certifies and agrees that:

* * *

3. The drive-by inspector has inspected the

exterior of the property only and that

inspection may be limited to what can be

seen from the street. To the best of the

drive-by inspector's knowledge and belief,

all statements and information in this

report are true and correct and that the

drive-by inspector has not knowingly

withheld any significant information. It is

assumed that the interior is in good

condition but it must be noted that a more

complete exterior inspection and/or an

interior inspection could produce a

substantial change in value from that value

indicated in this report.

4. All contingent and limiting conditions

are contained herein (imposed by the terms

of the assignment or by the undersigned

affecting the analyses opinion, and

conclusions contained in this report).

5. All conclusions and opinions concerning

the real estate that are set forth in the

report were prepared by the drive-by

inspector whose signature appears on the

report, unless indicated as 'reviewer.' No

change of any item in the report shall be

made by anyone other than the appraiser or

the reviewer whose names appear on the

report, and the appraiser, the reviewer, or

their firm shall have no responsibility for

any such unauthorized change.

CONTINGENT AND LIMITING CONDITIONS

The certification of the drive-by inspector

is subject to the following conditions in

addition to any other specific and limiting

conditions as are set forth by the drive-by

inspector in the report:

* * *

5. The inspector assumes that there are no

hidden or unapparent conditions of the

property, subsoil, or structures, which

would render it more or less valuable. The

inspector assumes no responsibility for such

conditions, or for engineering which might

be required to discover such factors.

* * *

7. Disclosure of the contents of the report

is governed by the Bylaws and Regulations of

the professional appraisal organization with

which the inspector is affiliated.

8. Neither all, not any part of the content

of the report, or copy thereof (including

conclusions as to the property value . . .)

shall be used for any purposes by anyone but

the client specified in the report, the

mortgagee or its successors and

assigns . . . without the previous written

consent of the inspector, nor shall it be

conveyed by anyone to the public . . .

without the written consent and approval of

the inspector.

9. On all reports, subject to satisfactory

completion, repairs, or alteration, the

report and value conclusion are contingent

upon completion of the improvements in a

professional workmanlike manner.

At the end of this last certification page, an unidentified

individual signed Respondent's alleged initials as the drive-by

inspector. Mr. Wright's alleged signature and appraiser number

also appears at the bottom of the page.

36. Respondent's three-page appraisal report did not

include the following or state why these factors were not

considered: (a) a label or title indicating that the report was

restricted in scope as opposed to a conventional summary report;

(b) an accurate statement regarding the report's intended use or

purpose; (c) a statement regarding the property's highest and

best use; (d) a cost approach analysis including an estimate of

site value and an estimate of the value of the improvement,

together with comments describing the sources used to compute

the cost estimate, site value, and square footage; (e) an income

approach analysis; (f) a history of prior sales or listing

information for the property even though Respondent knew it had

been on the market for 18 months for $61,500 and had not sold

for that price; (g) an addenda explaining relevant information

and including any departures from USPAP not otherwise included

in the report; (h) a standard language explaining the scope of

appraisal and the appraisal process; ( i ) a standard language of

additional comments, explanations and limiting conditions;

(j) a statement of contingent and limiting conditions and

appraiser's certification, including the supervisory appraiser's

certification; and (k) the signature of appraiser and/or

supervisory appraiser, together with their respective state

certification numbers.

37. On or about August 12, 1998, William Wynn, inspected

the subject property. He prepared a Uniform Residential

Appraisal Report on August 17, 1998. Mr. Wynn's report lists

Deborah Palfrey as current owner and borrower. It lists

Pinnacle Financial Corp. as lender/client.

38. Mr. Wynn's report describes the neighborhood of the

property. The report includes comments describing market

conditions and factors that affect the marketability of the

properties in the neighborhood.

39. Mr. Wynn's report described the property's site,

stating that its highest and best use was its present use. It

also includes a description of improvements on the property,

indicating that the interior floors, walls, trims/finish, bath

floor, bath wainscot, and doors were in good condition.

Mr. Wynn added the following comments about the condition of the

improvement: "The improvements are of average quality

construction maintained in good condition. No repairs required

at the time of inspection. The garage has been converted into

living area."

40. Mr. Wynn's report provides an estimate of the

property's value using the cost approach. Regarding the cost

approach, Mr. Wynn made the following comments:

See attached sketch. Cost calculations are

based on Marshall and Swift Guidelines and

information for local contractors. Physical

depreciation is based on observed conditions

and estimated by the age/life method. Land

[is] valued by abstraction, sales

comparison, and typical ratio of land to

improvement for the area. The estimated

remaining economic life is 49 years.

41. Mr. Wynn's report provides an estimate of the

property's value using a sales comparison analysis. In making

this analysis, Mr. Wynn compared the subject property to three

comparables. Regarding the sales comparison approach, Mr. Wynn

made the following relevant comments:

The subject and the three comparable sales

are located in Deltona Lakes. See the

addendum for additional comments explaining

the adjustments for the differences in gross

living area and explanation for sales dated

over six months. The three closed sales

used in the sales comparison approach

provide a reliable range of value for the

appraiser property. *See Addendum.

* * *

The subject was listed at $57,500, in the

first part of 1998. The subject sold for

$50,000 March 1998.

42. Mr. Wynn's report states that the appraisal was made

"as is" and not subject to repairs. As part of the final

reconciliation, the report states as follows:

Emphasis is on the sales comparison approach

because it reflects current market trends

for similar properties. Typically homes in

the subject's neighborhood are not purchased

for income; therefore, the income approach

was not applied. Cost approach is not

required.

43. Mr. Wynn concluded in his report that the property's

estimated value was $60,000 as of August 12, 1998. He then

signed his name and identified his state certification number.

44. Mr. Wynn attached a General Text Addendum to his

report, which states as follows:

The comparables are closed sales in the

subject's market area. All three sales are

considered to be reasonable substitutes for

the appraised property. Sale #2 and # 3,

although dated over six months is [sic]

considered a reliable value indicator due to

stable market conditions for the time period

covered. The subject has a family room 19.9

x 19.8 that is a garage converted to heated

and air-conditioned living area. The

adjustments for the differences in living

area are made at a lower than typical amount

($20 per sq. foot) because the ceiling in

the family room has exposed roof trusses

(painted). There is no finished drywall

ceiling in the family room to cover the roof

trusses.

The appraiser was not able to bracket the

subject in gross living area with a similar

comparable sale.

45. Mr. Wynn attached the following additional information

to his report: (a) two maps showing the location of the subject

property and the comparables; (b) three pictures of the subject

property and pictures of the comparables; (c) a sketch/area

table addendum; (d) a copy of his curriculum vitae; (e) a

definition of market value; (f) a statement of contingent and

limiting conditions; (g) an appraiser's certification; and

(h) a supervisory appraiser's certification. Mr. Wynn then

signed his name to the report and identified his state

certification number. Mr. Wynn did not have a supervisory

appraiser in making his report.

46. In September 1998, Peter T. Woods, a state-certified

general appraiser, requested his employee, Walter A. Drumb, a

state-certified residential appraiser, to perform an appraisal

of the subject property. Subsequently, Mr. Drumb prepared a

Summary Appraisal Report using the form for a Uniform

Residential Appraisal Report. The report lists Jean Palfrey as

the borrower and Pinnacle Financial Corp. as the lender/client.

47. Mr. Drumb's report states that "[t ]he intended use of

the appraisal is to aid in mortgage loan negotiations."

Mr. Drumb's report also comments that "[t ]he dwelling appears to

be of average quality construction and in good physical

condition with no functional inadequacies noted."

48. In making his report, Mr. Drumb used two approaches:

(a) the cost approach; and (b) the sales comparison analysis.

The report states that the income approach was not used "due to

a lack of reliable market rental data in the subject

neighborhood."

49. Regarding the cost approach, Mr. Drumb included the

"as is" value of site improvements and made the following

comments: "No functional or external obsolescence noted. Cost

approach was prepared using Marshall and Swift Residential Cost

Handbook and local cost estimates. See attached addendum for

measurements. Estimated remaining economic life : 52 years."

50. Regarding the sales comparison analysis, Mr. Drumb

made the following comments: "The subject conveyed in March

1998 for $50,000. The public records reveal no prior sales of

the comparable sales within the past year."

51. Mr. Drumb concluded that the property had an estimated

market value of $63,000 as of September 11, 1998. His report

indicates that the appraisal was made "as is" and not subject to

repairs and alterations.

52. Mr. Drumb signed his report and identified his

state-certified residential appraiser number. Mr. Woods also

signed the report as the supervising appraiser and identified

his state-certified general appraiser number.

53. Mr. Drumb included an addendum to his report that

explained his choice of comparables. He included a floor plan,

pictures of the subject property and the properties used as

comparables, a map showing the locations of the subject property

and comparables, and a subdivision plat. Mr. Drumb included a

page in his report that explained the scope of the appraisal and

the appraisal process in detail.

54. Finally, Mr. Drumb attached three pages to his report,

setting forth additional comments, explanations, and limiting

conditions. Included in these comments was a statement of

limiting conditions and appraiser's certification. Mr. Drumb

and his supervisory appraiser, Mr. Woods, signed the final

certification page and identified their state-certified

appraiser numbers.

55. Petitioner's investigator, Robert Baird, has personal

knowledge of the property as he resided on the same street as

the property at all times material here. In late 1997 or early

1998, prior to investigating the complaint, Mr. Baird viewed the

property and thought that it was in a state of disrepair.

56. Mr. Baird inspected the property for second time on or

about May 17, 1999, as part of his investigation. At that time,

the property appeared to have been renovated as compared to its

condition in early 1998.

57. In the course of the investigation, Mr. Baird

interviewed Respondent. During the interview, Respondent stated

that her estimated value of the property included "with

improvements." Respondent later admitted that she "could

understand how individuals could misunderstand her estimate of

value if they were not aware that it was based on proposed

renovations." In either case, Respondent was unable to furnish

Mr. Baird with documentation to support her estimated value of

the property with or without improvements.

58. Respondent admitted in the hearing that the cost of

renovating the house could have been more than the renovated

house would have been worth. She admitted that, based on her

personal experience, the proposed renovations could cost in

excess of $20,000, excluding any termite or wood rot.

59. Respondent knew Realnet USA wanted the appraisal to

help it "determine whether the house was worth it to purchase or

not." If Respondent's estimated value of the property was

$79,000 as it existed on March 7, 1998, and as stated on the

cover page of her report, then her estimated value was

substantially higher than the property's "as is" market value.

If Respondent's estimated value of the property was $79,000,

taking into consideration the appraisal request for an estimate

of the market value after proposed renovations to meet minimum

FHA standards, then Respondent failed to place a stated value on

the estimated cost for each proposed renovation.

60. During the hearing, Respondent admitted that USPAP

required her to prepare an addendum to include necessary

information such as prior sales history when the restricted form

she was using did not include that information. She

acknowledged that she was required to comply with 1998 USPAP

even if she was unfamiliar the publication's contents and

despite her client's request for something less than a

conventional appraisal.

61. Competent evidence indicates that appraisal reports by

state-certified residential appraisers are seldom, if ever, free

of errors. Certain information is always subjective as it is

based upon the appraisers' personal experience and expertise.

Additionally, there appears to be some confusion in the

profession as to the precise information that a "restricted

appraisal" must include. Nevertheless, USPAP requires the all

appraisal reports prepared by state-certified residential

appraisers to contain certain basic information or an

explanation as to any departures from those requirements.

62. At times, a supervisory/review appraiser will make

changes to an appraiser's report. Knowing that a supervisory

appraiser has this prerogative, does not mean that an appraiser

is allowed to submit an incomplete appraisal report with the

expectation that the review appraiser will complete the report

and sign the appraiser's name. Clear and convincing evidence in

this case indicates that the three-page appraisal report

prepared by Respondent and submitted to Mr. Wright was

substantially deficient and resulted in Realnet USA's receipt of

an ambiguous, contradictory, and misleading appraisal based on

unverifiable data.

CONCLUSIONS OF LAW

63. The Division of Administrative Hearings has

jurisdiction over the parties and the subject matter of this

proceeding. Sections 120.569 and 120.57(1), Florida Statutes.

64. Petitioner has the burden of proving by clear and

convincing evidence that Respondent committed violations of

Chapter 475, Florida Statutes. Ferris v. Turlington , 510 So. 2d

292 (Fla. 1987) ; Florida Department of Transportation v. J.W.C.

Company, Inc. , 396 So. 2d 778 (Fla. 1st DCA 1981) ; Balino v.

Department of Health and Rehabilitative Services , 348 So. 2d

349 (Fla. 1st DCA 1977).

65. A real estate licensee is charged with knowledge of

Chapter 475, Florida Statutes. Wallen v. Florida Department of

Professional Regulation, Division of Real Estate , 568 So. 2d 975

(Fla. 3d DCA 1990).

66. Section 475.624, Florida Statutes, states in pertinent

part:

The Board may deny an application for

registration, licensure, or certification;

may investigate the actions of any appraiser

registered, licensed, or certified under

this part; may reprimand or impose an

administrative fine not to exceed $5,000 for

each count or separate offense against any

such appraiser; and may revoke or suspend,

for a period not to exceed 10 years, the

registration, license, or certification or

any such appraiser, or place any such

appraiser on probation if it finds that the

registrant, licensee, or certificate-holder:

* * *

(2 ) Has been guilty of . . . culpable

negligence or breach of trust in a business

transaction . . . .

* * *

(14 ) Has violated any standard for the

development or communication of a real

estate appraisal or other provision of the

Uniform Standards of Professional Appraisal

Practice.

* * *

(15 ) Has failed or refused to exercise

reasonable diligence in developing an

appraisal or preparing an appraisal report.

67. Section 475.628, Florida Statutes, states as follows:

Each appraiser registered, licensed, or

certified under this section shall comply

with the Uniform Standards of Professional

Appraisal Practice. Statements on appraisal

standards which may be issued for the

purpose of clarification, interpretation,

explanation, or elaboration through the

Appraisal Foundation shall also be binding

on any appraiser registered, licensed, or

certified under this section.

68. The Preamble to the 1998 USPAP states as follows in

pertinent part:

It is essential that a professional

appraiser arrive at and communicate his or

her analyses, opinions, and advice in a

manner that will be meaningful to the client

and will not be misleading in the

marketplace. These Uniform Standards of

Professional Appraisal Practice reflect the

current standards of the appraisal

profession.

* * *

These standards deal with the procedures to

be followed in performing an appraisal,

review or consulting service and the manner

in which an appraisal, review or consulting

service is communicated. . . .

69. The 1998 USPAP, states as follows in pertinent part:

STANDARD 1

In developing a real property appraisal, an

appraiser must be aware of, understand, and

correctly employ those recognized methods

and techniques that are necessary to produce

a credible appraisal.

* * *

Standards Rule 1-1

In developing a real property appraisal, an

appraiser must:

(a ) be aware of, understand, and correctly

employ those recognized methods and

techniques that are necessary to produce a

credible appraisal;

* * *

(b ) not commit a substantial error of

omission or commission that significantly

affects an appraisal;

* * *

(c ) not render appraisal services in a

careless or negligent manner, such as a

series of errors that considered

individually, may not significantly affect

the results of an appraisal, but which, when

considered in the aggregate, would be

misleading.

* * *

Standards Rule 1-4

In developing a real property appraisal , and

appraiser must observe the following

specific appraisal guidelines, when

applicable:

* * *

(h ) appraise proposed improvement only

after examining and having available for

future examination:

( i ) plans, specification, or other

documentation sufficient to identify the

scope and character of the proposed

improvements;

(ii ) evidence indicating the probable time

of completion of the proposed improvements;

and

(iii ) reasonably clear and appropriate

evidence supporting development costs,

anticipated earnings, occupancy projections,

and the anticipated competition at the time

of completion.

* * *

Standards Rule 1-5

In developing a real property appraisal, an

appraiser must:

* * *

(b ) consider and analyze any prior sales of

the property being appraised that occurred

within the following time periods:

( i ) one year for one-to four family

residential property . . .

STANDARD 2

In reporting the results of a real property

appraisal an appraiser must communicate each

analysis, opinion, and conclusion in a

manner that is not misleading.

* * *

Standards Rule 2-1

Each written or oral real property appraisal

report must:

(a ) clearly and accurately set forth the

appraisal in a manner that will not be

misleading;

* * *

(b ) contain sufficient information to

enable the person(s) who are expected to

receive or rely on the report to understand

it properly.

* * *

(c ) clearly and accurately disclose any

extraordinary assumption or limiting

condition that directly affects the

appraisal and indicate its impact on value.

Standards Rule 2-2

Each written real property appraisal report

must be prepared under one of the following

three options an prominently state which

option is used : Self -Contained Appraisal

Report, Summary Appraisal Report or

Restricted Appraisal Report.

* * *

(c ) The Restricted Appraisal Report must:

* * *

(iii ) state the purpose and intended use of

the appraisal;

* * *

(iv ) state and reference a definition of

the value to be estimated;

* * *

(vi ) describe the extent of the process of

collecting, confirming, and reporting data;

* * *

(vii ) state all assumptions and limiting

conditions that affect the analyses,

opinions, and conclusions;

* * *

(viii ) state the appraisal procedures

followed, state the value conclusion and

reference the existence of specific file

information in support of the conclusion;

* * *

(ix ) state the appraiser's opinion of the

highest and best use of the real estate,

when such an opinion is necessary and

appropriate;

* * *

(x ) state the exclusion of any of the usual

valuation approaches;

* * *

( xi ) contain a prominent use restriction

that limits reliance on the report to the

client and warn that the report cannot be

understood properly without additional

information in the workfile of the

appraiser, and clearly identify and explain

any permitted departures from the specified

guidelines of STANDARD 1;

* * *

( xii ) include a signed certification in

accordance with Standards 2-3.

70. Black's Law Dictionary (1979 5th Ed.) defines culpable

negligence as "[f ] ailure to exercise that degree of care

rendered appropriate by the particular circumstances, and which

a man of ordinary prudence in the same situation and with equal

experience would not have omitted." Respondent is guilty of

culpable negligence because she failed to comply with 1998 USPAP

when she prepared her report. She carelessly developed and

communicated an appraisal report that did not meet the

requirements of a restricted report. By failing to include the

required information in her report, Respondent produced a

misleading appraisal, breaching the trust that was created when

she accepted the assignment. Accordingly, Respondent is guilty

of violating Section 475.624(2), Florida Statutes.

71. These same actions clearly show that Respondent failed

to exercise reasonable diligence in preparing her report. For

example, Respondent failed to clearly and correctly identify the

type of report she prepared. She failed to document the basis

for her estimated value of the property with proposed

renovations. She failed to explain her departures from 1998

USPAP. She failed to include a history of the property's prior

sales and/or listing information even though this information

was available. She failed to sign her report. All of these

omissions, among others, show that Respondent is guilty of

violating Sections 475.624 (14) and 475.624(15), Florida

Statutes, and Standards 1-1(a), 1-1(b), and 1-5(b)( i) in 1998

USPAP.

72. Finally, Respondent violated Section 475.624(14),

Florida Statutes, and Standards 2-1(a), 2-1(b), and 2-2(c), 1998

USPAP in the following ways: (a) She failed to develop her

report in a manner that was not misleading; (b) Her report did

not contain sufficient information to enable Realnet USA to

understand it properly; (c) She included an inaccurate purpose

on the cover page of her report; (d) She did not reference a

definition of the value to be estimated; (e) She did not

describe her process of collecting and reporting data; (f) She

did not state all assumptions and limiting conditions; (g) She

did not reference the existence of specific file information in

support of her conclusion; (h) She did not give her opinion of

the property's highest and best use; ( i ) She did not explain why

she excluded the usual valuation approaches; (j) She did not

include a prominent use restriction that limited reliance on the

report to Realnet USA; and (k) She did not include a signed

certification or identify her state certification number.

73. Rule 61J1-8.002, Florida Administrative Code, sets

forth the applicable disciplinary guidelines absent aggravating

or mitigating circumstances. Under these guidelines and

pursuant to clear and convincing evidence, Respondent is subject

to a penalty of licensure suspension for as much as 90 days for

failing to place her state-certification designation and her

certification number on her report. She is subject to a penalty

ranging from a $1,000 fine to one year's suspension of licensure

for violation of Section 475.624(2), Florida Statutes. She is

subject to a penalty ranging from a five-year suspension to

revocation and a $1,000 fine for violating Sections 475.624(14)

and 475.624(15), Florida Statutes.

74. Rule 61J1-8.002(4), Florida Administrative Code, sets

forth the applicable mitigating and aggravating factors. Under

these guidelines, and pursuant to clear and convincing evidence,

Respondent's penalty should be mitigated because she has been a

state-certified residential appraiser since 1998, performing

hundreds of appraisals, with no prior disciplinary history.

Respondent's penalty should be aggravated because of the number

of counts in the Administrative Complaint.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is

RECOMMENDED:

That Petitioner enter a final order, suspending

Petitioner's certification for one year followed by one year of

probation in which Respondent shall be required to complete 30

hours of continuing education courses in addition to the courses

required to maintain licensure and imposing an administrative

fine in the amount of $2,000.

DONE AND ENTERED this 20th day of July, 2001, in

Tallahassee, Leon County, Florida.

___________________________________

SUZANNE F. HOOD

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

(850) 488- 9675 SUNCOM 278-9675

Fax Filing [phone]

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 20th day of July, 2001.

COPIES FURNISHED :

Steven W. Johnson, Esquire

Steven W. Johnson, P.A.

1801 East Colonial Drive

Suite 101

Orlando, Florida 32803

Sunia Y. Marsh, Esquire

Department of Business and

Professional Regulation

Division of Real Estate

400 West Robinson Street, Suite N-308A

Orlando, Florida 32801-1772

Herbert R. Fisher, Chairperson

Florida Real Estate Commission

Department of Business and

Professional Regulation

Post Office Box 1900

Orlando, Florida 32802-1900

Hardy L. Roberts, III, General Counsel

Department of Business and

Professional Regulation

Northwood Centre

1940 North Monroe Street

Tallahassee, Florida 32399-2202

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within

15 days from the date of this Recommended Order. Any exceptions

to this Recommended Order should be filed with the agency that

will issue the final order in this case.