08-002722PL Department Of Business And Professional Regulation, Division Of Real Estate vs. Lee Ann Moody Status: Closed Recommended Order on Tuesday, January 27, 2009.

Summary: Petitioner alleged violations of statute addressing the discipline of real estate appraisers. Held: Respondents failed to adequately document adjustments made to their appraisal report.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF BUSINESS AND )

PROFESSIONAL REGULATION, )

DIVISION OF REAL ESTATE, )

)

Petitioner, )

)

vs. ) Case No. 08-2721PL

)

KATHLEEN GREEN, )

)

Respondent. )

_______________________________ )

DEPARTMENT OF BUSINESS AND )

PROFESSIONAL REGULATION, )

DIVISION OF REAL ESTATE, )

)

Petitioner, )

)

vs. ) Case No. 08-2722PL

)

LEE ANN MOODY, )

)

Respondent. )

)

RECOMMENDED ORDER

This cause came on for final hearing before Harry L.

Hooper, Administrative Law Judge with the Division of

Administrative Hearings, on November 5, 2008, in Pensacola,

Florida.

APPEARANCES

For Petitioner: Robert Minarcin, Esquire

Department of Business &

Professional Regulation

400 West Robinson Street, N801

Orlando, Florida 32801-1757

For Respondent: Thomas M. Brady, Esquire

3250 Navy Boulevard, Suite 204

Post Office Box 12584

Pensacola, Florida 32591-2584

STATEMENT OF THE ISSUE

The issue is whether either Respondent committed the

violations alleged in Counts I through VIII of their respective

Administrative Complaints.

PRELIMINARY STATEMENT

The Florida Department of Business and Professional

Regulation, Division of Real Estate (Division), filed

Administrative Complaints in the cases of Respondent Kathleen

Green (Ms. Green), a certified residential real estate

appraiser; and Respondent Lee Ann Moody (Ms. Moody), a

registered trainee appraiser, on March 4, 2008. Ms. Green and

Ms. Moody will also be referred to collectively as the

Respondents. The Administrative Complaints sought disciplinary

action by the Florida Real Estate Appraisal Board (Board).

The Administrative Complaints charged as follows: Count I,

violating Subsection 475.624(15), Florida Statutes, by failing

to exercise reasonable diligence in developing an appraisal

report; Count II, violating Subsection 475.624(4), Florida

Statutes, by failing to retain records for at least five years

of any contracts engaging the appraiser's services, appraisal

reports, and supporting data assembled and formulated by the

appraiser in preparing the appraisal report; Count III,

violating Subsection 475.624(2), Florida Statutes, by

misrepresentation, culpable negligence, or breach of trust in a

business transaction; Count IV, violating Subsection

475.624(14), Florida Statutes, by violating the Conduct Section

of the Ethics Rule, or other provision of the Uniform Standards

of Professional Appraisal Practice (2006) (USPAP); Count V,

violating Subsection 475.624(14), Florida Statutes, by violating

a standard for the development or communication of a real estate

appraisal, specifically the record keeping section of the Ethics

Rule or other provision of the USPAP; Count VI, violating

Subsection 475.624(14), Florida Statutes, by violating a

standard for the development or communication of a real estate

appraisal, specifically Standards Rule 1-1(c), or other

provision of the USPAP; Count VII, violating Subsection

475.624(14), Florida Statutes, by violating a standard for the

development or communication of a real estate appraisal,

specifically Standards Rule 2-1(a) and (b), or other provision

of the USPAP; Count VIII, violating Subsection 475.624(14),

Florida Statutes, by violating a standard for the development or

communication of a real estate appraisal, specifically Standards

Rule 2-2(b)(viii), or other provision of the USPAP.

Both Respondents served answers on April 29, 2008.

The matter was filed with the Division of Administrative

Hearings on June 9, 2008. The cases were consolidated on

June 25, 2008, and set for hearing on August 19 and 20, 2008.

Pursuant to Petitioner's motion, the hearing was set for

October 15 and 16, 2008, in Pensacola, Florida. Pursuant to a

Joint Motion to Continue, the hearing was scheduled for

November 5 and 6, 2008, and was heard in its entirety on

November 5, 2008.

At the hearing, Petitioner presented the testimony of Jack

Case, an investigator specialist for the Division; and Sylvia

Storm, an expert in real estate appraisal, and offered seven

exhibits that were accepted into evidence. Respondents

presented the testimony of Ms. Moody and Ms. Green. Victor

Harrison was qualified as an expert witness in the field of real

estate appraisal. His testimony was presented by Ms. Moody and

Ms. Green. Respondents offered 17 exhibits that were accepted

into evidence.

A Transcript was filed on December 1, 2008. Subsequently,

the Division filed an Amended Motion for Extension of Time for

filing proposed recommended orders. Counsel for Respondents

agreed. The Amended Motion for Extension of Time was granted,

and the deadline was set for December 23, 2008, as requested by

the Division. The Petitioner and Respondents timely filed their

Proposed Recommended Orders.

References to statutes are to Florida Statutes (2006)

unless otherwise noted.

FINDINGS OF FACT

1. The Florida Real Estate Appraisal Board is the state

agency charged with regulating real estate appraisers who are,

or want to become, licensed to render appraisal services in the

State of Florida.

2. At all times pertinent, Ms. Green was licensed as a

certified residential real estate appraiser. Ms. Green held

license number 3236 in accordance with Chapter 475, Part II,

Florida Statutes. Ms. Moody was licensed as a registered

trainee appraiser. Ms Moody held license number 16667 in

accordance with Chapter 475, Part II, Florida Statutes. In

October 2008, Ms. Moody received a license as a certified

residential appraiser, license number RD 7444.

3. On March 8, 2007, Ms. Moody signed an appraisal of real

property located at 11735 Chanticleer Drive, Lot 16, Block B

Grand Lagoon, in Pensacola, Florida. She signed as appraiser.

Ms. Green signed the report as supervisory appraiser. The

listed borrower was James W. Cobb, and the lender was Premier

Mortgage Capital. Respondents developed, signed, and

communicated this report.

4. Subsequently, the borrower, Mr. Cobb, who was also the

buyer, complained to the Division with regard to the appraisal

on the property, and the Division investigated the matter. The

investigation resulted in an investigative report dated

December 21, 2007.

5. According to the appraisal, the property was listed for

$1,030,000 in the multiple listing service, and the contract

price was $790,000. The appraisal report valued the property

using both the sales comparison approach and the cost approach.

Both approaches resulted in a value of $1,030,000. These facts

were reported in a six-page Uniform Residential Appraisal

Report, Fannie Mae Form 1004 March 2005. At the time of the

hearing, the property was the subject of a foreclosure action.

6. The USPAP provides guidance to those involved in the

business of conducting real estate appraisals. Real estate

appraisers typically use both a "sales comparison approach" and

a "cost approach" in attempting to arrive at a value. A "sales

comparison approach" uses data obtained from sales of similar

properties and adjusts for differences. A "cost approach"

starts with the cost of an empty building site and adds to that

the cost of building an identical structure and adjusts for

enhancements and depreciation. Both approaches were used by

Respondents and were reported on the Form 1004.

7. The Division's expert witness, Sylvia G. Storm,

reviewed the Form 1004 and all of the available supporting data.

She did not make an appraisal herself and did not visit the

property in question. Ms. Storm was accepted as an expert as

provided by Section 90.702, Florida Statutes, because she had

"specialized knowledge" regarding real estate appraisals. This

was the first time that Ms. Storm testified as an expert witness

in a case involving appraisals. The same was true in the case

of the expert witness presented by Respondents, Victor Harrison.

It is noted that these experts were only minimally qualified,

and their testimony is given little weight.

8. Ms. Storm commented on the fact that the property was

called "new" in the improvements section yet on the following

sales comparison approach it was listed under actual age, "27/E

New-2." This suggests the property with improvements is 27

years old, but has an effective age of new to two years. In

fact, in the improvements section it was noted that the property

has been completely reconstructed. It is clear from the Form

1004, and the hearing record, that the property was essentially

destroyed during Hurricane Ivan and was rebuilt above the

surviving foundation. It is found that the house was

essentially new at the time of the appraisal.

9. Ms. Storm believes some of the deficiencies she noted

in the Form 1004, discussed in more detail below, and the

supporting documentation contained in the work file, affect the

credibility of the report. She believes that some of these

deficiencies amounted to a violation of USPAP.

10. Ms. Storm stated that an appraiser should do a

complete analysis of the contract and that if it is not done the

appraiser is not being reasonably diligent. She also testified

that an appraiser, who failed to discuss the large difference

between the contract price and appraised value, and who failed

to document the analysis, is not being reasonably diligent.

Mr. Harrison, on the other hand, testified that after his

analysis of the report he found no indication at all of a lack

of reasonable diligence.

11. Ms. Storm opined that two or more appraisers,

appraising the same property may arrive at two or more numbers

and that there is nothing unusual when that occurs.

12. Ms. Moody testified under oath that the supporting

information contained in the work file was adequate and that

references to other documents, such as public records, were

plentiful and complied with the requirements of USPAP. This

testimony was adopted by Ms. Green.

13. In order to provide clarity, actual allegations

contained in the Administrative Complaints will be discussed in

seriatim . As will be addressed more fully in the Conclusions of

Law, the Division must prove its factual allegations by clear

and convincing evidence. In evaluating the evidence presented,

that standard will be used below. The factual allegations will

be presented in bold face type, and the discussion of the proof

will be in regular type:

6. Respondent made the following errors and omission in

the Report:

A) "Failure to discuss or explain why the Subject

Property was listed for sale for $1,030,000 and the contract

price was $790,000."

Ms. Storm opined that the discussion of the contract price

did not go into the details as to the history of the property,

or list price history, or who the contracting parties were or

any fees to be paid by either party. She believes the Form 1004

should have reported when the property was listed and how many

days it had been on the market. She believes that USPAP

requires the appraiser to analyze the contract completely. She

believes the Form 1004 should have commented on the large

difference between the sales price and the appraised price. The

Form 1004 states, "I did analyze the contract for sale for the

subject purchase transaction." Ms. Moody testified under oath

that they analyzed the difference between the appraisal price

and the selling price. She stated that there was no requirement

to discuss it in the Form 1004. Ms. Green adopted this

testimony. Ms. Moody also stated that the contract price of a

piece of property does not affect the value of the property as

reported in the Form 1004. This factual allegation was not

proven.

B) "Use of an outdated FEMA map for the Subject

Property."

Respondents used a FEMA flood map that was outdated. This

occurred because the computer program Respondents were using,

InterFlood.com, presented an out-of-date map. The map used in

the appraisal was dated February 23, 2000, but the most current

edition of the map available at the time of the appraisal was

dated September 26, 2006. The later map was no different from

the map Respondents used. The Form 1004 notes, with regard to

the flood status, "It appears to be located in FEMA Flood Zones

X and AE. A survey would be needed to confirm flood zones." In

sum, there is nothing incorrect or misleading with regard to

flooding potential. The Division's expert witness, Ms. Storm,

concluded that Respondents did not err with regard to the FEMA

flood map. This factual allegation was not proven.

C) "Misstatement of PUD Homeowner's Association Fees

for the Subject Property."

Respondents asserted the homeowner's association fee to be

$100 annually. The by-laws of the Grande Lagoon Community

Association, Inc., in effect during all times pertinent, state

unequivocally that annual dues of the Association are $100. The

Division's investigator stated that he learned through a

telephone call with a "Mr. Broome," who was possibly an officer

in the homeowner's association, that at the time of the

appraisal there was an annual assessment by the homeowner's

association of $250 for canal maintenance, and that this amount

was to increase to $500 annually in 2008. Information about

this assessment was not readily available to Respondents. An

assessment is different from a homeowner's fee. The Division's

expert witness stated that if there is a homeowner's fee it

should be stated on the Form 1004, but that it is not a USPAP

requirement. This factual allegation was not proven.

D) "Failure to differentiate view of Subject Property

and comparable sale 2, when the Subject Property is located on a

canal and the comparable had an open water location."

Comparable Sale 2 is located on Star Lake, a small, lagoon-

like body of water with access to Pensacola Bay, similar to the

location of the appraised property, which is on a canal with

access to open water on Big Lagoon. The views on these

properties are sufficiently similar that no adjustment is

required. This factual allegation was not proven.

E) "Failure to note financial assistance in the sales

contract, where seller was to pay all closing costs."

The agreement whereby seller would pay $20,000 in closing

costs was not made until March 28, 2007, 20 days after the

appraisal was completed. This factual allegation was not

proven.

F) "Failure to note consulting fee to Investor's

Rehab in the sales contract."

This allegation is true in that the consulting fee was not

mentioned. Ms. Storm opined that it should be analyzed in the

appraisal report. She asserted that persons who were not privy

to the contract might make decisions in reliance upon the

appraisal report and, therefore, the Form 1004 should mention

the consulting fee. However, Ms. Moody pointed out that the

consulting fee had no effect on the value of the property and

stated that it was intentionally omitted. This factual

allegation was proven to the extent that the consulting fee was

not mentioned, but this omission did not affect the accuracy or

credibility of the appraisal report.

G) "Failure to explain range of effective age dates

for the Subject Property and comparable sale 1."

As discussed in Finding of Fact 8, the subject property was

essentially new at the time it was appraised. As pointed out by

Mr. Harrison, the effective age was new. Effective age is an

estimate of the physical condition of a building. The actual

age of the building may be shorter or longer than the effective

age. The determination of effective age is largely a matter of

judgment. In the case of Comparable Sale 1, it was built in

1980 and last sold in August 2005. Respondents reported the age

in 2007 as 26 years with an effective age of 1-5 years. The

Form 1004, therefore, presented a one year error as to actual

age, which is insignificant. The allegation is that Respondents

failed to explain the range of effective age dates. However, it

is found that the Form 1004 adequately informs anyone reading

it. Accordingly, this factual allegation is not proven.

H) "Failure to make an adjustment or provide an

explanation for no adjustment on comparable sale 1 for its

effective age difference."

No evidence supporting this allegation was presented. The

unrebutted testimony of Ms. Moody, adopted by Ms. Green, was

that there was no market data suggesting that there was a need

for adjustment. There was no evidence that an explanation for

no adjustment was required. Accordingly, this factual

allegation is not proven.

I) "Incorrect site size adjustment for comparable

sale 1; the $17,000 should be in the positive direction."

The site size adjustment for Comparable Sale 1 is in the

amount of $40,000. It appears that the intentions of the

Administrative Complaints were to allege an error in gross

living area. The result is that the record provides no proof of

this allegation.

J) "Adjustment for both the room count and square

footage, without explanation of its necessity or market support

of its accuracy, for comparable sale 1."

The Division's expert found this to be inconsequential.

There was no proof adduced indicating that this was a violation

of any standard.

K) "Incorrect actual age for comparable sale 1."

In the case of Comparable Sale 1, it was built in 1980 and

last sold in August 2005. Respondents reported the age in 2007

as 26 years with an effective age of 1-5. The Form 1004

therefore presented a one-year error. This error is

insignificant.

L) "Failure to explain inconsistent site size

adjustments made to comparable sale 1, comparable sale 2, and

comparable sale 3."

The subject property was located on a site (or lot) that

was .3 acres. Comparable Sale 1 was located on a site that was

.52 acres. Respondents subtracted $40,000 from the sale price

of Comparable Sale 1. Comparable Sale 2 was located on a site

that was .7 acres. Respondents subtracted $60,000 from the sale

price of Comparable Sale 2. Comparable Sale 3 was located on a

site that was .44 acres. Respondents added $25,000 to the sale

price of Comparable Sale 3. It is the appraiser's duty to value

a comparable in such a way that differences between the

comparable and the subject property are accounted so that a

common denominator may be found. For example, Comparable Sale 1

was approximately .2 of an acre larger than the subject property

and thus more valuable solely because it is on a larger site.

To equalize the situation, the price of Comparable Sale 1 must

be reduced, and it was. Comparable Sale 2 also was reduced, but

Comparable Sale 3 that was on a larger lot than the subject

property, was credited with a $25,000 addition to its price.

Nothing in Respondents' work file provides how the figures for

the comparables were found. Moreover, if two of the comparables

experienced a downward adjustment because of a larger lot size,

then the third comparable, having a larger lot size, should have

been adjusted downward also. Therefore, there were

inconsistencies requiring explanation, and no explanation was

found in the file.

M) "Failure to note that comparable sale 1 has a

fireplace."

The Division's expert witness said that the failure to

adjust for the fireplaces was of no consequence. No evidence

was adduced to demonstrate that the failure to adjust for

fireplaces was necessary. Accordingly, this factual allegation

was not proven.

N) "Failure to make an adjustment or provide an

explanation for no adjustment on comparable sale 1 for its

fireplace."

The Division's expert witness said that the failure to

adjust for the fireplaces was of no consequence. No evidence

was adduced to demonstrate that the failure to adjust for

fireplaces was necessary. Accordingly, this factual allegation

was not proven.

O) "Incorrect actual age for comparable sale 2."

Comparable Sale 2 was built in 1990. At the time of the

appraisal, it was approximately 17 years old. It last sold

November 2006. It was reported to be 16 years of age with an

effective age of five years on the Form 1004. This is both

incorrect and insignificant.

P) "Adjustment for both room count and square

footage, without explanation of its necessity or market support

of its accuracy, for comparable sale 2."

The Division's expert found this to be inconsequential.

There was no proof adduced indicating that this was a violation

of any standard.

Q) "Incorrect actual age for comparable sale 2."

This allegation repeats that stated in "O" above.

R) "Failure to not [sic] that comparable sale 2 has

three fireplaces."

The Division's expert witness said that the failure to

adjust for the fireplaces was of no consequence. No evidence

was adduced to demonstrate that the failure to adjust for

fireplaces was necessary. Accordingly, this allegation was not

proven.

S) "Failure to make an adjustment or provide an

explanation for no adjustment on comparable sale 2 for its

multiple fireplaces."

The Division's expert witness said that the failure to

adjust for the fireplaces was of no consequence. No evidence

was adduced to demonstrate that the failure to adjust for

fireplaces was necessary. Accordingly, this allegation was not

proven.

T) "Failure to make an adjustment or provide an

explanation for no adjustment on comparable sale 2 for its lake

view."

Comparable Sale 2 is located on Star Lake, a lagoon-like

body of water with access to open water, similar to the location

of the appraised property, which is on a canal with access to

open water on Big Lagoon. The views on these properties are

sufficiently similar that no adjustment is required. This

allegation was not proven.

U) "Incorrect actual age of comparable sale 3."

Comparable Sale 3 was built in 1989. At the time of the

appraisal, it was approximately 18 years old. It last sold in

August of 2005. It was reported to be 16 years of age with an

effective age of 10 years on the Form 1004. This age was

reported incorrectly.

V) "Use of comparable sale 3 which sold 19 months

prior to the Report."

The Form 1004 noted that finding comparables was difficult

due to market disruption caused by Hurricane Ivan. As noted by

Ms. Storm, the change in the real estate market during the years

2004, 2005, and 2006, have been profound everywhere. Primarily,

market prices have declined during those years. She was of the

opinion that the August 18, 2005, sale date of Comparable Sale 3

was too remote. She stated, correctly, that a market condition

adjustment should have been made to the price reported for

Comparable Sale 3. Ms. Storm found in the work file analyst

listings of the comparables that were utilized, and pages from

the Marshall and Swift, but did not see any actual paired sale

analyses for any of the adjustments that were used in the

report. She could not determine from where they obtained these

sales and the adjustments for differences. She opined that this

made the report less credible. According to Ms. Storm, the

insufficient analysis runs afoul of USPAP. The opinion of Ms.

Storm, however, fails to take into account the insufficient data

in the Pensacola area that resulted from hurricane-induced

market disruption and the consequent lack of sales. Because of

the lack of viable alternatives, using this property as a

comparable was necessary. This factual allegation was not

proven.

W) "Adjustment for both room count and square

footage, without explanation of its necessity or market support

of its accuracy, for comparable sale 3."

The Division's expert found this to be inconsequential.

There was no proof adduced indicating that this was a violation

of any standard.

X) "Failure to calculate and list the net adjustment

and gross adjustment totals for comparable sale 1, comparable

sale 2, and comparable sale 3."

The Division's expert found this to be inconsequential.

There was no proof adduced indicating that this was a violation

of any standard.

Y) "Failure to utilize current Marshall & Swift

information for the Cost Approach section of the Report."

Marshall and Swift is a reference service that is used to

develop information in the cost approach analysis. It provides

"local multipliers" to provide for cost differentials in various

geographic areas, including differentials for garages and

two-story houses. It also provides "local multipliers" for the

cost per square foot for construction. The pages used by

Respondents expired at the end of February 2007, eight days

before the Form 1004 issued. Respondents receive quarterly

updates. The issue after February 2007 showed no change. To

the extent Respondents failed to get the most current

information, it had no impact on the appraisal amount.

Z) "Failure to complete the PUD information section

of the Report, when Subject Property, as noted by Respondent in

Report, is located in a PUD."

The Division acknowledged during the hearing that there was

no support for this allegation, and withdrew it.

AA) "Failure to date when Respondent inspected the

Subject Property and comparable sales listed in the Report."

(This allegation was made in the case of Ms. Green, but not in

the case of Ms. Moody.)

In the blocks on the Form 1004, below the Supervisory

Appraiser's signature, Ms. Green signed statements indicating

that she inspected the interior and exterior of the subject

property and that she inspected the exterior of the comparable

sales properties. She did not date either of these statements.

7. There is no documentation in the work file to support

the $40,000 "site size" adjustment made to comparable sale 1 in

the Sales Comparison section of the Report.

Respondents' work file, attached as Exhibit 1 to the

Administrative Complaints, does not contain documentation for

this adjustment to the "site size" of Comparable Sale 1.

8. There is no documentation in the work file to support

the $60,000 "site size" adjustment made to comparable sale 2 in

the Sales Comparison section of the Report.

Respondents' work file, attached as Exhibit 1 to the

Administrative Complaints, does not contain documentation for

this adjustment to the "site size" of Comparable Sale 2.

9. There is no documentation in the work file to support

the $25,000 "site size" adjustment made to comparable sale 3 in

the Sales Comparison section of the Report.

Respondents' work file, attached as Exhibit 1 to the

Administrative Complaints, does not contain documentation for

this adjustment to the "site size" of Comparable Sale 3.

10. There is no documentation in the work file to support

the $50,000 "view" adjustment made to comparable sale 1 in the

Sales Comparison section of the Report.

Comparable Sale 1 is on Big River. The Form 1004 notes

that Big River is similar to Big Lagoon. A $50,000 downward

adjustment was made in the "view" category. Ms. Storm stated

that she had searched for documentation and did not find it.

The work file does not have documentary support for the

adjustments. Respondents and Ms. Storm agreed that the lack of

sales in the area made such adjustments like this problematic.

As Ms. Storm said, "I know there haven't been that many sales of

waterfronts so it's really difficult to arrive at that data."

Nevertheless, the lack of any information in the work file to

support the adjustment means that this factual allegation is

proven.

11. There is no documentation in the work file to support

the $5,000 "age" adjustment made to comparable sale 2 in the

Sales Comparison section of the Report.

Respondents' work file, attached as Exhibit 1 to the

Administrative Complaints, does not contain documentation for

this adjustment to the "age" of Comparable Sale 2.

12. There is no documentation in the work file to support

the $10,000 "age" adjustment made to comparable sale 3 in the

Sales Comparison section of the Report.

Respondents' work file, attached as Exhibit 1 to the

Administrative Complaints, does not contain documentation for

this adjustment to the "age" of Comparable Sale 3.

13. There is no documentation in the work file to support

the $3,000 "triple garage" adjustment made to comparable sale 3

in the Sales Comparison section of the Report.

A downward adjustment of $3,000 was made to Comparable Sale

3 because of its triple garage. No testimony supporting this

allegation was presented. Respondents' work file, attached as

Exhibit 1 to the Administrative Complaints, includes Marshall

and Swift data for garages. Although exactly how the $3,000

adjustment was calculated is not clear, the Marshall and Swift

information was in the file and provided a method for making the

calculation.

14. There is no documentation in the work file to support

the $10,000 "dock/pier" adjustment made to comparable sale 1 in

the Sales Comparison section of the Report.

A downward adjustment of $10,000 was made to Comparable

Sale 1 because of the presence of a "dock/pier." No testimony

supporting this allegation was presented. Respondents' work

file, attached as Exhibit 1 to the Administrative Complaints,

does not contain documentation for this adjustment.

15. There is no documentation in the work file to support

the $15,000 "pool" adjustment made to comparable sale 2 in the

Sales Comparison section of the Report.

A downward adjustment of $15,000 was made to Comparable

Sale 2 because of the presence of a pool on the property. No

testimony supporting this allegation was presented.

Respondents' work file, attached as Exhibit 1 to the

Administrative Complaints, does not contain documentation for

this adjustment.

16. There is no documentation in the work file to support

the $39/square foot adjustment for gross living area made to

comparable sale 1, comparable sale 2, and comparable sale 3 in

the Sales Comparison section of the Report.

No testimony supporting this allegation was presented. The

Division has not directed the attention of the Administrative

Law Judge to any reference in the record to a "$39/square foot

adjustment for gross living area." An independent search of

Respondents' work file, attached as Exhibit 1 to the

Administrative Complaints, did not reveal documentation for this

adjustment or any documentation mentioning it. Accordingly,

this allegation is not proven.

17. The work file lacks current Marshall and Swift pages

for the time frame that the Reports were completed, as well as

any local builder information, to justify the dwelling square

footage price in the Cost Approach section of the Report.

Marshall and Swift is a reference service that is used to

develop information for use in the cost approach. It provides

"local multipliers" to provide for cost differentials in various

geographic areas, including differentials for garages and

two-story houses. It also provides information used to

calculate the construction cost per square foot. The pages used

by Respondents expired at the end of February 2007, eight days

before the report issued. Respondents receive quarterly

updates. The issue subsequent to February 2007 showed no

change. To the extent Respondents failed to get the most

current information, it had no impact on the appraisal amount.

18. The work file lacks any documentation to support the

$30,000 As-Is Value of Site Improvements adjustment in the Cost

Approach section of the Report.

As-is value of site improvements adjustment, in the cost

approach section, is a positive value of $30,000. There is no

explanation in the record as to what an "as-is value of site

improvements adjustment" is or from what source came the $30,000

value.

19. The work file lacks any documentation to support the

$60,000 Porches/Appliances adjustment in the Cost Approach

section of the Report

Respondents' work file, attached as Exhibit 1 to the

Administrative Complaints, contains Marshall and Swift

information for porches and appliances. Thus, documentation is

present.

CONCLUSIONS OF LAW

14. The Division of Administrative Hearings has

jurisdiction over the subject matter of and the parties to this

proceeding. § 120.57(1), Fla. Stat. (2008).

15. As a disciplinary statute, Section 475.624, Florida

Statutes "must be construed strictly, in favor of the one

against whom the penalty would be imposed." Munch v. Department

of Professional Regulation, Div. of Real Estate , 592 So. 2d

1136, 1143 (Fla. 1st DCA 1992).

16. Agencies seeking disciplinary actions against licenses

must prove the factual allegations by clear and convincing

evidence. Department of Bank. and Fin., Div. of Securities &

Investor Protection v. Osborne Stern and Co. , 670 So. 2d 932,

933 (Fla. 1996) and Subsection 120.57(1)(j), Florida Statutes

(2008).

17. Clear and convincing evidence "requires more proof

than a 'preponderance of the evidence' but the [sic] less than

'beyond and to the exclusion of a reasonable doubt.'" In re

Graziano , 696 So. 2d 744, 753 (Fla. 1997). It is an

"intermediate standard." Id. For proof to be considered

"'clear and convincing' . . . the evidence must be found to be

credible; the facts to which the witnesses testify must be

distinctly remembered; the testimony must be precise and

explicit; and the witnesses must be lacking in confusion as to

the facts in issue. The evidence must be of such weight that it

produces in the mind of the trier of fact a firm belief or

conviction, without hesitancy, as to the truth of the

allegations sought to be established." In re Davey , 645 So. 2d

398, 404 (Fla. 1994), quoting, with approval, from Slomowitz v.

Walker , 429 So. 2d 797, 800 (Fla. 4th DCA 1983).

18. In determining whether Petitioner has met its burden

of proof, it is necessary to evaluate its evidentiary

presentation in light of the specific allegations of wrongdoing

made in the charging instrument. Due process prohibits the

Board from taking disciplinary action against a licensee based

on conduct not specifically alleged in the charging instrument,

unless those matters have been tried by consent. See Aldrete v.

Department of Health, Board of Medicine , 879 So. 2d 1244, 1246

(Fla. 1st DCA 2004); Shore Village Property Owners' Association,

Inc., et al. v. Department of Environmental Protection, et al. ,

824 So. 2d 208, 210 (Fla. 4th DCA 2002); and Delk v. Department

of Professional Regulation , 595 So. 2d 966, 967 (Fla. 5th DCA

1992).

19. Furthermore, "the conduct proved must legally fall

within the statute or rule claimed [in the charging instrument]

to have been violated." Delk , 595 So. 2d at 967. In deciding

whether "the statute or rule claimed [in the charging

instrument] to have been violated" was in fact violated, as

alleged by Petitioner, if there is any reasonable doubt, that

doubt must be resolved in favor of the licensee.

20. The following factual allegations were proven by clear

and convincing evidence: 6L, 6U, 6AA, 7, 8, 9, 10, 11, 12, 14,

15, and 18.

21. Section 475.624, Florida Statutes, provides in part as

follows:

475.624 Discipline.--The board may deny an

application for registration 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 of any such appraiser, or

place any such appraiser on probation, if it

finds that the registered trainee, licensee,

or certificateholder:

* * *

(2) Has been guilty of fraud,

misrepresentation, concealment, false

promises, false pretenses, dishonest

conduct, culpable negligence, or breach of

trust in any business transaction in this

state or any other state, nation, or

territory; has violated a duty imposed upon

her or him by law or by the terms of a

contract, whether written, oral, express, or

implied, in an appraisal assignment; has

aided, assisted, or conspired with any other

person engaged in any such misconduct and in

furtherance thereof; or has formed an

intent, design, or scheme to engage in such

misconduct and committed an overt act in

furtherance of such intent, design, or

scheme. It is immaterial to the guilt of

the registered trainee, licensee, or

certificateholder that the victim or

intended victim of the misconduct has

sustained no damage or loss; that the damage

or loss has been settled and paid after

discovery of the misconduct; or that such

victim or intended victim was a customer or

a person in confidential relation with the

registered trainee, licensee, or

certificateholder, or was an identified

member of the general public.

* * *

(4) Has violated any of the provisions of

this part or any lawful order or rule issued

under the provisions of this part or chapter

455.

* * *

(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.

* * *

22. Section 475.629, Florida Statutes, provides as

follows:

475.629 Retention of records.--An appraiser

registered, licensed, or certified under

this part shall retain, for at least 5

years, original or true copies of any

contracts engaging the appraiser's services,

appraisal reports, and supporting data

assembled and formulated by the appraiser in

preparing appraisal reports. The period for

retention of the records applicable to each

engagement of the services of the appraiser

runs from the date of the submission of the

appraisal report to the client. These

records must be made available by the

appraiser for inspection and copying by the

department on reasonable notice to the

appraiser. If an appraisal has been the

subject of or has served as evidence for

litigation, reports and records must be

retained for at least 2 years after the

trial.

23. Count I of the Administrative Complaints alleges that

Respondents failed to exercise reasonable diligence in

developing an appraisal report in violation of Subsection

475.624(15), Florida Statutes.

24. "There is no statute, rule, or USPAP standard that

defines ' reasonable diligence. ' " Department of Business and

Professional Regulation, Division of Real Estate v. Guilfoyle ,

Case No. 07-0683PL (DOAH August 22, 2007). It was therefore

incumbent upon the Division, in order to meet its burden of

proving that Respondents deviated from the required standard of

diligence in violation of Subsection 475.624(15), Florida

Statutes , to present "competent evidence . . . from a person

with sufficient insight into what constitutes reasonable

diligence on the part of a certified real estate appraiser when

developing an appraisal or in preparing an appraisal report"

under the circumstances that Respondents faced in the instant

case. Department of Business and Professional Regulation ,

Division of Real Estate v. Harrison , Case No. 06-3387PL (DOAH

May 30, 2007); Department of Business and Professional

Regulation, Division of Real Estate v. Catchpole , Case

No. 06-3389PL (DOAH May 30, 2007); and Department of Business

and Professional Regulation, Division of Real Estate v. Price ,

Case No. 06-3720PL (DOAH May 3, 2007). See also McDonald v.

Department of Professional Regulation , 582 So. 2d 660, 670

(Zehmer, J., specially concurring), citing Purvis v. Department

of Professional Regulation , 461 So. 2d 134 (Fla. 1st DCA 1984)

("[W]here the agency charges negligent violation of general

standards of professional conduct, i.e. , the negligent failure

to exercise the degree of care reasonably expected of a

professional, the agency must present expert testimony that

proves the required professional conduct as well as the

deviation therefrom.").

25. Neither expert was competent to provide sufficient

insight into what constitutes reasonable diligence. Ms. Storm

opined that Respondents failed to be reasonably diligent in two

different areas, analyzing the sales contract and the failure to

discuss the difference between the sales price and the appraisal

price. Mr. Harrison found Respondents used reasonable diligence

throughout their efforts. The Division did not demonstrate that

Respondents failed or refused to exercise reasonable diligence

in developing an appraisal or preparing an appraisal report.

Count I should be dismissed.

26. Count II of the Administrative Complaints alleges that

Respondents were guilty of a failure to retain records for at

least five years of any contracts engaging the appraisers'

services, appraisal reports, and supporting data assembled and

formulated by the appraiser in preparing appraisal reports in

violation of Section 475.629, Florida Statutes, and therefore,

in violation of Subsection 475.624(4), Florida Statutes.

27. The time period for retention of appraisal and

supporting documents, according to Section 475.629, Florida

Statutes, "runs from the date of the submission of the appraisal

report to the client." Because this must have occurred after

the date appearing on the cover of the appraisal report, which

was March 8, 2007, five years has not yet passed. Section

475.629, Florida Statutes, does not address the quality or

completeness of the work file. It only addresses the retention

period of the file. Accordingly, Count II should be dismissed.

28. Count III alleges that Respondents engaged in

misrepresentation, culpable negligence, or breach of trust in

any business transaction in violation of Subsection 475.624(2),

Florida Statutes.

29. "An intentional act must be established before a

violation of the . . . statute proscribing . . .,

misrepresentation, . . . culpable negligence, or breach of trust

in a business transaction may be established." See Munch v.

Department of Professional Regulation, Division of Real Estate ,

592 So. 2d. 1136 (Fla. 1st DCA 1992). It must be determined,

therefore, whether the Respondents' actions rise to that level

of intentional conduct necessary to prove a violation of this

subsection. No such proof was provided. See also Department

of Professional Regulation, Florida Real Estate Commission v.

James J. Baruch , Case No. 81-2398 (DOAH 1982). Count III should

be dismissed.

30. Count IV of the Administrative Complaints alleged a

violation of a standard for the development or communication of

a real estate appraisal, specifically the Conduct Section of the

Ethics Rule, or other provision of the USPAP in violation of

Subsection 475.624(14), Florida Statutes.

31. The USPAP is a set of guidelines established for

property appraisals by the Appraisals Standards Board. It has

the effect of law in Florida. The Division urges, through its

Proposed Recommended Order, that Respondents violated the part

of the Conduct Section that recites, "An appraiser must not

communicate assignment results in a misleading or fraudulent

manner. An appraiser must not use or communicate a misleading

or fraudulent report or knowingly permit an employee or other

person to communicate a misleading or fraudulent report."

32. The Division asserts that Respondents violated this

admonition in a number of instances. Proof of only two of the

matters listed was established by the evidence: a failure to

support the adjustments made in the sales comparison approach

and cost approach section of the appraisal report and the

failure of Ms. Green to note the date she inspected the subject

property and the comparable sales listed in the appraisal

report.

33. The failure to support the adjustments made in the

sales price was an error of omission that did not mislead. The

adjustments made were clearly set forth in Form 1004 although

there was no evidence on the Form 1004 or the work file as to

how Respondents arrived at the figures. In the case of the site

size adjustments, there was a clear error as demonstrated by the

inconsistency between adjustments. The failure to support the

adjustments cannot be deemed fraudulent because an element of

fraud is intent, and there was no proof in the record that

Respondents intended to misrepresent any fact. The failure to

provide the date of inspections did not mislead or defraud

anyone. Count IV should be dismissed.

34. Count V alleged that Respondents violated the Record

Keeping Section of the USPAP Ethics Rule. It is recited in its

entirety below:

An appraiser must prepare a workfile

for each appraisal, appraisal review, or

appraisal consulting assignment. The

workfile must include:

the name of the client and the

identity, by name or type, of any other

intended users;

true copies of any written reports,

documented on any type of media;

summaries of any oral reports or

testimony, or a transcript of testimony,

including the appraiser's signed and dated

certification; and

all other data, information, and

documentation necessary to support the

appraiser's opinions and conclusions and to

show compliance with this Rule and all other

applicable Standards, or references to the

location(s) of such other documentation.

An appraiser must retain the workfile for a

period of at least five (5) years after

preparation or at least two (2) years after

final disposition of any judicial proceeding

in which the appraiser provided testimony

related to the assignment, whichever period

expires last.

An appraiser must have custody of his or her

workfile, or make appropriate workfile

retention, access, and retrieval

arrangements with the party having custody

of the workfile.

35. Respondents failed to maintain all data necessary to

support the adjustments made to the comparable sales, and in one

case, the cost adjustment in the cost approach. The comment

section to this Standard recites as follows: "A workfile

supplies evidence of the appraiser's consideration of all

applicable data and statements required by USPAP and other

information as may be required to support the appraiser's

opinions, conclusions, and recommendations." Clearly, the

purpose of the rule is to preserve data so that in cases such as

this one, evidence can be produced that demonstrates how figures

were generated. Proof of allegations of fact 7, 8, 9, 10, 11,

12, 14, 15, and 18 coupled with the requirements of the USPAP

Ethics Record Keeping Rule require finding Respondents guilty of

Count V.

36. Count VI alleged that Respondents violated Standards

Rule 1-1(c) that provides that an appraiser must "not render

appraisal services in a careless or negligent manner, such as by

making a series of errors that, although individually might not

significantly affect the results of an appraisal, in the

aggregate affects the credibility of those results." The

comment to the section notes: "Perfection is impossible to

attain, and competence does not require perfection. However, an

appraiser must not render appraisal services in a careless or

negligent manner. This Standards Rule requires an appraiser to

use due diligence and due care."

37. To the extent there were some errors in the appraisal

report they were not serious. Respondents were engaged in

making an appraisal in a difficult market environment that had

experienced disruption caused by a hurricane and a serious

decline in demand, and, therefore, price for waterfront

properties. The appraisal report and the extensive work file

indicate Respondents' due diligence and due care. Count VI

should be dismissed.

38. Count VII alleged that Respondents violated Standards

Rule 2-1(a) and (b), or other provision of the USPAP in

violation of Subsection 475.624(14), Florida Statutes.

Standards Rule 2-1(a) and (b) state that, "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 intended users

of the appraisal to understand the report properly; . . . ."

These standards address the appraisal report, not the work file.

The appraisal report was not at all misleading and it contained

sufficient information for the intended users to understand the

report. Count VI should be dismissed.

39. Count VIII alleged that Respondents violated Standards

Rule 2-2(b)(viii), in violation of Subsection 475.624(14),

Florida Statutes. The pertinent part of this Rule states:

(b) The content of a Summary Appraisal

Report must be consistent with the intended

use of the appraisal and, at a minimum:

* * *

(viii) summarize the information analyzed,

the appraisal methods and techniques

employed, and the reasoning that supports

the analyses, opinions, and conclusions;

exclusion of the sales comparison approach,

cost approach, or income approach must be

explained; . . . .

* * *

40. This rule refers to the content of the Summary

Appraisal Report, not the work file. The report adequately

summarized the information analyzed; the appraisal methods and

techniques employed; and the reasoning that supports the

analyses, opinions, and conclusions. It used the sales

comparison approach and cost approach and noted, with regard to

the income approach, "The income approach to value has not been

used due to its limited utility when appraising single family

homes." Count VIII should be dismissed.

41. The legislature has directed the regulatory boards

falling under the Department of Business and Professional

Regulation's jurisdiction to promulgate rules specifying the

penalties that can be imposed for statutory offenses.

Section 455.2273, Florida Statutes, provides:

(1) Each board, or the department when

there is no board, shall adopt, by rule, and

periodically review the disciplinary

guidelines applicable to each ground for

disciplinary action which may be imposed by

the board, or the department when there is

no board, pursuant to this chapter, the

respective practice acts, and any rule of

the board or department.

(2) The disciplinary guidelines shall

specify a meaningful range of designated

penalties based upon the severity and

repetition of specific offenses, it being

the legislative intent that minor violations

be distinguished from those which endanger

the public health, safety, or welfare; that

such guidelines provide reasonable and

meaningful notice to the public of likely

penalties which may be imposed for

proscribed conduct; and that such penalties

be consistently applied by the board.

(3) A specific finding of mitigating or

aggravating circumstances shall allow the

board to impose a penalty other than that

provided for in such guidelines. If

applicable, the board, or the department

when there is no board, shall adopt by rule

disciplinary guidelines to designate

possible mitigating and aggravating

circumstances and the variation and range of

penalties permitted for such circumstances.

(4) The department must review such

disciplinary guidelines for compliance with

the legislative intent as set forth herein

to determine whether the guidelines

establish a meaningful range of penalties

and may also challenge such rules pursuant

to s. 120.56.

(5) The administrative law judge, in

recommending penalties in any recommended

order, must follow the penalty guidelines

established by the board or department and

must state in writing the mitigating or

aggravating circumstances upon which the

recommended penalty is based.

42. Florida Administrative Code Rule 61J1-8.002(1)

provides, in part, as follows:

61J1-8.002 Disciplinary Guidelines.

(1) Pursuant to Section 455.2273, F.S., the

Florida Real Estate Appraisal Board sets

forth below a range of disciplinary

guidelines from which disciplinary penalties

will be imposed upon licensees guilty of

violating Chapter 455 or Part II, Chapter

475, F.S. (For purposes of this rule, the

term licensee shall refer to registrants,

license holders or certificate holders.)

The purpose of the disciplinary guidelines

is to give notice to licensees of the range

of penalties which normally will be imposed

for each count during a formal or an

informal hearing. For purposes of this

rule, the order of penalties, ranging from

lowest to highest, is: reprimand, fine,

probation, suspension, and revocation or

denial. Pursuant to Section 475.624, F.S.,

combinations of these penalties are

permissible by law. Nothing in this rule

shall preclude any discipline imposed upon a

licensee pursuant to a stipulation or

settlement agreement, nor shall the ranges

of penalties set forth in this rule preclude

the probable cause panel from issuing a

letter of guidance upon a finding of

probable cause, where appropriate.

* * *

43. Florida Administrative Code Rule 61J1-8.002(3)(q)

provides that for a violation of Subsection 475.624(14), Florida

Statutes: "The usual action of the Board shall be to impose a

penalty from a 5-year suspension to revocation and an

administrative fine of $1,000." Upon consideration of the facts

of this case, a reprimand, which is the lowest possible penalty,

should be imposed.

RECOMMENDATION

RECOMMENDED that the Florida Real Estate Appraisal Board

find Respondents guilty of violating Subsection 475.624(14),

Florida Statutes, by failing to document adjustments made to

comparable sales and reprimand Respondents.

DONE AND ENTERED this 27th day of January, 2009, in

Tallahassee, Leon County, Florida.

S

HARRY L. HOOPER

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

[phone]

Fax Filing [phone]

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 27th day of January, 2009.

COPIES FURNISHED :

Thomas M. Brady, Esquire

3250 Navy Boulevard, Suite 204

Post Office Box 12584

Pensacola, Florida 32591-2584

Robert Minarcin, Esquire

Department of Business &

Professional Regulation

400 West Robinson Street, N801

Orlando, Florida 32801-1757

Ned Luczynski, General Counsel

Department of Business and

Professional Regulation

Northwood Centre

1940 North Monroe Street

Tallahassee, Florida 32399-0792

Thomas W. O'Bryant, Jr., Director

Division of Real Estate

Department of Business and

Professional Regulation

400 West Robinson Street

Suite 802, North

Orlando, Florida 32801

Frank K. Gregoire, Chairman

Real Estate Appraisal Board

Department of Business and

Professional Regulation

400 West Robinson Street, Suite 801N

Orlando, Florida 32802-1900

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.