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.
Recommended Order on Friday, July 20, 2001.
1STATE OF FLORIDA
4DIVISION OF ADMINISTRATIVE HEARINGS
8DEPARTMENT OF BUSINESS AND )
13PROFESSIONAL REGULATION, )
16FLORIDA REAL ESTATE APPRAISAL )
21BOARD, )
23)
24Petitioner, )
26)
27vs. ) Case No. 01- 0385PL
33)
34KATHY F. AUGUSTINE, )
38)
39Respondent. )
41)
42RECOMMENDED ORDER
44A formal hearing was conducted in this case on May 11,
552001, in Deland , Florida, before the Division of Administrative
64Hearings by its Administrative Law Judge, Suzanne F. Hood.
73APPEARANCES
74For Pe titioner : Sunia Y. Marsh, Esquire
82Department of Business and
86Professional Regulation
88Division of Real Estate
92400 West Robinson Street, Suite N-308A
98Orlando, Florida 32801-1772
101For Respondent : Steven W. Johnson, Esquire
108Steven W. Johnson, P.A.
1121801 East Colonial Drive, Suite 101
118Orlando, Florida 32803
121STATEMENT OF THE ISSUES
125The issues are whether Respondent violated Sections
132475.624(2), 475.624(14), and 475.624(15), Florida Statutes, and
139if so, what penalty should be imposed.
146PRELIMINARY STATEMENT
148On March 6, 2001, Petitioner Department of Business and
157Professional Regulation, Division of Real Estate (Petitioner)
164filed an Administrative Complaint against Respondent Kathy F.
172Augustine (Respondent). Said complaint alleged as follows:
179(a) in Count I, that Respondent was guilty of culpable
189negligence or breach of trust in a business transaction in
199violation of Section 475.624(2), Florida Statutes; (b) in Count
208II, that Respondent was guilty of having failed to exercise
218reasonable diligence in developing an appraisal report in
226violation of Section 475.624(15), Florida Statutes; and (c) in
235Counts III and IV, that Respondent had violated Section
244475.624(14), Florida Statutes, by violating certain standards
251for the development or communication of a real estate appraisal
261or other provisions of the 1998 Uniform Standards of
270Professional Appraisal Practice ( USPAP ).
276On or about March 22, 2000, Respondent filed an Election of
287Rights form with Petitioner requesting an administrative hearing
295to contest the allegations in the Administrative Complaint. On
304April 14, 2000, Respondent filed an Answer to Administrative
313Complaint and Request for a Formal Hearing. Petitioner referred
322this case to the Division of Administrative Hearings on
331January 29, 2001.
334On January 6, 2001, Administrative Law Judge Charles C.
343Adams issued a Notice of Hearing, scheduling the hearing for
353April 10, 2001, together with an Order of Pre-hearing
362Instructions.
363On March 30, 2001, Petitioner filed an unopposed Motion to
373Take Deposition by Telephone and Motion to Use Deposition as
383Evidence at Formal Hearing. An Order dated April 2, 2001,
393granted this motion.
396On March 30, 2001, Petitioner filed an unopposed Motion to
406Continue. Judge Adams issued an Order Granting Continuance and
415Re-scheduling Hearing on April 3, 2001. Said order rescheduled
424the hearing for May 11, 2001.
430On April 23, 2001, Petitioner filed an unopposed Motion for
440Telephonic Witness Testimony. Judge Adams issued an Order
448Granting Telephonic Witness Testimony on April 26, 2001.
456The parties filed a Joint Pre-hearing Stipulation on May 4,
4662001.
467On May 10, 2001, the Division of Administrative Hearings
476transferred this case to Administrative Law Judge Suzanne F.
485Hood.
486During the hearing, Petitioner presented the testimony of
494four witnesses and offered nine exhibits (P1-P6 and P8-P10) ,
503which were accepted into evidence. Respondent testified on her
512own behalf and presented the testimony of one additional
521witness. Respondent's Exhibits R1 and R2 were accepted into
530evidence.
531During the hearing, the parties stipulated that the 1998
540USPAP should be officially recognized. They also agreed that
549Petitioner could file a copy of that publication as a
559post-hearing submission. On May 18, 2001, Petitioner filed a
568copy of the 1998 USPAP publication.
574A copy of the Transcript was filed on June 7, 2001.
585Respondent filed a Proposed Recommended Order on June 20, 2001.
595Petitioner filed a Proposed Recommended Order on June 22, 2001.
605FINDINGS OF FACT
6081. Petitioner is the agency charged with the duty of
618licensing and regulating real estate appraisers in the State of
628Florida.
6292. Respondent is and was at all times material here a
640state-certified residential real estate appraiser. In January
6471998, Petitioner issued Respondent residential real estate
654appraiser certificate number RD-0002524, with a business
661location of 2607 South Woodlawn Boulevard, No. 271, Deland,
670Florida, 32720.
6723. On or about March 5, 1998, Deborah Jeane Palfrey, as
683the buyer, and United Capital of Central Florida, Inc. (UCCF),
693as the seller, entered into a contract for sale and purchase of
705residential property ("the property") located at 236 Steward
715Terrace, Deltona, Florida. The contract lists the purchase
723price of the property as $54,500.
7304. Testimony developed at hearing indicates that UCCF did
739not own the property in fee simple. Instead, UCCF had an
750assignable contract to purchase the property. UCCF eventually
758assigned this contract to Ms. Palfrey.
7645. In March 1998, John E. Parrot owned both UCCF and
775Realnet USA. Both companies were located at the same address in
786Orlando, Florida. Both companies were involved to some extent
795in the real estate investment business. Competent evidence
803indicates that Realnet USA was a mortgage broker.
8116. Michael Mullvain was vice-president of UCCF and, as
820such, had signature authority for that company. Mr. Mullvain,
829a licensed real estate broker, also was the general manager of
840Realnet USA.
8427. On or about March 5, 1998, Mr. Mullvain and/or his
853assistant at Realnet USA, Tammie Wright, faxed a request for an
864appraisal of the property to Certified Appraisal Service ( CAS),
874which was located in Winter Park, Florida. The appraisal
883request was made on behalf of USCCF and directed to the
894attention of Cecil and Teresa Wright.
9008. UCCF and Realnet USA were frequent clients of CAS.
910Realnet USA had requested CAS to provide as many as 200 similar
922appraisals in the past.
9269. The appraisal request for the property stated that the
936projected sale price was $79,000. The request contained the
946following comments: "House to be brought up to FHA
955specifications with central A/C, new kitchen, and baths." The
964request also included the following statement: "Cecil : Paul
973said you have already done some research on the property for
984him. Please go ahead with drive-by appraisal as usual."
99310. In requesting a drive-by appraisal, Mr. Mullvain
1001intended for the appraiser to take note of needed repairs. He
1012wanted an estimate of what the property would be worth based on
1024the repairs being requested.
102811. At the time that the appraisal request was m ade ,
1039Mr. Mullvain knew that the property was distressed. His purpose
1049in requesting the appraisal was to determine what the property
1059would be worth if it was brought up to minimum Federal Housing
1071Administration (FHA) standards. These standards require that
1078all surface areas be serviceable. They also require anything
1087that functions to function properly. FHA specifications take
1095into consideration paint, carpet, kitchen, central air
1102conditioning, windows, etc. In other words, the house must be
1112habitable to pass an FHA appraisal inspection.
111912. Mr. Mullvain understood that he was ordering a
1128proposed appraisal based on a comparable market analysis of the
1138property's future value after repairs. He did not expect an
1148appraisal based on a cost approach and an income approach, as
1159well as a sales comparison approach.
116513. When Mr. Mullvain ordered the appraisal, he did not
1175intend for it to be used by anyone other than UCCF. However,
1187Mr. Mullvain testified that a salesperson would have given the
1197appraisal to potential buyers upon request or in a package to
1208provide additional information about the property.
121414. According to its normal business practice, Realnet USA
1223prepared a rehabilitation summary for the property, showing the
1232expected cost of repair. This document listed the following
1241repair items and costs: (a) landscape, $100; (b) roof, $0.00;
1251(c) exterior, $600; windows/doors, $100; (d) kitchen, $200;
1259(e) plumbing-bath, $200; (f) paint & ceilings, $650; (g) carpet,
1269$200; (h) subcontractors, $500; ( i ) central A/C, $100;
1279(j) termite, $100; (k) appliances, $250; and (l) other, $0.00.
1289The total expected repair cost was $3,000. Realnet USA kept
1300this rehabilitation summary in its file for the property. No
1310one provided a copy of the document to Respondent.
131915. Respondent occasionally worked for CAS as an
1327independent contractor. Cecil Wright would call Respondent and
1335ask her to prepare appraisals for Realnet USA. Respondent
1344understood that all appraisal reports for Realnet USA should
1353produce a proposed estimate of value based on the assumption
1363that improvements were to be "better than new" when repairs and
1374renovations were complete. Respondent prepared these reports on
1382forms specified by Mr. Wright and sent them to him without
1393signing her name under her typed signature and without
1402identifying her state-certified residential appraiser number.
140816. In March 1998, Mr. Wright requested Respondent to
1417prepare an appraisal report on the property for Realnet USA. He
1428asked her to use a Federal Home Loan Mortgage Corporation
1438(Freddie Mac) form contained in his computer software.
1446Respondent understood that she would be using the forms to
1456prepare a "restricted appraisal," showing the estimated market
1464value of the property as it would exist after improvements were
1475made to bring the house up to FHA specifications, including
1485central air conditioning, a new kitchen, and new baths.
1494Respondent also understood that the appraisal was intended only
1503for Realnet USA's use.
150717. After accepting the assignment, Resp ondent went to the
1517property. She observed the neighborhood and the exterior and
1526interior of the house. She took pictures of the property.
153618. As to the exterior of the house, Respondent observed
1546wood damage. She concluded that the damage was probably the
1556result of termites or some other kind of pest infestation.
1566There were little holes in the back of the house.
157619. As to the interior of the house, Respondent noted that
1587the kitchen needed new cabinets and appliances. One of two
1597baths needed repairs because the toilet shared plumbing with the
1607kitchen refrigerator's icemaker, which was located on the other
1616side of the wall. The other bathroom had a brick shower stall.
1628Respondent saw that someone had renovated a one-car garage,
1637changing it into living space, but leaving the supporting roof
1647beams exposed.
164920. After visiting the property, Respondent performed the
1657necessary research to complete her assignment. This research
1665included performing a computer search of the local multiple
1674listing service and public records to find comparable
1682properties. Respondent did not make and file copies of
1691documents that supported any of her research results. She did
1701take pictures of the properties that she chose as comparable.
171121. On March 9, 1998, Respondent produced the report
1720described below. The computer-generated cover page identifies
1727Realnet USA as the entity requesting the appraisal and provides
1737a file number. The following is the only other information on
1748the cover page:
1751In accordance with your request, I have
1758personally made an exterior inspection from
1764the street in front of the real property at:
1773235 Steward Terrace
1776Deltona, Florida 32738
1779The purpose of this report is to estimate
1787the market value of the subject property
1794observed. In my opinion, the estimated
1800market value of the property as of March 7,
18091998, is:
1811$79,000
1813Seventy-Nine Thousand
1815The attached report contains the
1820description, analysis, and supportive data
1825for the conclusions, final estimate of
1831value, descriptive photographs, limiting
1835conditions and appropriate certifications.
183922. Next, Respondent filed in the two-page Freddie Mac
1848form. The form states as follows at the top: "This form may be
1861used if the second mortgage will not exceed $15,000 and value is
1874based on 'as is' condition."
187923. On the form, Respondent typed in UCCF as the borrower.
1890She indicated that the 1,556 square-foot house had six rooms,
1901including three bedrooms, two baths, a family room, and no
1911garage/carport. She noted that the house had central air
1920conditioning.
192124. In the Field Report section of the form, Respondent
1931provided information regarding the neighborhood, adding the
1938following comments: "The subject is located in well-established
1946neighborhood conveniently located to schools, shopping,
1952employment, places of worship, and major arteries. There are no
1962apparent adverse factors which would affect the subject's
1970marketability."
197125. Respondent also typed information about the property,
1979indicating that it was a detached, rambler-style, building with
1988frame/siding exterior walls and a composite shingle roof
1996material. In the section for favorable or unfavorable comments
2005including any deferred maintenance, Respondent stated as
2012follows: "When renovated to meet FHA/HUD standards, the subject
2021will be a well built dwelling that projects good eye appeal.
2032Functional utility will be average. The subject will meet
2041expectations of purchases in this price range."
204826. In a section of the form labeled "Market Comparable
2058Analysis Prior to Improvement," Respondent used the data she had
2068collected from the local multiple listing service and public
2077records to describe four pieces of property that she considered
2087comparable. The four houses that Respondent listed as
2095comparable were located one to fifteen miles from the subject
2105property. Respondent listed the sale price of each house all of
2116which sold between September 1997 and December 1997. Comparable
2125one through four sold for $79,000; $77,700; $85,700; and
2137$77,200, respectively.
214027. Respondent included the following general comments
2147about her sales comparable approach: "Sale 3 is located more
2157than one mile from the subject but was included for support
2168purposes to the report. Depreciation is based on the subject
2178being renovated and having an effective life of 3 years.
2188Depreciation is calculated using 1% per year of effective age."
219828. Under the general comments in very fine print, the
2208form states as follows:
2212The information shown in this report is
2219derived from an inspection of the
2225neighborhood and exterior inspection of the
2231subject property and market comparisons.
2236The estimated market value is based upon
2243this information and the knowledge of the
2250undersigned. This report is not to be
2257construed as an appraisal report.
226229. Respondent filled in the blank for the estimated value
2272of the subject property as $79,000 as of March 7, 1998. She
2285typed in her name as the person completing the report without
2296signing her name under her typed signature and without
2305identifying her state-certified residential appraiser number.
231130. Respondent attached the following to the report before
2320she sent it to Cecil Wright at CAS : (a) subject property photo
2333addendum containing three pictures that Respondent took of the
2342property; (b) comparable property photo addendum containing
2349pictures that Respondent took of the four comparable houses
2358described in the report; (c) sketch/area table addendum of the
2368subject property that Respondent prepared.
237331. Respondent testified that she also attached some
2381certification pages to her report. However, the record contains
2390no such documents. Respondent expected Mr. Wright to complete
2399the report and sign his name as her supervising/review
2408appraiser. Respondent did not keep a copy of the report she
2419sent to Mr. Wright.
242332. The record contains two copies of Respondent's report,
2432the first of which was eventually sent to Realnet USA. The
2443first report contains the following alterations from the work
2452personally prepared by Respondent: (a) An unidentified
2459individual added Respondent's alleged hand-written initials
2465under her typed name at the end of the Freddie Mac form; and
2478(b) An unidentified individual added the alleged signature of
2487Cecil Wright and his alleged state-certified residential
2494appraiser number at the end of the Freddie Mac form. The first
2506copy of the report includes only the cover page and the Freddie
2518Mac form described above that Respondent prepared. It does not
2528include the pictures or sketch prepared by Respondent or any
2538other addendum.
254033. Respondent copied the second copy of the report from
2550CAS's files after the initiation of Petitioner's investigation
2558in this case. The second copy of the report includes the
2569pictures and sketch prepared by Respondent but does not contain
2579hand-written initials under Respondent's typed name or
2586Mr. Wright's alleged signature and appraiser number at the end
2596of the Freddie Mac form. Instead, it contains the following
2606additions: (a) three maps prepared by an unidentified
2614individual showing the location of the subject property and the
2624four comparable properties; (b) a CAS certification page,
2632attached by an unidentified individual; and (c) a page setting
2642forth a certification and statement of limiting conditions
2650together with contingent and limiting conditions, attached by an
2659unidentified individual.
266134. The first certification page, attached to the second
2670copy of the report, states as follows in relevant part:
2680CERTIFIED APPRAISAL SERVICE
2683CERTIFICATION
2684* * *
2687The appraiser has inspected all improvement
2693on this property, but does not warrant the
2701condition of the roof, floors, appliances,
2707plumbing, electrical, heating and air
2712conditioning. Only a visual inspection has
2718been made and it is assumed that all are in
2728serviceable condition for the purpose of
2734this appraisal. Unless noted, it is assumed
2741the subject property is free from termite
2748infestation.
2749* * *
2752The value estimate is -as is- unless
2759otherwise stated.
2761Certification of Appraiser/Review Appraiser
2765(If applicable)
2767As of the date of this report, Cecil Wright,
2776SRA has completed the requirement of the
2783continuing education program of the
2788Appraisal Institute. Cecil Wright is a
2794State-Certified Residential Appraiser- No.RD
27980000219.
2799Additional Certification of the Appraisal
2804Institute
2805The appraisal analysis and opinion were
2811developed and this appraisal report has been
2818prepared in conformity with the Uniform
2824Standards of Professional Appraisal
2828Practice, as promulgated by the Appraisal
2834Standards Board of the Apraisal [sic]
2840Foundation, and the requirements of the code
2847of Professional Ethics and Standards of
2853Professional Appraisal Practice of the
2858Appraisal Institute.
2860* * *
2863Definition of Client
2866Neither all nor any part of the contents of
2875this report shall be conveyed to any person
2883or entity, other than the appraiser's or
2890firm's client (the client is defined as the
2898person or firm ordering the appraisal from
2905the appraiser), through advertising,
2909solicitation materials, public relations,
2913news, sales, or other media without the
2920written consent or approval of the authors,
2927particularly as to valuation
2931conclusions. . . .
2935Termite information
2937The appraiser makes a cursory inspection of
2944the exterior wood on the dwelling for the
2952purpose of determining whether there is wood
2959rot, possible termite damage or any other
2966wood related problems. The appraiser is not
2973qualified to determine if any damage is
2980caused by termites as this is beyond our
2988expertise. Should we find any rotted wood
2995damage that requires attention it will be
3002mentioned in the appraisal report. . . .
301035. The last certification page attached to the second
3019copy of the report, states as follows in relevant part:
3029CERTIFICATION AND STATEMENT
3032OF LIMITING CONDITIONS
3035Certification: The drive-by inspector
3039certifies and agrees that:
3043* * *
30463. The drive-by inspector has inspected the
3053exterior of the property only and that
3060inspection may be limited to what can be
3068seen from the street. To the best of the
3077drive-by inspector's knowledge and belief,
3082all statements and information in this
3088report are true and correct and that the
3096drive-by inspector has not knowingly
3101withheld any significant information. It is
3107assumed that the interior is in good
3114condition but it must be noted that a more
3123complete exterior inspection and/or an
3128interior inspection could produce a
3133substantial change in value from that value
3140indicated in this report.
31444. All contingent and limiting conditions
3150are contained herein (imposed by the terms
3157of the assignment or by the undersigned
3164affecting the analyses opinion, and
3169conclusions contained in this report).
31745. All conclusions and opinions concerning
3180the real estate that are set forth in the
3189report were prepared by the drive-by
3195inspector whose signature appears on the
3201report, unless indicated as 'reviewer.' No
3207change of any item in the report shall be
3216made by anyone other than the appraiser or
3224the reviewer whose names appear on the
3231report, and the appraiser, the reviewer, or
3238their firm shall have no responsibility for
3245any such unauthorized change.
3249CONTINGENT AND LIMITING CONDITIONS
3253The certification of the drive-by inspector
3259is subject to the following conditions in
3266addition to any other specific and limiting
3273conditions as are set forth by the drive-by
3281inspector in the report:
3285* * *
32885. The inspector assumes that there are no
3296hidden or unapparent conditions of the
3302property, subsoil, or structures, which
3307would render it more or less valuable. The
3315inspector assumes no responsibility for such
3321conditions, or for engineering which might
3327be required to discover such factors.
3333* * *
33367. Disclosure of the contents of the report
3344is governed by the Bylaws and Regulations of
3352the professional appraisal organization with
3357which the inspector is affiliated.
33628. Neither all, not any part of the content
3371of the report, or copy thereof (including
3378conclusions as to the property value . . .)
3387shall be used for any purposes by anyone but
3396the client specified in the report, the
3403mortgagee or its successors and
3408assigns . . . without the previous written
3416consent of the inspector, nor shall it be
3424conveyed by anyone to the public . . .
3433without the written consent and approval of
3440the inspector.
34429. On all reports, subject to satisfactory
3449completion, repairs, or alteration, the
3454report and value conclusion are contingent
3460upon completion of the improvements in a
3467professional workmanlike manner.
3470At the end of this last certification page, an unidentified
3480individual signed Respondent's alleged initials as the drive-by
3488inspector. Mr. Wright's alleged signature and appraiser number
3496also appears at the bottom of the page.
350436. Respondent's three-page appraisal report did not
3511include the following or state why these factors were not
3521considered: (a) a label or title indicating that the report was
3532restricted in scope as opposed to a conventional summary report;
3542(b) an accurate statement regarding the report's intended use or
3552purpose; (c) a statement regarding the property's highest and
3561best use; (d) a cost approach analysis including an estimate of
3572site value and an estimate of the value of the improvement,
3583together with comments describing the sources used to compute
3592the cost estimate, site value, and square footage; (e) an income
3603approach analysis; (f) a history of prior sales or listing
3613information for the property even though Respondent knew it had
3623been on the market for 18 months for $61,500 and had not sold
3637for that price; (g) an addenda explaining relevant information
3646and including any departures from USPAP not otherwise included
3655in the report; (h) a standard language explaining the scope of
3666appraisal and the appraisal process; ( i ) a standard language of
3678additional comments, explanations and limiting conditions;
3684(j) a statement of contingent and limiting conditions and
3693appraiser's certification, including the supervisory appraiser's
3699certification; and (k) the signature of appraiser and/or
3707supervisory appraiser, together with their respective state
3714certification numbers.
371637. On or about August 12, 1998, William Wynn, inspected
3726the subject property. He prepared a Uniform Residential
3734Appraisal Report on August 17, 1998. Mr. Wynn's report lists
3744Deborah Palfrey as current owner and borrower. It lists
3753Pinnacle Financial Corp. as lender/client.
375838. Mr. Wynn's report describes the neighborhood of the
3767property. The report includes comments describing market
3774conditions and factors that affect the marketability of the
3783properties in the neighborhood.
378739. Mr. Wynn's report described the property's site,
3795stating that its highest and best use was its present use. It
3807also includes a description of improvements on the property,
3816indicating that the interior floors, walls, trims/finish, bath
3824floor, bath wainscot, and doors were in good condition.
3833Mr. Wynn added the following comments about the condition of the
3844improvement: "The improvements are of average quality
3851construction maintained in good condition. No repairs required
3859at the time of inspection. The garage has been converted into
3870living area."
387240. Mr. Wynn's report provides an estimate of the
3881property's value using the cost approach. Regarding the cost
3890approach, Mr. Wynn made the following comments:
3897See attached sketch. Cost calculations are
3903based on Marshall and Swift Guidelines and
3910information for local contractors. Physical
3915depreciation is based on observed conditions
3921and estimated by the age/life method. Land
3928[is] valued by abstraction, sales
3933comparison, and typical ratio of land to
3940improvement for the area. The estimated
3946remaining economic life is 49 years.
395241. Mr. Wynn's report provides an estimate of the
3961property's value using a sales comparison analysis. In making
3970this analysis, Mr. Wynn compared the subject property to three
3980comparables. Regarding the sales comparison approach, Mr. Wynn
3988made the following relevant comments:
3993The subject and the three comparable sales
4000are located in Deltona Lakes. See the
4007addendum for additional comments explaining
4012the adjustments for the differences in gross
4019living area and explanation for sales dated
4026over six months. The three closed sales
4033used in the sales comparison approach
4039provide a reliable range of value for the
4047appraiser property. *See Addendum.
4051* * *
4054The subject was listed at $57,500, in the
4063first part of 1998. The subject sold for
4071$50,000 March 1998.
407542. Mr. Wynn's report states that the appraisal was made
"4085as is" and not subject to repairs. As part of the final
4097reconciliation, the report states as follows:
4103Emphasis is on the sales comparison approach
4110because it reflects current market trends
4116for similar properties. Typically homes in
4122the subject's neighborhood are not purchased
4128for income; therefore, the income approach
4134was not applied. Cost approach is not
4141required.
414243. Mr. Wynn concluded in his report that the property's
4152estimated value was $60,000 as of August 12, 1998. He then
4164signed his name and identified his state certification number.
417344. Mr. Wynn attached a General Text Addendum to his
4183report, which states as follows:
4188The comparables are closed sales in the
4195subject's market area. All three sales are
4202considered to be reasonable substitutes for
4208the appraised property. Sale #2 and # 3,
4216although dated over six months is [sic]
4223considered a reliable value indicator due to
4230stable market conditions for the time period
4237covered. The subject has a family room 19.9
4245x 19.8 that is a garage converted to heated
4254and air-conditioned living area. The
4259adjustments for the differences in living
4265area are made at a lower than typical amount
4274($20 per sq. foot) because the ceiling in
4282the family room has exposed roof trusses
4289(painted). There is no finished drywall
4295ceiling in the family room to cover the roof
4304trusses.
4305The appraiser was not able to bracket the
4313subject in gross living area with a similar
4321comparable sale.
432345. Mr. Wynn attached the following additional information
4331to his report: (a) two maps showing the location of the subject
4343property and the comparables; (b) three pictures of the subject
4353property and pictures of the comparables; (c) a sketch/area
4362table addendum; (d) a copy of his curriculum vitae; (e) a
4373definition of market value; (f) a statement of contingent and
4383limiting conditions; (g) an appraiser's certification; and
4390(h) a supervisory appraiser's certification. Mr. Wynn then
4398signed his name to the report and identified his state
4408certification number. Mr. Wynn did not have a supervisory
4417appraiser in making his report.
442246. In September 1998, Peter T. Woods, a state-certified
4431general appraiser, requested his employee, Walter A. Drumb, a
4440state-certified residential appraiser, to perform an appraisal
4447of the subject property. Subsequently, Mr. Drumb prepared a
4456Summary Appraisal Report using the form for a Uniform
4465Residential Appraisal Report. The report lists Jean Palfrey as
4474the borrower and Pinnacle Financial Corp. as the lender/client.
448347. Mr. Drumb's report states that "[t ]he intended use of
4494the appraisal is to aid in mortgage loan negotiations."
4503Mr. Drumb's report also comments that "[t ]he dwelling appears to
4514be of average quality construction and in good physical
4523condition with no functional inadequacies noted."
452948. In making his report, Mr. Drumb used two approaches:
4539(a) the cost approach; and (b) the sales comparison analysis.
4549The report states that the income approach was not used "due to
4561a lack of reliable market rental data in the subject
4571neighborhood."
457249. Regarding the cost approach, Mr. Drumb included the
"4581as is" value of site improvements and made the following
4591comments: "No functional or external obsolescence noted. Cost
4599approach was prepared using Marshall and Swift Residential Cost
4608Handbook and local cost estimates. See attached addendum for
4617measurements. Estimated remaining economic life : 52 years."
462550. Regarding the sales comparison analysis, Mr. Drumb
4633made the following comments: "The subject conveyed in March
46421998 for $50,000. The public records reveal no prior sales of
4654the comparable sales within the past year."
466151. Mr. Drumb concluded that the property had an estimated
4671market value of $63,000 as of September 11, 1998. His report
4683indicates that the appraisal was made "as is" and not subject to
4695repairs and alterations.
469852. Mr. Drumb signed his report and identified his
4707state-certified residential appraiser number. Mr. Woods also
4714signed the report as the supervising appraiser and identified
4723his state-certified general appraiser number.
472853. Mr. Drumb included an addendum to his report that
4738explained his choice of comparables. He included a floor plan,
4748pictures of the subject property and the properties used as
4758comparables, a map showing the locations of the subject property
4768and comparables, and a subdivision plat. Mr. Drumb included a
4778page in his report that explained the scope of the appraisal and
4790the appraisal process in detail.
479554. Finally, Mr. Drumb attached three pages to his report,
4805setting forth additional comments, explanations, and limiting
4812conditions. Included in these comments was a statement of
4821limiting conditions and appraiser's certification. Mr. Drumb
4828and his supervisory appraiser, Mr. Woods, signed the final
4837certification page and identified their state-certified
4843appraiser numbers.
484555. Petitioner's investigator, Robert Baird, has personal
4852knowledge of the property as he resided on the same street as
4864the property at all times material here. In late 1997 or early
48761998, prior to investigating the complaint, Mr. Baird viewed the
4886property and thought that it was in a state of disrepair.
489756. Mr. Baird inspected the property for second time on or
4908about May 17, 1999, as part of his investigation. At that time,
4920the property appeared to have been renovated as compared to its
4931condition in early 1998.
493557. In the course of the investigation, Mr. Baird
4944interviewed Respondent. During the interview, Respondent stated
4951that her estimated value of the property included "with
4960improvements." Respondent later admitted that she "could
4967understand how individuals could misunderstand her estimate of
4975value if they were not aware that it was based on proposed
4987renovations." In either case, Respondent was unable to furnish
4996Mr. Baird with documentation to support her estimated value of
5006the property with or without improvements.
501258. Respondent admitted in the hearing that the cost of
5022renovating the house could have been more than the renovated
5032house would have been worth. She admitted that, based on her
5043personal experience, the proposed renovations could cost in
5051excess of $20,000, excluding any termite or wood rot.
506159. Respondent knew Realnet USA wanted the appraisal to
5070help it "determine whether the house was worth it to purchase or
5082not." If Respondent's estimated value of the property was
5091$79,000 as it existed on March 7, 1998, and as stated on the
5105cover page of her report, then her estimated value was
5115substantially higher than the property's "as is" market value.
5124If Respondent's estimated value of the property was $79,000,
5134taking into consideration the appraisal request for an estimate
5143of the market value after proposed renovations to meet minimum
5153FHA standards, then Respondent failed to place a stated value on
5164the estimated cost for each proposed renovation.
517160. During the hearing, Respondent admitted that USPAP
5179required her to prepare an addendum to include necessary
5188information such as prior sales history when the restricted form
5198she was using did not include that information. She
5207acknowledged that she was required to comply with 1998 USPAP
5217even if she was unfamiliar the publication's contents and
5226despite her client's request for something less than a
5235conventional appraisal.
523761. Competent evidence indicates that appraisal reports by
5245state-certified residential appraisers are seldom, if ever, free
5253of errors. Certain information is always subjective as it is
5263based upon the appraisers' personal experience and expertise.
5271Additionally, there appears to be some confusion in the
5280profession as to the precise information that a "restricted
5289appraisal" must include. Nevertheless, USPAP requires the all
5297appraisal reports prepared by state-certified residential
5303appraisers to contain certain basic information or an
5311explanation as to any departures from those requirements.
531962. At times, a supervisory/review appraiser will make
5327changes to an appraiser's report. Knowing that a supervisory
5336appraiser has this prerogative, does not mean that an appraiser
5346is allowed to submit an incomplete appraisal report with the
5356expectation that the review appraiser will complete the report
5365and sign the appraiser's name. Clear and convincing evidence in
5375this case indicates that the three-page appraisal report
5383prepared by Respondent and submitted to Mr. Wright was
5392substantially deficient and resulted in Realnet USA's receipt of
5401an ambiguous, contradictory, and misleading appraisal based on
5409unverifiable data.
5411CONCLUSIONS OF LAW
541463. The Division of Administrative Hearings has
5421jurisdiction over the parties and the subject matter of this
5431proceeding. Sections 120.569 and 120.57(1), Florida Statutes.
543864. Petitioner has the burden of proving by clear and
5448convincing evidence that Respondent committed violations of
5455Chapter 475, Florida Statutes. Ferris v. Turlington , 510 So. 2d
5465292 (Fla. 1987) ; Florida Department of Transportation v. J.W.C.
5474Company, Inc. , 396 So. 2d 778 (Fla. 1st DCA 1981) ; Balino v.
5486Department of Health and Rehabilitative Services , 348 So. 2d
5495349 (Fla. 1st DCA 1977).
550065. A real estate licensee is charged with knowledge of
5510Chapter 475, Florida Statutes. Wallen v. Florida Department of
5519Professional Regulation, Division of Real Estate , 568 So. 2d 975
5529(Fla. 3d DCA 1990).
553366. Section 475.624, Florida Statutes, states in pertinent
5541part:
5542The Board may deny an application for
5549registration, licensure, or certification;
5553may investigate the actions of any appraiser
5560registered, licensed, or certified under
5565this part; may reprimand or impose an
5572administrative fine not to exceed $5,000 for
5580each count or separate offense against any
5587such appraiser; and may revoke or suspend,
5594for a period not to exceed 10 years, the
5603registration, license, or certification or
5608any such appraiser, or place any such
5615appraiser on probation if it finds that the
5623registrant, licensee, or certificate-holder:
5627* * *
5630(2 ) Has been guilty of . . . culpable
5640negligence or breach of trust in a business
5648transaction . . . .
5653* * *
5656(14 ) Has violated any standard for the
5664development or communication of a real
5670estate appraisal or other provision of the
5677Uniform Standards of Professional Appraisal
5682Practice.
5683* * *
5686(15 ) Has failed or refused to exercise
5694reasonable diligence in developing an
5699appraisal or preparing an appraisal report.
570567. Section 475.628, Florida Statutes, states as follows:
5713Each appraiser registered, licensed, or
5718certified under this section shall comply
5724with the Uniform Standards of Professional
5730Appraisal Practice. Statements on appraisal
5735standards which may be issued for the
5742purpose of clarification, interpretation,
5746explanation, or elaboration through the
5751Appraisal Foundation shall also be binding
5757on any appraiser registered, licensed, or
5763certified under this section.
576768. The Preamble to the 1998 USPAP states as follows in
5778pertinent part:
5780It is essential that a professional
5786appraiser arrive at and communicate his or
5793her analyses, opinions, and advice in a
5800manner that will be meaningful to the client
5808and will not be misleading in the
5815marketplace. These Uniform Standards of
5820Professional Appraisal Practice reflect the
5825current standards of the appraisal
5830profession.
5831* * *
5834These standards deal with the procedures to
5841be followed in performing an appraisal,
5847review or consulting service and the manner
5854in which an appraisal, review or consulting
5861service is communicated. . . .
586769. The 1998 USPAP, states as follows in pertinent part:
5877STANDARD 1
5879In developing a real property appraisal, an
5886appraiser must be aware of, understand, and
5893correctly employ those recognized methods
5898and techniques that are necessary to produce
5905a credible appraisal.
5908* * *
5911Standards Rule 1-1
5914In developing a real property appraisal, an
5921appraiser must:
5923(a ) be aware of, understand, and correctly
5931employ those recognized methods and
5936techniques that are necessary to produce a
5943credible appraisal;
5945* * *
5948(b ) not commit a substantial error of
5956omission or commission that significantly
5961affects an appraisal;
5964* * *
5967(c ) not render appraisal services in a
5975careless or negligent manner, such as a
5982series of errors that considered
5987individually, may not significantly affect
5992the results of an appraisal, but which, when
6000considered in the aggregate, would be
6006misleading.
6007* * *
6010Standards Rule 1-4
6013In developing a real property appraisal , and
6020appraiser must observe the following
6025specific appraisal guidelines, when
6029applicable:
6030* * *
6033(h ) appraise proposed improvement only
6039after examining and having available for
6045future examination:
6047( i ) plans, specification, or other
6054documentation sufficient to identify the
6059scope and character of the proposed
6065improvements;
6066(ii ) evidence indicating the probable time
6073of completion of the proposed improvements;
6079and
6080(iii ) reasonably clear and appropriate
6086evidence supporting development costs,
6090anticipated earnings, occupancy projections,
6094and the anticipated competition at the time
6101of completion.
6103* * *
6106Standards Rule 1-5
6109In developing a real property appraisal, an
6116appraiser must:
6118* * *
6121(b ) consider and analyze any prior sales of
6130the property being appraised that occurred
6136within the following time periods:
6141( i ) one year for one-to four family
6150residential property . . .
6155STANDARD 2
6157In reporting the results of a real property
6165appraisal an appraiser must communicate each
6171analysis, opinion, and conclusion in a
6177manner that is not misleading.
6182* * *
6185Standards Rule 2-1
6188Each written or oral real property appraisal
6195report must:
6197(a ) clearly and accurately set forth the
6205appraisal in a manner that will not be
6213misleading;
6214* * *
6217(b ) contain sufficient information to
6223enable the person(s) who are expected to
6230receive or rely on the report to understand
6238it properly.
6240* * *
6243(c ) clearly and accurately disclose any
6250extraordinary assumption or limiting
6254condition that directly affects the
6259appraisal and indicate its impact on value.
6266Standards Rule 2-2
6269Each written real property appraisal report
6275must be prepared under one of the following
6283three options an prominently state which
6289option is used : Self -Contained Appraisal
6296Report, Summary Appraisal Report or
6301Restricted Appraisal Report.
6304* * *
6307(c ) The Restricted Appraisal Report must:
6314* * *
6317(iii ) state the purpose and intended use of
6326the appraisal;
6328* * *
6331(iv ) state and reference a definition of
6339the value to be estimated;
6344* * *
6347(vi ) describe the extent of the process of
6356collecting, confirming, and reporting data;
6361* * *
6364(vii ) state all assumptions and limiting
6371conditions that affect the analyses,
6376opinions, and conclusions;
6379* * *
6382(viii ) state the appraisal procedures
6388followed, state the value conclusion and
6394reference the existence of specific file
6400information in support of the conclusion;
6406* * *
6409(ix ) state the appraiser's opinion of the
6417highest and best use of the real estate,
6425when such an opinion is necessary and
6432appropriate;
6433* * *
6436(x ) state the exclusion of any of the usual
6446valuation approaches;
6448* * *
6451( xi ) contain a prominent use restriction
6459that limits reliance on the report to the
6467client and warn that the report cannot be
6475understood properly without additional
6479information in the workfile of the
6485appraiser, and clearly identify and explain
6491any permitted departures from the specified
6497guidelines of STANDARD 1;
6501* * *
6504( xii ) include a signed certification in
6512accordance with Standards 2-3.
651670. Black's Law Dictionary (1979 5th Ed.) defines culpable
6525negligence as "[f ] ailure to exercise that degree of care
6536rendered appropriate by the particular circumstances, and which
6544a man of ordinary prudence in the same situation and with equal
6556experience would not have omitted." Respondent is guilty of
6565culpable negligence because she failed to comply with 1998 USPAP
6575when she prepared her report. She carelessly developed and
6584communicated an appraisal report that did not meet the
6593requirements of a restricted report. By failing to include the
6603required information in her report, Respondent produced a
6611misleading appraisal, breaching the trust that was created when
6620she accepted the assignment. Accordingly, Respondent is guilty
6628of violating Section 475.624(2), Florida Statutes.
663471. These same actions clearly show that Respondent failed
6643to exercise reasonable diligence in preparing her report. For
6652example, Respondent failed to clearly and correctly identify the
6661type of report she prepared. She failed to document the basis
6672for her estimated value of the property with proposed
6681renovations. She failed to explain her departures from 1998
6690USPAP. She failed to include a history of the property's prior
6701sales and/or listing information even though this information
6709was available. She failed to sign her report. All of these
6720omissions, among others, show that Respondent is guilty of
6729violating Sections 475.624 (14) and 475.624(15), Florida
6736Statutes, and Standards 1-1(a), 1-1(b), and 1-5(b)( i) in 1998
6746USPAP.
674772. Finally, Respondent violated Section 475.624(14),
6753Florida Statutes, and Standards 2-1(a), 2-1(b), and 2-2(c), 1998
6762USPAP in the following ways: (a) She failed to develop her
6773report in a manner that was not misleading; (b) Her report did
6785not contain sufficient information to enable Realnet USA to
6794understand it properly; (c) She included an inaccurate purpose
6803on the cover page of her report; (d) She did not reference a
6816definition of the value to be estimated; (e) She did not
6827describe her process of collecting and reporting data; (f) She
6837did not state all assumptions and limiting conditions; (g) She
6847did not reference the existence of specific file information in
6857support of her conclusion; (h) She did not give her opinion of
6869the property's highest and best use; ( i ) She did not explain why
6883she excluded the usual valuation approaches; (j) She did not
6893include a prominent use restriction that limited reliance on the
6903report to Realnet USA; and (k) She did not include a signed
6915certification or identify her state certification number.
692273. Rule 61J1-8.002, Florida Administrative Code, sets
6929forth the applicable disciplinary guidelines absent aggravating
6936or mitigating circumstances. Under these guidelines and
6943pursuant to clear and convincing evidence, Respondent is subject
6952to a penalty of licensure suspension for as much as 90 days for
6965failing to place her state-certification designation and her
6973certification number on her report. She is subject to a penalty
6984ranging from a $1,000 fine to one year's suspension of licensure
6996for violation of Section 475.624(2), Florida Statutes. She is
7005subject to a penalty ranging from a five-year suspension to
7015revocation and a $1,000 fine for violating Sections 475.624(14)
7025and 475.624(15), Florida Statutes.
702974. Rule 61J1-8.002(4), Florida Administrative Code, sets
7036forth the applicable mitigating and aggravating factors. Under
7044these guidelines, and pursuant to clear and convincing evidence,
7053Respondent's penalty should be mitigated because she has been a
7063state-certified residential appraiser since 1998, performing
7069hundreds of appraisals, with no prior disciplinary history.
7077Respondent's penalty should be aggravated because of the number
7086of counts in the Administrative Complaint.
7092RECOMMENDATION
7093Based on the foregoing Findings of Fact and Conclusions of
7103Law, it is
7106RECOMMENDED:
7107That Petitioner enter a final order, suspending
7114Petitioner's certification for one year followed by one year of
7124probation in which Respondent shall be required to complete 30
7134hours of continuing education courses in addition to the courses
7144required to maintain licensure and imposing an administrative
7152fine in the amount of $2,000.
7159DONE AND ENTERED this 20th day of July, 2001, in
7169Tallahassee, Leon County, Florida.
7173___________________________________
7174SUZANNE F. HOOD
7177Administrative Law Judge
7180Division of Administrative Hearings
7184The DeSoto Building
71871230 Apalachee Parkway
7190Tallahassee, Florida 32399-3060
7193(850) 488- 9675 SUNCOM 278-9675
7198Fax Filing (850) 921-6847
7202www.doah.state.fl.us
7203Filed with the Clerk of the
7209Division of Administrative Hearings
7213this 20th day of July, 2001.
7219COPIES FURNISHED :
7222Steven W. Johnson, Esquire
7226Steven W. Johnson, P.A.
72301801 East Colonial Drive
7234Suite 101
7236Orlando, Florida 32803
7239Sunia Y. Marsh, Esquire
7243Department of Business and
7247Professional Regulation
7249Division of Real Estate
7253400 West Robinson Street, Suite N-308A
7259Orlando, Florida 32801-1772
7262Herbert R. Fisher, Chairperson
7266Florida Real Estate Commission
7270Department of Business and
7274Professional Regulation
7276Post Office Box 1900
7280Orlando, Florida 32802-1900
7283Hardy L. Roberts, III, General Counsel
7289Department of Business and
7293Professional Regulation
7295Northwood Centre
72971940 North Monroe Street
7301Tallahassee, Florida 32399-2202
7304NOTICE OF RIGHT TO SUBMIT EXCEPTIONS
7310All parties have the right to submit written exceptions within
732015 days from the date of this Recommended Order. Any exceptions
7331to this Recommended Order should be filed with the agency that
7342will issue the final order in this case.
![](/images/view_pdf.png)
- Date
- Proceedings
-
PDF:
- Date: 07/20/2001
- Proceedings: Recommended Order issued (hearing held May 11, 2001) CASE CLOSED.
-
PDF:
- Date: 07/20/2001
- Proceedings: Recommended Order cover letter identifying hearing record referred to the Agency sent out.
- Date: 06/07/2001
- Proceedings: Transcript (2 volumes) filed.
-
PDF:
- Date: 05/18/2001
- Proceedings: Uniform Standards of Professional Appraisal Practice Publication filed.
- Date: 05/11/2001
- Proceedings: CASE STATUS: Hearing Held; see case file for applicable time frames.
-
PDF:
- Date: 04/26/2001
- Proceedings: Amended Notice of Hearing issued. (hearing set for May 11, 2001; 10:00 a.m.; Deland, FL, amended as to location).
-
PDF:
- Date: 04/23/2001
- Proceedings: Motion for Telephonic Witness Testimony (filed by Petitioner via facsimile).
-
PDF:
- Date: 04/03/2001
- Proceedings: Order Granting Continuance and Re-scheduling Hearing issued (hearing set for May 11, 2001; 10:00 a.m.; Deland, FL).
-
PDF:
- Date: 04/02/2001
- Proceedings: Order issued (the deposition of Ms. Jeane Palfrey may be taken by telephone).
-
PDF:
- Date: 03/30/2001
- Proceedings: Motion to Take Deposition by Telephone and Motion to use Deposition as Evidence at Formal Hearing (filed by Petitioner via facsimile).
-
PDF:
- Date: 02/06/2001
- Proceedings: Notice of Hearing issued (hearing set for April 10, 2001; 10:00 a.m.; Deland, FL).
-
PDF:
- Date: 01/29/2001
- Proceedings: Respondent`s Answer to Administrative Complaint and Request for Formal Hearing filed.
- Date: 01/29/2001
- Proceedings: Respondents` Motion for Substitution of Counsel filed.
- Date: 01/29/2001
- Proceedings: Election of Rights filed.
Case Information
- Judge:
- SUZANNE F. HOOD
- Date Filed:
- 01/29/2001
- Date Assignment:
- 05/10/2001
- Last Docket Entry:
- 11/30/2001
- Location:
- Deland, Florida
- District:
- Northern
- Agency:
- ADOPTED IN TOTO
- Suffix:
- PL
Counsels
-
Steven W. Johnson, Esquire
Address of Record -
Sunia Y Marsh, Esquire
Address of Record