10-001098PL Department Of Business And Professional Regulation, Division Of Real Estate vs. Francis J. Coleman Status: Closed Recommended Order on Monday, August 9, 2010.

Summary: Appraiser used an inappropriate property as a comparable when using the sales comparison method in valuating the property at issue.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF BUSINESS AND )

PROFESSIONAL REGULATION, )

DIVISION OF REAL ESTATE, )

)

Petitioner, )

)

vs. ) Case No. 10-1098PL

)

FRANCIS J. COLEMAN, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, a final hearing was held in this case

on May 12, 2010, in Venice, Florida, before Susan B. Harrell, a

designated Administrative Law Judge of the Division of

Administrative Hearings.

APPEARANCES

For Petitioner: Donna Christine Lindamood, Esquire

Department of Business and

Professional Regulation

400 West Robinson Street, Suite N801

Orlando, Florida 32801-1757

For Respondent: Daniel Villazon, Esquire

Daniel Villazon, P.A.

1420 Celebration Boulevard, Suite 200

Celebration, Florida 34747

STATEMENT OF THE ISSUES

The issues in this case are whether Respondent violated

Subsections 475.624(15), Florida Statutes (2006), 1 and, if so,

what discipline should be imposed.

PRELIMINARY STATEMENT

On July 7, 2009, Petitioner, Department of Business and

Professional Regulation, Division of Real Estate (Department),

filed a seven-count Administrative Complaint against Respondent,

Francis J. Coleman (Mr. Coleman), alleging in Count One that

Mr. Coleman violated Subsection 475.624(15), Florida Statutes,

by having failed to exercise due diligence in developing an

appraisal report and alleging in Counts Two through Seven that

Mr. Coleman violated Subsection 475.624(14), Florida Statutes,

by violating certain provisions of the Uniform Standards of

Professional Appraisal Practice (USPAP) (2006). Mr. Coleman

requested an administrative hearing, and the case was forwarded

to the Division of Administrative Hearings on March 3, 2010, for

assignment to an Administrative Law Judge to conduct the final

hearing.

At the final hearing, the Department dismissed Counts Two

through Seven of the Administrative Complaint and withdrew the

allegation in paragraph 11(c) of the Administrative Complaint.

The Department called Dennis J. Black as its expert witness.

Petitioner’s Exhibits 1 through 7 were admitted in evidence.

Mr. Coleman testified in his own behalf, and Respondent’s

Exhibits 1 and 2 were admitted in evidence.

The one-volume Transcript of the hearing was filed on

June 16, 2010. The parties agreed to file their proposed

recommended orders within 30 days of the filing of the

Transcript. The parties filed their Proposed Recommended

Orders, which have been considered in the preparation of this

Recommended Order.

FINDINGS OF FACT

1. Mr. Coleman is and was at all times material to

this proceeding, a state-certified residential real estate

appraiser in the State of Florida, having been issued license

number RD-4033 in July 2003. Mr. Coleman has never had any

prior disciplinary action taken against him.

2. In March 2007, Mr. Coleman received a request

to perform an appraisal on a condominium unit located

at 841 Amberjack Circle, Unit 304, Englewood, Florida (Subject

Property). The purpose of the appraisal was for mortgage

lending, and the lender was J.P. Morgan, Chase Bank, N.A.

3. The Subject Property is a newly-constructed three-

bedroom, two-bath condominium unit with 1,903 square feet of

gross living area. The Subject Property is located on the third

floor and is the first unit in the development to be sold that

has a view of a natural body of water and a preserve.

4. On March 10, 2007, Mr. Coleman developed and

communicated an appraisal report on the Subject Property.

5. In determining his opinion of value, Mr. Coleman used

the sales comparison approach. This approach requires the

appraiser to find comparable sales of property similar to the

property being appraised and to make adjustments for any

differences from the property being appraised and the comparable

properties. Mr. Coleman selected three properties to be used as

comparable sales for his report.

6. The first property selected as a comparable sale is a

third-floor, three-bath condominium unit located at

8520 Amberjack Circle, H2/301, Englewood, Florida (Comparable

Sale 1). This unit contains 2,625 square feet of gross living

area. Comparable Sale 1 sold for $550,496.

7. The second property selected as a comparable sale is a

second-floor condominium located at 8540 Amberjack Circle,

H3/203, Englewood, Florida (Comparable Sale 2). This unit

contains 1,927 square feet of gross living area. The recorded

deed shows that the selling price of Comparable Sale 2 is

$408,000. Mr. Coleman was provided information by the developer

that in addition to the original selling price of $408,000 that

upgrades had been purchased, bringing the total sale price of

Comparable Sale 2 to $417,200. 2 There was no information in the

appraisal report to show why there was a discrepancy between the

selling price reported by the developer and the selling price

contained in the public records.

8. The third property selected as a comparable sale is a

second-floor condominium located at 8560 Amberjack Circle,

H4/203, Englewood, Florida (Comparable Sale 3). This unit has

1,927 square feet of gross living area. At the time that

Mr. Coleman was preparing the appraisal report, he could not

find a listing for Comparable Sale 3 in the county records. It

is not clear whether Mr. Coleman relied on online records or

whether he actually went to the clerk’s office to check the

records. The deed that was recorded for Comparable Sale 3 shows

a sale price of $409,000. Mr. Coleman was advised by the

developer that in addition to the selling price of $409,000 that

upgrades had been purchased, bringing the total sale price of

Comparable Sale 3 to $416,000.

9. Mr. Coleman relied upon the sales information from the

developer and concluded that the county clerk’s office had erred

in recording the total sale prices for Comparable Sale 2 and

Comparable Sale 3.

10. There were at least 15 other units that were more

similar to the Subject Property than Comparable Sale 1.

Mr. Coleman selected Comparable Sale 1, because he wanted a unit

that would have a higher price than the contract price for the

Subject Property. He stated:

I knew that this property [Subject Property]

sold for $450,000, and if I was going to

make it work at all I would have to use a

comparable with a higher sale price. I

believed at the time that the subject unit

was worth more than $450,000 that it sold

for, at least that much. And so in order to

show that the subject unit had that value, I

used the higher price comparable. . . . I

was asking the sales office for-–give me

unit that is of similar size that’s sold for

a higher price. And he said there weren’t

any that he was aware of, and I said, well

give me something that shows that there’s

value at the subject property.

11. Mr. Coleman argues in his Proposed Recommended Order

that he was bracketing when he chose Comparable Sale 1. There

was no evidence presented that bracketing was involved in his

decision to chose Comparable Sale 1 nor was there any evidence

that bracketing was an accepted practice in Charlotte County,

Florida, at the time the appraisal report was prepared and

communicated.

12. Because Comparable Sale 1 was a larger unit than the

Subject Property, Mr. Coleman made an adjustment in the price

for Comparable Sale 1 to compensate for the difference in square

footage. Mr. Coleman concluded that the value of a square foot

of gross living area was $100. 3 He did not comment in his

appraisal report how he arrived at this price per square foot.

The difference in the amount of square footage in the Subject

Property and Comparable Sale 1 is 722 square feet. Thus, he

adjusted the sale price for Comparable Sale 1 by deducting

$72,200. Mr. Coleman also adjusted the price for Comparable

Sale 3 by deducting $5,000 for an additional bathroom.

13. None of the comparable sales have a view of a natural

body of water or a preserve as does the Subject Property. The

comparables have a view of man-made retention ponds, which are

referred to as lakes. Mr. Coleman concluded that, based on his

professional and personal knowledge, there is a premium for a

view of a natural body of water and a preserve and stated in his

report:

The adjustment for site is based on the list

prices for the same unit in Hammock Cove

condos versus the subject Preserve condo.

The premium for having a view of Lemon Creek

and the preserve is estimated at $120,000.

The adjustment is less than half the

estimated difference.

14. The units in the development in which the Subject

Property is located that have a view of the natural body of

water or preserve were listed for sale at the time of the

appraisal for approximately $120,000 more than similar units

without such a view. None of the units with a view of the

natural water and preserve had sold at the time of the

preparation of the appraisal report; therefore, there were no

prior sales which could be used to determine the value of the

view. After the appraisal was completed, there were some units

with the view of the natural body of water and the preserve

which sold for $500,000. There was no evidence presented to

show whether these units were similar to the Subject Property in

size, upgrades, or floor location.

15. The Department’s expert, Dennis J. Black (Mr. Black),

criticized Mr. Coleman for relying on the listing information

from the developer, who was an interested party, in determining

the value of the view of the natural body of water and the

preserve. Mr. Black felt that Mr. Coleman should have gone to

other sources for such information, such as other developments

which were similarly situated.

16. Mr. Coleman knew from his own experience that units in

the development in which he lived that had a similar view of the

Subject Property sold for more than units without a view of the

preserve. He did try unsuccessfully to find some developments

that were similar to the one at issue with some units having a

view of a natural body of water and other units having a view of

man-made retention ponds. Therefore, Mr. Coleman did try to

find sources other than the developer for a valuation of the

view. Mr. Coleman concluded that the value of the view was less

than half of the $120,000 increase for which other units with a

view of natural water and a preserve were being listed for sale.

The record does not establish on what basis he made the

assumption that the value of the view was less than half of

$120,000. Mr. Coleman made an adjustment of $50,000 to the

three comparable sales.

17. Based on the adjustments made by Mr. Coleman for the

size in the units, the view, and the additional bathroom, the

adjusted sale price for Comparable Sale 1 was $523,296. The

adjusted sale price for Comparable 2 was $467,200, and the

adjusted sale price for Comparable Sale 3 was $466,000. Thus,

the range of adjusted sale prices of the comparable sales was

from $466,000 to $523,296. He valued the Subject Property at

$500,000, which was within the range of the adjusted comparable

sales. He testified that he tended to value the Subject

Property a little higher because it had upgrades, a superior

view, and was located on the third floor. The evidence does not

demonstrate why he valued the Subject Property higher when an

adjustment had been made for the superior view in computing the

adjusted selling prices for Comparable Sales 1 and 2.

Additionally, Comparable Sales 2 and 3 also had upgrades, as

evidenced by the discrepancies between the recorded deeds and

the selling prices provided by the developer. The only

difference between the Subject Property and Comparable Sales 2

and 3 was the location of Comparable Sales 2 and 3 on the second

floor and the location of the Subject Property on the third

floor.

18. Mr. Coleman indicated in his appraisal report that the

current condominium trends in the neighborhood of the Subject

Property showed that the property values were stable, and the

demand/supply was in balance. Based on research that he had

done for a book shortly before the effective date of the subject

appraisal report, Mr. Black opined that the general market in

the area of southern Sarasota County and northern Charlotte

County was not stable, but was in a decline, with deteriorating

property values and an oversupply of similar properties offered

for sale. His opinion was of the overall market trends and not

the trends of the particular neighborhood in which the Subject

Property is located.

19. In his appraisal report, Mr. Coleman certified that he

“performed this appraisal in accordance with the requirements of

the Uniform Standards of Professional Appraisal Practice [USPAP]

that were adopted and promulgated by the Appraisal Standards

Board of the Appraisal Foundation and that were in place at the

time this appraisal report was prepared.”

20. The following USPAP requirements were applicable to

the instant case at the time the appraisal report was prepared.

Standards Rule 1-1

In developing a real property appraisal, an

appraiser must:

(a) be aware of, understand, and correctly

employ those recognized methods and

techniques that are necessary to produce a

credible appraisal;

(b) not commit a substantial error of

omission or commission that significantly

affects an appraisal; and

(c) not render appraisal services in a

careless or negligent manner, such as by

making a series of errors that, although

individually might not significantly affect

the results of an appraisal, in the

aggregate affects the credibility of those

results.

Standards Rule 1-2

In developing a real property appraisal, an

appraiser must:

* * *

(f) identify any extraordinary assumptions

necessary in the assignment; . . .

Standards Rule 1-4

In developing a real property appraisal, an

appraiser must collect, verify, and analyze

all information necessary for credible

assignment results.

(a) When a sales comparison approach is

necessary for credible assignment results,

an appraiser must analyze such comparable

sales data as are available to indicate a

value conclusion.

Standards Rule 2-1

Each written or oral real property appraisal

report must:

(a) clearly and accurately set forth the

appraisal in a manner that will not be

misleading;

(b) contain sufficient information to

enable the intended users of the appraisal

to understand the report properly; and

(c) clearly and accurately disclose all

assumptions, extraordinary assumptions,

hypothetical conditions, and limiting

conditions used in the assignment.

Standards Rule 2-2

Each written real property appraisal report

must be prepared under one of the following

three options and prominently state which

option is used: Self-Contained Appraisal

Report, Summary Appraisal Report, or

Restricted Use Appraisal Report.

(b) The content of a Summary Appraisal

Report must be consistent with the intended

use of the appraisal and, at a minimum:

* * *

(iii) summarize information sufficient to

identify the real estate involved in the

appraisal, including the physical and

economic property characteristics relevant

to the assignment.

21. Mr. Black opined that Mr. Coleman violated USPAP

Standards Rules 1-1(a), 1-1(b), and 1-1(c). According to

Mr. Black, Mr. Coleman did not correctly employ the cost

comparison method by giving more weight to Comparable Sale 1,

which was the most dissimilar comparison sale. Mr. Black

concluded that Mr. Coleman violated USPAP Standards Rule 1-1(b),

because there was no support to demonstrate how Mr. Coleman

arrived at the $50,000 adjustment for the preserve view.

Mr. Black opined that Mr. Coleman violated USPAP Standards

Rule 1-1(c) by giving more weight to Comparable Sale 1 and by

failing to demonstrate how he developed the adjustment for the

preserve view.

22. Mr. Black opined that Mr. Coleman violated USPAP

Standards Rule 1-2(f) by failing to identify the $50,000

adjustment for the view in the work file or the report.

23. Mr. Black concluded that Mr. Coleman violated USPAP

Standards 1-4(a) for failing to collect, verify, and analyze the

information on other units which were more similar to the

Subject Property than Comparable Sale 1.

24. Mr. Black opined that Mr. Coleman violated USPAP

Standards Rules 2-1(a), 2-1(b), and 2-1(c). Mr. Black

determined that Mr. Coleman’s failure to show how he arrived at

the $50,000 adjustment for the view, when the information on

which he was relying showed a value of $120,000, constituted a

violation of USPAP Standards Rule 2-1(a). Mr. Black concluded

that Mr. Coleman violated USPAP Standards Rule 2-1(b) as

follows:

[B]y failing to provide the information of

the support and rationale for the $50,000

adjustment. He has not provided sufficient

information. He’s also failed to explain

how he arrives at the $500,000 amount, which

is $15,000 above the amount that would have

been determined by equal weighting of all

comparables. And how he comes up with

$500,000 where the most weight would be

given to Comparable Sale 1, which the most

dissimilar sale.

Mr. Black opined that Mr. Coleman violated USPAP Standards

Rule 2-1(c) by failing to disclose the extraordinary assumption

that the view of the Subject Property was valued at $50,000.

25. Mr. Black concluded that Mr. Coleman violated USPAP

Standards Rule 2-2(b)(iii) by failing to support how he came up

with the $50,000 positive adjustment and by failing to explain

the reasoning behind giving the most weight to the most

dissimilar sale.

CONCLUSIONS OF LAW

26. The Division of Administrative Hearings has

jurisdiction over the parties to and the subject matter of this

proceeding. §§ 120.569 and 120.57, Fla. Stat. (2009).

27. The Department has the burden to establish the

allegations in the Administrative Complaint by clear and

convincing evidence. Department of Banking and Finance v.

Osborne Stern and Company , 670 So. 2d 932 (Fla. 1996).

28. The Department alleges that Mr. Coleman violated

Subsection 475.624(15), Florida Statutes, which provides:

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:

* * *

(15) Has failed or refused to exercise

reasonable diligence in developing an

appraisal or preparing an appraisal report.

29. The disciplinary action against a licensee may be

based only upon those offenses specifically alleged in the

administrative complaint. See Cottril v. Department of

Insurance , 685 So. 2d 1371 (Fla. 1st DCA 1996); Kinney v.

Department of State , 501 So. 2d 129, 133 (Fla. 5th DCA 1984);

Hunter v. Department of Professional Regulation , 458 So. 2d 842,

844 (Fla. 2nd DCA 1984).

30. In determining whether the Department has met its

burden of proof, it is necessary to evaluate its evidentiary

presentation in light of the specific factual allegations made

in the Administrative Complaint. Due process prohibits an

agency from taking disciplinary action against a licensee based

upon conduct not specifically alleged in the agency’s

administrative complaint. See Hamilton v. Department of

Business and Professional Regulation , 764 So. 2d 778 (Fla. 1st

DCA 2000); Lusskin v. Agency for Health Care Administration , 731

So. 2d 67, 69 (Fla. 4th DCA 1999).

31. The Department alleges in paragraph 11 of the

Administrative Complaint that Mr. Coleman violated Subsection

475.624(15), Florida Statutes, in the following ways:

A. Respondent relied upon a much larger

(2625 versus 1903 square feet of gross

living area) Comparable Sale 1, selling for

$550,496, adjusted to $523,396, when there

were closed sales of condominium units in

the Subject Property’s project equivalent in

size to the Subject Property selling for

between $384,000 and $416,000;

B. Respondent misstated the selling price

for Comparable Sale 2 as $417,200 instead of

the actual $408,000;

* * *

D. Respondent misstated the selling price

for Comparable Sale 3 as $416,000 instead of

the actual $409,000;

E. Respondent made adjustments for “lake

view” when the lake was a man-made water

retention area;

F. Respondent erred in making adjustments

for view (lake versus preserve) which should

have offset each other;

G. Respondent failed to disclose an

extraordinary assumption that Preserve-view

condominiums were more valuable than other

units in the Subject Property project;

H. Because no Preserve-view units had been

sold prior to the effective date of the

Report, Respondent had no basis for

computing an adjustment for “Preserve-view”;

I. Respondent mischaracterized condominium

unit housing trends as having stable

property values and in balance demand/supply

when the trend was declining values and an

oversupply in the market; and

J. Respondent relied on sales data from the

onsite sales office for his comparable sales

and failed to verify with a disinterested

party.

32. The Department presented evidence in the form of

expert testimony and exhibits which may have supported other

violations, but the factual basis for such evidence was not

included in the Administrative Complaint. Thus, the

determination of whether disciplinary action should be taken by

the Department is limited to the factual allegations of

misconduct listed in paragraph 11 of the Administrative

Complaint.

33. The Department has established by clear and convincing

evidence that Mr. Coleman violated Subsection 475.624(15),

Florida Statutes. The Department established that the use of

Comparable Sale 1 was inappropriate. The unit was over

700 square feet larger than the Subject Property. There were

other properties, which were closer in similarity to the Subject

Property than Comparable Sale 1. Based on Mr. Coleman’s

testimony, the use of Comparable Sale 1 was to get a higher

value for the Subject Property.

34. The Department established that Mr. Coleman relied on

the sales information from the developer, an interested party,

to determine the selling prices for Comparable Sale 2, when the

public records showed a different selling price. However, the

Department did not establish that the selling prices, which

Mr. Coleman used for Comparable Sale 2 and Comparable Sale 3,

were incorrect as set forth in the Administrative Complaint.

35. No evidence was presented to support the factual

allegations contained in subsections E and F of paragraph 11 of

the Administrative Complaint.

36. The Department did not establish by clear and

convincing evidence that Mr. Coleman failed to disclose the

extraordinary assumption that units with a preserve view had

more value than units without a view of a preserve. He did

disclose the extraordinary assumption. He did not disclose how

he determined the value of the view, but that was not the

factual allegation alleged.

37. The Department did not establish by clear and

convincing evidence that Mr. Coleman mischaracterized the

condominium unit housing trends. Although Mr. Black testified

that based on the research he had done for a book, his testimony

was for general market trends and did not involve the

neighborhood of the Subject Property.

38. The Department did not establish by clear and

convincing evidence that Mr. Coleman failed to verify the sales

data that he received from the developer with a disinterested

party. Mr. Coleman did check the public records for the

comparables. The selling prices contained in the public records

for Comparable Sale 1 was the same as listed in the developers

records. The sale price of Comparable Sale 2, without the

upgrades, was the same for both the public records and the

developer’s records. Mr. Coleman did check the public records

for the sale price of Comparable Sale 3, but was unable to

locate the information. The Department did not present clear

and convincing evidence that on the date of the appraisal report

that the selling price for Comparable Sale 3 was available

through the public records.

39. Florida Administrative Code Rule 61J1-8.002 contains

the disciplinary guidelines applicable to this proceeding.

Florida Administrative Code Rule 61J1-8.002(3) provides that the

recommended range of penalties for a violation of Subsection

475.624(15), Florida Statutes, ranges from a five-year

suspension to revocation and an administrative fine of $1,000.

Pursuant to Florida Administrative Code Rule 61J1-8.002(4), the

Florida Real Estate Appraisal Board may deviate from the

recommended penalties based on a showing of mitigating or

aggravating circumstances. Mr. Coleman has not had any prior

disciplinary action taken against him. Six of the seven counts

of the Administrative Complaint were dismissed at the

commencement of the final hearing. Of the ten factual

allegations of misconduct in the Administrative Complaint, the

Department withdrew one of the allegations at the final hearing

and failed to establish eight of the remaining allegations by

clear and convincing evidence.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is RECOMMENDED that a final order be entered finding

that Mr. Coleman violated Subsection 475.624(15), Florida

Statutes, and suspending his license for six months.

DONE AND ENTERED this 9th day of August, 2010, in

Tallahassee, Leon County, Florida.

S

SUSAN B. HARRELL

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

[phone]

Fax Filing [phone]

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 9th day of August, 2010.

ENDNOTES

1/ Unless otherwise indicated, all references to the Florida

Statutes are to the 2006 version.

2/ The developer had provided a document entitled “Hammocks

closed files and closing schedule detail,” which provided

information on sales in the Subject Property development between

December 2006 and March 2007.

3/ It is unclear how he calculated the price for a square foot

at $100. Mr. Coleman’s appraisal report listed the price per

square foot of the Subject Property based on the selling price

as $236.47 and the price per square foot for Comparable Sale 1

based on the selling price as $209.71.

COPIES FURNISHED :

Donna Christine Lindamood, Esquire

Department of Business and

Professional Regulation

400 West Robinson Street, Suite N801

Orlando, Florida 32801-1757

Daniel Villazon, Esquire

Daniel Villazon, P.A.

1420 Celebration Boulevard, Suite 200

Celebration, Florida 34747

Reginald Dixon, 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 N802

Orlando, Florida 32801

Joni Herndon, Chair

Real Estate Appraisal Board

Department of Business and

Professional Regulation

400 West Robinson Street, Suite N801

Orlando, Florida 32801

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.