ALJDEC decisions subject to certification as final

07F-2321-BOA · Board of Appraisal · 2007-11-20

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: November 6, 2007 at 9:00 a.m. APPEARANCES: The Arizona State Board of Appraisal appeared through Dawn Walton Lee, Esq., Assistant Attorney General; Respondent Thomas J. Dozier appeared on his own behalf. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

The parties presented evidence and made argument. Based on the entire record, the Administrative Law Judge makes the following Findings of Fact, Conclusions of Law, and Recommended Order to the Arizona State Board of Appraisal (“the Board”). FINDINGS OF FACT Background and Procedure 1. Thomas J. Dozier has been a practicing appraiser for approximately 22 years in Washington state and Arizona. The Board granted Mr. Dozier Certified Residential Appraiser Certificate No. 20359 in 1986. 2. On January 16, 2007, the Board received a complaint against Mr. Dozier’s appraiser certificate from Mia Suchoski of Prescott West Realty. The gravamen of Ms. Suchoski’s complaint was that her asking price for a property at 325 N. Alma School Rd. (“the subject property”) in Mesa, Arizona was $475,000 and that, after Mr. Dozier in 2005 appraised the property at $391,000, the seller of the property was forced to accept an offer in that amount, based on the purchaser’s ability to obtain financing. Mr. Dozier had performed a second appraisal of the property in 2006. Ms. Suchoski had obtained a third appraisal from another licensed appraiser named Tom Loorz and, based on that appraisal, demanded that Board or Mr. Dozier pay her the difference between her asking price and Mr. Dozier’s first appraised value of $84,000. Ms. Suchoski also noted that the property was commercial and that, by performing the appraisal, Mr. Dozier had practiced beyond the scope of his residential certificate.[1] 3. The Board forwarded the complaint to Mr. Dozier. On March 28, 2007, the Board received Mr. Dozier’s 7-page, single- spaced, typewritten response. Mr. Dozier generally attacked Ms. Suchoski’s motivation and credentials and noted that she was not the intended user of his appraisal reports. With respect to Mr. Loorz’s report, Mr. Dozier noted that Mr. Loorz was from Prescott, like Ms. Suchoski, and that there were over 400 Arizona General Appraisers in Maricopa County. He also pointed out that Ms. Suchoski “could have attained a second or third objective opinion of market value for the property in question by one of the over 400 Arizona General Appraisers in Maricopa County, or one of the more than 40 Arizona General Appraisers in the city of Mesa, AZ.”[2] 4. The Board appointed contract investigator Roy E. Morris, III, Certified General Appraiser Certificate No. 30029 to investigate Ms. Suchoski’s complaint. On May 4, 2007, the Board received Mr. Morris’ investigative report, which concluded that Mr. Dozier had violated certain Arizona statutes and regulations governing residential certificated appraisers in preparing two appraisals of the subject property, one on April 12, 2005 and the other on August 25, 2006.[3] 5. The Board referred the matter to the Office of Administrative Hearings for the scheduling of a hearing in due course. 6. On September 25, 2007, the Board issued a Complaint and Notice of Public Hearing, which charged Mr. Dozier with violations of A.R.S. §§ 32-3612(A)(2), 32-3631(A)(6), (7), and (8), and 32-3635, and A.A.C. R4-46-401. The Board also charged Mr. Dozier, in his preparation of the April 12, 2005 report, with violations of the 2005 edition of the Uniform Standards of Appraisal Practice (“2005 USPAP”) Rules 1-1(a), 1-3(h), 1-4(c), 2-1(a), 2-2, 2-2(iii), 2-2(ix), and 2-2(x); and, in his preparation of the August 25, 2006 report, with violations of the 2006 edition of USPAP (“2006 USPAP”) Standards Rules 1-1(a), Ethics Rule, Record Keeping, the Departure Rule, and Statement on Standard 10 for federally related transactions, 1-1, 1-2(h), 1-3(a) and 1-3(b), 1-3(f), 1-4(b) and 1-4(c), 2-1(a), 2-2(vii), 2-2(viii), 2-2(ix), 2- 2(x), and 2-2(xi). 7. A hearing was held on November 6, 2007 at 9:00 a.m. The Board presented the testimony of Mr. Morris and had admitted into evidence six exhibits, including the two appraisals at issue. Mr. Dozier testified on his own behalf, presented the testimony of Joel McDaniel, the intended user of the 2005 appraisal, and his secretary Michelle Amelonke, whom he was also mentoring in appraisal practices, and had admitted into evidence four exhibits. Hearing Evidence The Board’s Investigator Mr. Morris 8. Mr. Morris has been a certified general appraiser since 1991, when the Board first started licensing appraisers. He has been appraising properties for 37 years and teaches USPAP at Arizona State University and elsewhere. USPAP is a nationally recognized code of conduct for appraisers, which has been adopted in other countries as well. Mr. Morris reviewed the complaint, Mr. Dozier’s response, the two appraisal reports, and Mr. Dozier’s file. 9. As part of his assignment, Mr. Morris signed a certification that, among other things, he had no interest in the subject property and no bias with respect to any of the parties involved in the investigation. 10. Mr. Morris applied 2005 USPAP to evaluate Mr. Dozier’s April 12, 2005 appraisal report and applied the 2006 USPAP to evaluate Mr. Dozier’s August 25, 2006 appraisal report of the subject property. 11. Mr. Morris performed research and analysis on Mr. Dozier’s appraisal reports to determine the factual matters that he relied upon. Mr. Morris also conducted a field inspection of the exteriors of the subject property and the comparable sales cited in the appraisal reports. 12. Mr. Morris testified that the subject property is being used as a child care facility, which is a commercial retail classification. Child care facilities are licensed by the state according to the age of the children cared for, whether they are infants, toddlers, or pre-school. All three classifications have different requirements as to the number of caregivers and physical characteristics of the facility. Children from different classifications cannot be mixed in the same area of a facility. 13. Mr. Morris testified that Mr. Dozier’s references to General Appraisers in his response acknowledges that appraisal of the subject property was beyond the scope of his residential appraiser certificate. April 12, 2005 Appraisal Report 14. Mr. Morris noted that the 2005 report was prepared for Applewood Funding. Although Applewood Funding is a private lender, it probably would sell the loan on the property to another lender, which likely would have been a member of the FDIC. 15. The report indicated that it was a “limited use restricted narrative appraisal report.” This description was meaningless and in violation of USPAP Standards Rule 2.2. 16. The transmittal letter and report states numerous times that the report did not comply with the guidelines of the Federal National Mortgage Association (“FNMA” or “Fannie Mae”). The FNMA guidelines only apply to residential properties; because the subject property was commercial, Mr. Dozier’s repeated references to FNMA were misleading. 17. Mr. Dozier’s comments to his report stated that there were no sales of similar properties, i.e., child care facilities, in the past 12 months. Mr. Morris found this statement to be factually incorrect. 18. Another comment referred to “available sales histories of similar commercial properties.” Mr. Morris testified that similar commercial properties would have been other childcare facilities, not he purported comparable sales referenced in Mr. Dozier’s appraisal report. 19. Another comment referred the subject’s and comparables’ lack of “premium considerations for such items such as view, golf course, or other exterior amenities . . . .” None of these amenities would affect the value of a childcare facility. 20. Mr. Dozier also commented he had considered the subject properties’ “additional privacy, room for storage, etc.” due to its relatively larger site. Mr. Morris testified that these considerations were not relevant to an appraisal of a daycare facility. 21. Mr. Morris testified that the report’s assertion that certain properties were comparable was in error. The purported comparable sales included an industrial use property, with a two-story building on site, a historic 8-suite office building, and a liquor store. Although the report stated that the industrial use property had 1918 square feet and was built in 1920, that was not what Mr. Morris found on site. The subject property was built in 1968 and was in no way comparable to a historic office complex. Finally, although the liquor store was in close proximity, it had substantial equipment and fixtures that would not comparable to the equipment and fixtures that a child care facility would need. Mr. Dozier’s use of these sales as comparables was misleading. 22. Mr. Dozier’s report included a Multi Purpose FIRREA[4] Addendum. Mr. Morris testified this inclusion was inappropriate, because the addendum was for residential, not commercial, properties. 23. Mr. Morris testified that, if the report had been a limited use appraisal report, Mr. Dozier was required to document the limited use to the intended use, with a justification for the limitation, and include sufficient information to allow the report to be understood by another appraiser. Mr. Dozier had not done either of these things. 24. Mr. Morris testified that the subject property was being leased by a tenant for use as a daycare facility. But the report contained no income or “highest and best use” analyses if the property had been vacant, which would have been appropriate under the circumstances. 25. Mr. Morris concluded: The respondent is a certified residential appraiser, and as such does not meet the qualifications criteria to appraise commercial properties in Arizona.

There was a violation of Standard Rule 2-2, which requires a prominently stated option as to type of report. If the report was a limited use, then the Departure rule was violated. In any case, the report’s description and/or labeling is misleading.

The report repeatedly states that the report does not comply with FNMA Guidelines, but fails to state or describe the appraisal procedures followed and the reasoning that supports the analysis, opinions, and conclusions made under Standard Rule 2-2(ix) and Standard Rule 2-2(iii), physical and economic characteristics.

The subject property was and is a commercial property which was leased or rented. Standard Rule 1-4(c), the Income Approach is applicable, and would go to Standard Rule 2-2(ix), appraisal procedures and reasoning that supports.

There was a violation of Standard Rule 1-3(h) and Standard Rule 2-2(x) as the report or workfile contained no highest and best use analysis or statement.

In conclusion, under Standard 1 and Standard 2, the appraisal and report dated April 12, 2005 to Applewood Funding is not credible under Standard 1 and is misleading under Standard 2.

August 25, 2006 Appraisal Report 26. The 2006 report was prepared for Towanda Carrigan/M & I Bank. M & I Bank is a member of the FDIC. 27. Although Mr. Dozier described the 2006 report as a “Limited Use Restricted Narrative Appraisal Report,” under the standards, Mr. Morris testified that, when a financial institution is the user and lending is the use, the report must be to a summary level under USPAP Statement 10. Mr. Dozier’s report did not meet any of the federal requirements. 28. Mr. Dozier had a file only for the 2005 report, not for the 2006 report. There also was no signed certification for the 2006 report. 29. The subject property included residentially zoned parcels which Mr. Dozier’s report noted the owner was in the process of rezoning. But the report did not include any clear and conspicuous hypothetical assumption statement, which would be necessary if Mr. Dozier was assuming that commercial use would be legally allowed on the residential parcels. 30. The report referred to “paved parking.” Mr. Morris testified that, in fact, most of the parking was in a fenced area covered with gravel. 31. The report referred to the subject’s “livable area” as approximately 2,169 square feet. This reference was in error because the subject was commercial and had no livable area. The subject had only occupancy area for its intended use, which at present was a daycare facility, such as rooms sufficient to separate the three classes of children. 32. The report stated that “[a]ny possible or actual specific-use fixtures have not been given any consideration in complet[ing] this restricted-appraisal report.” Mr. Morris testified that the statement was incomprehensible. 33. The report also stated that on-street parking was available to supplement on-site parking. Mr. Morris testified that the statement was false, because no parking was allowed on Alma School Rd. where the subject was located. 34. The comparable sales in the August 2006 report were a community center, a gym, an auto repair facility, a multi- story/multi-tenant office building, a retail pad in a shopping center, and a private school with extensive parking. Mr. Morris testified that none of these properties were comparable to the subject. 35. Mr. Morris testified that USPAP requires an appraiser to use comments to explain in why he did not use an approach contemplated by USPAP, so that the absence of the approach does not undermine the credibility of the report. Mr. Dozier’s comments were nonsensical and would not have been useful to a peer in understanding the report. 36. The report cited the 2005 USPAP definition of market value, which was an error since the 2006 USPAP governed the report. Mr. Morris testified that, if the legislature has not defined “market value,” the judicial construction should be used under the case of Mandl v. City of Phoenix.[5] 37. The report contained no “highest and best use” analysis, no cost approach or income approach to valuation, which Mr. Morris would expect to see in a commercial building that was leased or rented. 38. Mr. Morris’ report concluded as to the August 2006 report: The respondent is a certified residential appraiser, and as such does not meet the Arizona Appraisal Board’s qualifications criteria to appraise the subject.

There is a violation of the Ethic Rule, Recordkeeping section, as there was no workfile or copy of the second report with a signed and dated certification.

There was a violation of the Departure rule and Statement on Standard 10 for federally related transactions.

There were violations to Standard Rule 1-1, failure to use recognized methods and techniques, errors of omission and commission, and due diligence and due care. These go to Standard Rule 2-2(ix). Failure to label hypothetical condition as required under Standard Rule 1-2(h) and Standard Rule 2- 2(vii). Violation of highest and best use under Standard Rule 1- 3(a) and (b), and Standard Rule 2-2(x).

Violation as to failure to support the exclusion of other approaches to value under Standard Rule 1-4(b) and (c) also Standard Rule 1-3(f) for sound reasons to exclude any information or procedure that would appear relevant.

Failure to support exclusion of approaches for a licensed facility that was leased prior to sale also goes to Standard Rule 2-2(vii) scope, and (xi) reason for excluding any of he usual valuation approaches.

Under Standard 1, the appraisal is not credible and under Standard 2, the report is misleading.

39. Mr. Morris provided the following other information, observations, and conclusions as to both reports: The reports were cobbled together form format rather than narrative, too-short and poorly constructed paragraphs, and inadequate appraisals. This is a strong indication that the respondent is being misleading on purpose in an attempt to avoid responsibility for an improper scope of work.

Mr. Dozier 40. Mr. Dozier did not dispute any of Mr. Morris’ conclusions or that he had violated the statutes, rules, and USPAP standards charged. 41. Mr. Dozier testified that he had never meant to break the law. He had been asked to do the appraisal by a long-time client, Applewood Funding, which was a lender that is not a member of the FDIC. He had called the Board and asked if he could appraise the commercial property. He had been told to look at the statutes, which led him to believe that, if no federal money was involved, he could appraise a commercial property. He argued that the USPAP appeared to countermand the statutory language. 42. Mr. Dozier testified that no one had lost any money as a result of the two appraisal reports. Much of the information was communicated to the lender by telephone. He spoke to Applewood Funding’s representative several times a day by telephone and even met the representative on site to inspect the subject and comparable sales. 43. Mr. Dozier testified that, before the subject had become a daycare facility, it had housed an insurance agency’s office. The building itself was not designed for a specific use. His problem was that he had been more concerned with communicating with the intended user than putting the reports in a form that would allow another appraiser to understand them. 44. Mr. Dozier testified that, in the past, the Board had brought a case against him based on his appraisal of another commercial property. But the Board had dropped the case. Mr. Dozier testified he had no notice that he had exceeded the scope of his certificate in this case until he received the Board’s complaint. As soon as he did, he canceled all pending contracts for appraisal of commercial properties. 45. Mr. Dozier only accepts clients through referrals. If a client is not 100% satisfied, he refunds the cost of the appraisal. It is cheaper to refund the money than to defend a complaint against his certificate. 46. Mr. Dozier testified that he works 60-70 hours/week doing appraisals. Most of his business concerns residential appraisals. He has taken classes from Mr. Morris. Over the years, he has performed a few appraisals of commercial properties. If the property is complex, he refers the appraisal to Jerry Huish, who has agreed to mentor Mr. Dozier so that he can get a general certificate. 47. Mr. Dozier had admitted into evidence the following letters of reference from long-term clients: 1. Myron L. Snow, the President and owner of MBS Financial, wrote that he has been using Mr. Dozier’s appraisal services for over 15 years. Mr. Snow has always found Mr. Dozier’s appraisals to be “fully researched in justifying his conclusions to lenders.” When Mr. Snow first started in the mortgage business 35 years ago, he did not sell loans, which became his “personal responsibility” if they went into default. Now that originating and selling a single home loan involves so many people, departments, and companies, “[i]t is unfortunate the concern is now is not to make a good loan, but to be creative enough at each step of the process to pass guidelines and get paid for the volume.” Mr. Snow considers Mr. Dozier to be “one of the few responsible professionals involved in this industry who still believes an appraiser’s purpose is to provide a fair valuation of the property.” 2. Mr. Dozier testified that he has performed appraisals for Rebecca Roberts of Cougar Mortgage for more than ten years. Ms. Roberts gave Mr. Dozier her “highest recommendation as his appraisal work is nearly flawless.” Lenders were generally happy with Mr. Dozier’s work. Mr. Dozier’s “appraisals are never below fair market value as is the case many times with lazy appraisers. [His] thorough research would never allow for property appraised under fair market value.” As a mortgage broker, Ms. Roberts cannot have appraisers undervalue properties “because this would lead to me losing many transactions both purchase and refinance.” She also “cannot afford to work with appraisers who ‘stretch values’ as this would mess up transactions and damage my lender/underwriter relationships which I have worked for years to develop.” 3. Jeff Takoushian of Applewood Funding stated that Applewood hired Mr. Dozier to appraise the property at 325 N. Alma School. Mr. Takoushian stated: I discussed the assignment at length with Mr. Dozier prior to his acceptance of the assignment to insure that he and I were in agreement that he was competent and capable of completing the assignment under my conditions and direction. Each assignment I give to Mr. Dozier is discussed prior to his acceptance of the assignment and Mr. Dozier has demonstrated an excellent record of capability and competency to complete the assignments that he has accepted from my company for approximately the past 13 years. On the occasion that the potential assignment is too complex for Mr. Dozier to complete, he has always declined the assignment and referred me to a Certified General Appraiser for completion.

I personally inspected the subject property and viewed the comparable sales and concluded that the report prepared for me by Mr. Dozier was acceptable to me as the intended user. The report was prepared and completed in exact compliance with my direction and met my expectations and direction, as is every appraisal assignment completed by Mr. Dozier for my company.

As a private equity lender, I do not consider such items as licenses, fixtures, inventory and other non-realty items associated with a given property. Therefore as the intended user of the appraisal reports, I instruct Mr. Dozier to exclude those items as well as any considerations for income streams and cost approach methods to value.

I lend private funds exclusively on the equity of the real estate as a building and improved land, and instruct Mr. Dozier to complete appraisal reports under those conditions, without consideration to non-realty items and other methods of value which I do not consider or use in determining a loan amount for my clients.

48. Mr. Dozier testified that he would do “whatever it takes” to keep his license. Before Ms. Suchoski, no one had ever made a complaint against any appraisal he performed. 49. Although Mr. Dozier testified that he knew that he had a residential certificate, he testified he did not know that he could not appraise a commercial property, especially if no federally guaranteed funding were involved. Mr. McDaniel 50. Mr. McDaniel testified that Applewood Funding was not a federally chartered lender. Mr. Dozier has performed appraisals for Applewood Funding for approximately 13 years. He has always provided “good fair market values.” 51. Mr. McDaniel testified that he passes the subject property twice a day, on his way to and from work. He thought that Mr. Dozier’s appraisal report provided a “good value” and Applewood Funding made the loan. He thought that the report was credible. 52. Mr. McDaniel testified that, in his opinion, the subject property as “multiple use,” in that it could be used for many different purposes with very little modification. It could be a day care facility, insurance office, or restaurant. Applewood Funding was not looking at the value of the business but the value of the land and the building. 53. Mr. McDaniel testified that he had told Mr. Dozier not to prepare an income stream or highest and best use analysis. He knew that the appraisal report was restricted use, based on his instructions to Mr. Dozier. Many of his instructions to Mr. Dozier had been oral. Mr. McDaniel was not interested in the childcare business because the tenant could move out.

54. Mr. McDaniel was satisfied with Mr. Dozier’s appraisal report of the subject property and did not find it misleading. He recommends Mr. Dozier’s work to others. He finds Mr. Dozier’s character and work product to be acceptable. 55. Over the 13 years of their association, Mr. McDaniel has referred between 200 and 300 residential appraisal assignments to Mr. Dozier. He has made four or five assignments to Mr. Dozier for appraisals of commercial buildings. He was only looking for a “fair, honest appraisal” and what he wanted was separate from any compliance with USPAP. 56. Mr. McDaniel testified that, when Applewood Funding sells or markets loans it has originated, he may show other lenders appraisals. These lenders may be FDIC insured. Ms. Amelonke 57. Ms. Amelonke met Mr. Dozier through a mutual friend. She started working as his secretary on October 1, 2005. She has since decided that she wants to build a business of her own as an appraiser. She went back to school and, although she never did well in school, has received at least 90% on tests, with Mr. Dozier’s help and support. Since Ms. Amelonke finished classes in September 2007, she has started going with him on appraisal assignments. 58. Ms. Amelonke testified that Mr. Dozier is one of the most honest and principled people she has ever known. She does not believe that he ever would have done anything he knew that he could not do. He turns away potential clients if he thinks that he cannot ethically perform the work they require.

CONCLUSIONS OF LAW

The Board bears the burden of proof and must establish that Mr. Dozier violated applicable standards, as adopted by statute and regulation, by a preponderance of the evidence.[6] “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[7] A preponderance of the evidence is “[t]he greater weight of the evidence, not necessarily established by the greater number of witnesses testifying to a fact but by evidence that has the most convincing force; superior evidentiary weight that, though not sufficient to free the mind wholly from all reasonable doubt, is still sufficient to incline a fair and impartial mind to one side of the issue rather than the other.”[8] The Arizona legislature created the Board to prescribe and enforce standards of professional appraisal practice.[9] The Arizona legislature charged the Board with investigating complaints against licensed appraisers and, if violations of applicable statute, regulation, or standard are established, disciplining appraisers’ certification.[10] Licensed and certificated appraisers’ appraisals in Arizona must comply with USPAP.[11] Members of a regulated profession are presumed to know the law and will be bound by the requirements set forth in statutes that have been enacted to regulate their profession or in regulations promulgated pursuant to those statutes.[12] A.R.S. § 32-3612(A)(2) allowed a certified residential appraiser like Mr. Dozier only to appraise “one to four residential units without regard to value or complexity.” A.R.S. § 32-3612(B) and (C) did not expand the permissible scope of Mr. Dozier’s certified residential appraisal practice but, instead, limited the scope of an exempt person’s or a licensed appraiser’s practice depending on whether the transaction was “federally related.” Neither A.R.S. § 32-3612(A) nor any of the other charged statutes and USPAP rules require intentional misconduct. Even so, Mr. Dozier’s interpretation of A.R.S. § 32-2612 is no more than self-serving wishful thinking. The Board therefore has established that, in performing the two appraisals of the subject property, Mr. Dozier exceed the scope of his certified residential certificate, in violation of A.R.S. § 32-3612(A)(2). Mr. Dozier’s and Mr. McDaniel’s testimony and Mr. Dozier’s other long-term clients’ testimonials assumed that the credibility of an appraisal report depended solely on whether the final property value assigned met the lender/client’s opinion of reasonableness, which was never defined in this record. Instead, the credibility of a valuation depends on the steps that the appraiser took to reach the valuation and whether the appraisal report complied with the industry-wide standards that the appraisal profession has codified, and the Board has adopted, in USPAP. Mr. Dozier did not dispute any of the charged violations. The Board therefore has established that Mr. Dozier violated the statutes, regulations, and USPAP provisions charged in the Complaint and Notice of Hearing.[13] Applewood Funding’s employees’ alleged understanding and approval of the April 12, 2005 appraisal report does not vitiate Mr. Dozier’s violation of the charged statutes and USPAP rules because, as noted above, applicable criteria are objective, or at least capable of being understood by a qualified appraiser, not based on the intended user’s subjective response.

Mr. Dozier’s proven violations of applicable statutes, regulations, and USPAP are numerous and severe. But the record does not show any other discipline or even complaints against his certificate during the more than years since he received his certificate. Mr. Dozier’s disciplinary history is a factor that should be considered in mitigation of any penalty that is assessed for his proven violations in this matter. By his own admission, during his career, Mr. Dozier has prepared a handful of appraisal reports for commercial properties, despite the statutory requirement of a general appraiser’s certificate and his own professional lack of competence to perform such appraisals, which was demonstrated at the hearing of this matter. But the vast majority of appraisal reports that Mr. Dozier has prepared during the more than twenty years since he received his residential appraiser certificate have been residential and the record does not show any deficiencies or violations in those residential appraisal reports. RECOMMENDED ORDER Based on the foregoing, it is recommended that the Board issue the following order against Mr. Dozier’s Certified Residential Appraiser Certificate No. 20359: 1. Commencing on the date of the Board’s decision in this matter, Mr. Dozier shall be placed on probation for one year, actively working for under the supervision of an Arizona Certified Residential Appraiser, approved by the Board. During the probationary period, Mr. Dozier’s supervising appraiser must review and sign under USPAP Standards Rule 3-3 every appraisal that Mr. Dozier performs. 2. Mr. Dozier is required to provide the Board with every appraisal that he performs during the supervised probationary period. 3. Within that probationary period, Mr. Dozier will be required to complete at least 60 hours of qualifying education courses for a Certified General Residential Appraiser, including two qualifying education courses (at least 15 hours each with exam). This course work is in addition to any continuing education required for Mr. Dozier to maintain his appraiser certification. If the courses are not completed during one year, Mr. Dozier’s license shall remain on suspension until they are. 4. If after six months of the supervision, on Mr. Dozier’s motion, the Board determines that Mr. Dozier sufficiently improved his competency to warrant a more independent practice, the Board may lift the terms of supervision to allow Mr. Dozier to complete the remainder of his probationary unsupervised. 5. If Mr. Dozier is allowed unsupervised probation, he shall file a monthly appraisal log, by the fifteenth day the month following the month logged, listing every Arizona appraisal which he has completed within the prior calendar month by property address, appraisal type, valuation date. The monthly log report may be filed by mail. 1. Mr. Dozier shall comply with Arizona statute and the Uniform Standards of Professional Appraisal Practice in performing all appraisals. 2. If Mr. Dozier does not comply with the terms of his probation, his certificate no. 20359 shall be revoked. If Mr. Dozier successfully completes probation, the Board’s order in this matter may be considered as a factor in aggravation of the penalty to be imposed for any statutory violations that the Board in the future establishes based on conduct occurring after Mr. Dozier’s successful completion of probation. 3. Mr. Dozier shall bear all costs associated by his probation, including the cost of the reviewing appraiser. Done this day, November 20, 2007.

______________________________________ Diane Mihalsky Administrative Law Judge

Original transmitted by mail this ____ day of November, 2007, to:

Arizona State Board of Appraisal Deborah G. Pearson, Executive Director 1400 West Washington, Suite 360 Phoenix, AZ 85007

By ___________________________

APPENDIX A (CHARGED VIOLATIONS)

A.R.S. § 32-3612 creates three classifications of state licensed real estate appraisers, in relevant part as follows: A. The following classifications of state licensed real estate appraisers and state certificate real estate appraisers are established:

1. State certified general real estate appraisers consisting of those persons meeting the requirements for certification relating to the appraisal or appraisal review of all types of real property.

2. State certified residential real estate appraisers consisting of those persons meeting the requirements for certification relating to the appraisal or appraisal review of one to four residential units without regard to value or complexity.

3. State licensed real estate appraisers consisting of those persons meeting the requirements for licensing relating to appraisal or appraisal review of noncomplex one to four residential units having a value of less than one million dollars and complex one to four residential units having a value of less than two hundred fifty thousand dollars.

B. Notwithstanding § 32-3602 [which sets forth certain exemptions to the licensure requirement, which are not relevant here]:

1. All federally related transactions involving property with a value equal to or greater than one million dollars and complex one to four family residential real property shall be appraised by a state certified appraiser.

2. All federally related transactions not requiring a state certified appraiser may be appraised by either a state certified or state licensed appraiser.

C. All nonfederally related transactions may be appraised either by a state certified or a state licensed appraiser.

A.R.S. § 32-3631(A) sets forth grounds for which the Board may revoke, suspend, or otherwise discipline an appraisal certificate, in relevant part as follows: 6. Violation of any of the standards of development or communication of appraisals as provided in this chapter.

7. Negligence or incompetence in developing an appraisal, in preparing an appraisal report or in communicating an appraisal.

8. Willfully disregarding or violating any of the provisions of this chapter or the rules of the board for the administration and enforcement of this chapter.

A.R.S. § 32-3635 relates to “Standards of Practice” and provides in relevant part: A. A state licensed or state certified appraiser shall comply with the standards of professional appraisal practice adopted by the board.

B. An appraisal or appraisal report shall not be issued by a real estate appraiser unless it meets the appraisal standards established by this chapter and rules adopted pursuant to this chapter.

Pursuant to A.R.S. § 32-3605(A) and (B)(1), the Board has duly promulgated administrative regulation A.A.C. R4-46-401, which for the April 12, 2005 appraisal report provided: Every appraiser, in performing the acts and services of an appraiser, shall comply with the Uniform Standards of Professional Practice (USPAP), 2005 edition, published by The Appraisal Foundation, which is incorporated by reference and on file with the Board. . . .

By the time that Mr. Dozier prepared the August 25, 2006 appraisal report, A.A.C. R4-46-401 had been amended to require appraisers to comply with the USPAP 2006 edition. Both the 2005 and 2006 USPAP Standards Rule 1-1(a) require that, “[i]n developing a real property appraisal, an appraiser must . . . be aware of, understand, and correctly employ those recognized methods and techniques that are necessary to produce a credible appraisal.” The 2005 USPAP Standards Rule 1-3(b) requires that, “[w]hen the value opinion to be developed is market value, . . . an appraiser must . . . develop an opinion of the highest and best use of the real estate.” The 2005 USPAP Standards Rule 1-4(c) requires that, “[w]hen an income approach is applicable, an appraiser must” consider certain data in his valuation based on the income approach. The 2005 and 2006 USPAP Standards Rule 2-1(a) requires that “[e]ach written or oral real property appraisal report must . . . clearly and accurately set forth the appraisal in a manner that will not be misleading.” The 2005 USPAP Standards Rule 2-2 requires that “[e]ach 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.” The 2005 USPAP does not contain a Standards Rule 2-2(iii), 2- 2(ix), 2-2(x). The 2005 USPAP Standards Rule 2-2(a) provides in relevant part as follows: The content of a Self-Contained Appraisal Report must be consistent with the intended use of the appraisal and, at a minimum:

(iii) describe information sufficient to identify the real estate involved in the appraisal, including the economic property characteristics relevant to the assignment; . . . .

(ix) describe the information analyzed, the appraisal procedures followed, and the reasoning that supports the analyses, opinions, and conclusions;

(x) state the use of the real estate existing as of the date of value and the use of the real estate reflected in the appraisal; and, when reporting an opinion of market value, describe the support and rationale for the appraiser’s opinion of the highest and best use of the real estate . . . .

The 2005 USPAP Standards Rule 2-2(b) prescribes the contents of a Summary Appraisal Report; the 2005 USPAP Standards Rule 2-2(c) prescribes the contents of a Restricted Use Appraisal Report. The 2006 USPAP Ethics—Record Keeping Provision provides: “An appraiser must prepare a workfile for each appraisal,” which must include “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 locations of such other documentation.” The 2006 Statement on Appraisal Standards No. 10 provides that as follows: Compliance with USPAP is required when either the service or the appraiser is obligated by law or regulation, or by agreement with the client or intended users, to comply. The agencies’ appraisal regulations and guidelines require appraisers’ compliance with USPAP in an assignment where the intended user of the assignment results is a federal insured depository institution and the intended use is a federally related transaction. Therefore, appraisers are bound to comply with USPAP in performing those assignments.

The 2005 USPAP included a Departure Rule, which provided in relevant part as follows: This Rule permits exceptions from sections of USPAP that are classified as specific requirements rather than binding requirements. The burden of proof is on the appraiser to decide before accepting the assignment and invoking this Rule that the scope of the work applied will result in opinions or conclusions that are credible. The burden of disclosure is also on the appraiser to report any departures from the requirements.

The 2006 USPAP deleted the Departure Rule and all references to it. The 2006 USPAP Standards Rule 1-2(g) requires that, “[i]n developing a real property appraisal, an appraiser must . . . identify any hypothetical conditions necessary in the assignment.” Standards Rule 1-2(h) requires the appraiser to “determine the scope of work necessary to produce credible assignment results in accordance with the SCOPE OF WORK RULE.” The 2006 USPAP Standards Rules 1-3(a) and 1-3(b) provide as follows: When necessary for credible assignment results in developing a market value opinion, an appraiser must:

(a) identify and analyze the effect on use and value of existing land use regulations, reasonably probable modifications of such land use regulations, economic supply and demand, the physical adaptability of the real estate, and market area trends; and

(b) develop an opinion of highest and best use of the real estate.

The 2006 USPAP contains no Standards Rule 1-3(f). The 2006 USPAP Standards Rule 1-4 provides that, “[i]n developing a real property appraisal, an appraiser must collect, verify and analyze all information necessary for credible assignment results.” Standards Rules 1- 4(b) and 1-4(c) state requirements when a cost approach or income approach is necessary for credible results. The 2006 USPAP Standards Rule 2-2 requires that “[e]ach 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.” Standards Rules 2-2(a), 2-2(b), and 2-2(c) relate to the respective requirements self-contained appraisal reports, summary appraisal reports, and restricted use appraisal reports. The 2006 USPAP contains no Standards Rules 2-2(vii), 2-2(viii), 2-2(ix), 2-2(x), or 2-2(xi). 2006 USPAP Standards Rule 2-2(c), relating to the requirements for a restricted use appraisal report, provides in relevant part: The content of a Restricted Use Appraisal Report must be consistent with the intended use of the appraisal and, at a minimum: . . . .

(vii) state the cope of work used to develop the appraisal;

(viii) state the appraisal methods and techniques employed, state the value opinion(s) and conclusion(s) reached, and reference to the workfile; exclusion of the sales comparison approach, cost approach, or income approach must be explained;

(ix) state the use of the real estate existing as of the date of value and the use of the real estate reflected in the appraisal; and, when an opinion of highest and best use was developed by the appraiser, state that opinion;

(x) clearly and conspicuously

• state all extraordinary assumptions and hypothetical conditions; and

• state that they use might have affected the assignment results . . . ----------------------- [1] See Board Ex. 1. [2] See Board Ex. 2. [3] See Board Ex. 3. Mr. Morris’ opinions are set forth infra. [4] Financial Institutions Reform, Recovery, and Enforcement Act of 1989, Pub. L. No. 101-73, 103 Stat. 183. [5] 41 Ariz. 351, 18 P.2d 271 (1933). [6] See A.R.S. § 41-1092.07(G)(2); A.A.C. R2-19-119; see also Vazanno v. Superior Court, 74 Ariz. 369, 372, 249 P.2d 837 (1952). [7] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [8] Black’s Law Dictionary at page 1220 (8th ed. 1999). [9] A.R.S. § 32-3605(A)(1). [10] A.R.S. § 32-3631(A)(2) and (6); see also A.A.C. R4-46-301 and R4-46- 302 (concerning formal hearing procedures, investigations, and penalties). [11] A.A.C. R4-46-401. [12] See State v. Soltero, 403 Ariz. Adv. Rep. 8, ¶ 7, 71 P.3d 370, ¶ 7 (App. 2003) (“‘Enactment of statutes and promulgation of regulations, where there is no defect in the legislative process, provide all the notice that is due.’” (quoting Johnson v. Iowa Dept. of Human Services, 932 F.2d 1247, 1249-50 (8th Cir. 1991)). [13] These violations are set forth in Appendix A to this recommended decision.

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