ALJDEC decisions subject to certification as final

08F-2453-BOA · Board of Appraisal · 2009-02-26

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: February 10, 2009. APPEARANCES: The Arizona State Board of Appraisal was represented by Assistant Attorney General Jeanne M. Galvin. Jaime Topete did not appear. ADMINISTRATIVE LAW JUDGE: Brian Brendan Tully _____________________________________________________________________ Based upon the evidence of record, the Administrative Law Judge makes the following Findings of Fact, Conclusions of Law and Recommended Order:

FINDINGS OF FACT 1. The Arizona State Board of Appraisal (“Board”) is the authority for regulating and controlling the licensing and certification of real property appraisers in the State of Arizona. 2. There are three classifications for appraisers in Arizona: state certified general appraisers; state certified residential appraisers; and state licensed appraisers. 3. Jaime Topete (“Respondent”) is the holder of Certified Residential Appraiser Certificate No. 21207. 4. On or about July 26, 2007, the Board received a Real Estate Appraiser Violation Complaint against Respondent filed by Roger E. Beagle, Sr. A copy of the complaint was sent to Respondent. Mr. Beagle alleged that Respondent had violated provisions of Uniform Standards of Professional Appraisal Practice, 2006 edition (“USPAP 2006”) in his appraisal report prepared on December 19, 2006 for a residential property located at 3801 E. Lincoln Drive, Paradise Valley, Arizona. 5. Mr. Beagle is an appraiser. 6. On or about August 30, 2007, Respondent filed a response to Mr. Beagle’s complaint with the Board. Respondent denied the allegations contained in the complaint. 7. Mr. Beagle’s complaint against Respondent was assigned to Linda S. Beatty, a contract investigator for the Board, for investigation. Ms. Beatty is a certified general appraiser. 8. On or about December 18, 2007, Ms. Beatty submitted a written investigative report to the Board’s Executive Director, Deborah G. Pearson. After completing her investigation, Ms. Beatty opined that Respondent violated the following USPAP 2006 provisions in the subject appraisal: Standard Rule 1-1; Standard Rule 1-4; Standard Rule 1-5; and Standard Rule 2-1. Ms. Beatty further concluded that Respondent also violated the provisions of A.R.S. § 32-3635, Standards of Practice. 9. On or about January 5, 2009, the Board’s Executive Director, Deborah G. Pearson, issued a Complaint and Notice of Hearing against Respondent alleging conduct by him in violation of USPAP 2006. The Complaint and Notice of Hearing advised Respondent of the time, date and location of the formal hearing. 10. The Complaint and Notice of Hearing was delivered to Respondent’s address of record on January 6, 2009 at 7:33 a.m. 11. The commencement of the scheduled hearing was delayed approximately 15 minutes to allow for the late arrival of Respondent or an attorney authorized to represent him. After the delay the Administrative Law Judge conducted the hearing in Respondent’s absence. 12. In his appraisal report, Respondent stated that property values were increasing and marketing times were under three months. In fact, comparable sales reported marketing times from 142 to 293 days. Respondent also failed to note exposure time. 13. Respondent’s appraisal report included an out-dated Appraisal and Report Identification addendum, specifically identifying his appraisal as a Complete Appraisal, with no departures. This terminology was eliminated in the USPAP 2006. 14. Respondent’s appraisal report identifies the subject property’s improvements as good quality construction, good condition and highly upgraded. In fact, the subject property was mostly original 1975 condition and in need of significant updates, which would cost several hundred thousand dollars to bring to current Paradise Valley standards. 15. Based upon and exterior inspection and information provided by listing agents, all comparables appeared to be superior in location and upgrades. No adjustments for either of these items were noted in Respondent’s appraisal report. 16. Respondent’s appraisal report estimated the subject property value at $1,250,000.00 in the Cost Approach, indicating land value at nearly $29.00 per square foot. Adjustments to Comparables for differences in site areas are made at $1.00 per square foot. 17. Respondent’s appraisal report failed to include External Obsolescence in the Cost Approach. 18. Respondent classified the subject property as excellent quality construction at $129.34 per square foot. However, Respondent’s comparables were adjusted at $40.00 per square foot for differences in livable area. 19. Respondent’s data adjustments presented in the Sales Comparison Approach were not complete. He made no adjustment for the subject property’s location on a major arterial street. Respondent’s appraisal report lacked alternative analysis or data. 20. Respondent’s appraisal report stated that the subject property was under contract at the time of appraisal for $1,750,000.00. It had been listed for nine months at $1,375,000.00, then reduced to $1,200,000.00 and subsequently cancelled. Although Respondent stated that he analyzed the purchase contract, the only statement contained in his appraisal report was the following: “Purchase contract appears typical for market.” Respondent’s appraisal report lacked any discussion of the discrepancy between the cancelled list price and current contract price.

CONCLUSIONS OF LAW 1. The Board has jurisdiction over Respondent and the subject matter in this case. 2. Pursuant to A.R.S. § 41-1092.07(G) (2), the Board has the burden of proof in this matter. The standard of proof is preponderance of the evidence. A.A.C. R2-19-119(A). 3. Pursuant to A.R.S. § 32-3605(B)(1), the Board prescribed the USPAP 2006 as the standards of professional appraisal practice for the period of time when Respondent performed his appraisal report. 4. Respondent violated the provisions of USPAP 2006, Standard Rule 1-1 (a) and (b), which read as follows: 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;

The factual bases for this conclusion are the following: Respondent’s failure to identify the subject property’s External Obsolescence reflects a lack of knowledge of recognized methods and techniques; Respondent’s choice of superior comparables and inadequate adjustments was inconsistent with current appraisal practice; and Respondent’s failure to consider the subject property’s listing history in light of the contract price indicated a lack of knowledge of current market trends.. 5. Respondent violated the provisions of USPAP 2006, Standard Rule 1- 1(c), which reads as follows: In developing a real property appraisal, an appraiser must:

(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, affects the credibility of those results.

The above Findings describe errors and/or omissions in Respondent’s appraisal report supporting the conclusion that his appraisal report was prepared in a careless or negligent manner.

6. Respondent violated the provisions of USPAP 2006, Standard Rule 1-4(b) (iii), which reads as follows: In developing a real property appraisal, an appraiser must collect, verify, and analyze all information necessary for credible assignment results.

(b) When a Cost Approach is necessary for credible assignment results, an appraiser must:

(iii) analyze such comparable data as are available to estimate the difference between the cost new and the present worth of the improvements (accrued depreciation).

7. Respondent violated the provisions of USPAP 2006, Standard Rule 1- 5(a), which reads as follows: When the value opinion to be developed is market value, an appraiser must, if such information is available to the appraiser in the normal course of business:

a) analyze all agreements of sale, options, and listings of the subject property current as of the effective date of the appraisal;

The basis for this violation is Ms. Beatty’s conclusions that Respondent failed to include any explanation for the subject property’s estimated market value to be $550,000.00 over the most listed list price, and his failure to discuss or analyze the subject property’s marketing history. 8. Respondent violated the provisions of USPAP 2006, Rule 2-1(a), which reads as follows: 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.

Ms. Beatty expressed the following criticisms of Respondent’s appraisal report to support this violation: Respondent “chose superior comparables with unsupported adjustments”; “Numerous errors were discovered throughout the report”; and, “[t]he omission of any analysis or consideration of the subject’s contract price compared to its marketing history would suggest that the appraisal report was prepared in a careless or negligent manner and resulted in a misleading report.” 9. Respondent violated the USPAP 2006, Ethics Rule – Conduct. The factual basis for this conclusion is the above-described Conclusion No. 8. 10. Respondent’s above-described violations of USPAP 2006 constitute a violation of A.R.S. § 32-3635(a) and (b). 11. Pursuant to A.A.C. R4-46-301, the Board may utilize its Substantive Policy Statement #1, Guidelines for Board Complaint Resolution, in this matter. The Administrative Law Judge concludes that Respondent’s violations in this matter constitute Level III violations, which are described as follows: Violations found with substantial errors or a series of errors that in the aggregate may affect the credibility of the assignment. Minor violations of ethics and/or competency may be found. Violations found rise to the level of affecting the credibility of the assignment.

Pursuant to the Board Complaint Resolution Chart, the following disciplinary actions are appropriate in this matter: Order of Probation with Education, Mentorship and/or Practice Restrictions.

RECOMMENDED ORDER Respondent’s Certified Residential Appraiser Certificate No. 21207 shall be placed on probation for 12 months commencing on the effective date of the Order entered in this matter, subject to the following terms and conditions: 1. Respondent shall service his probation with mentorship. Respondent shall submit the name and resume of a mentor within thirty days from the effective date of the Order entered in this matter. Respondent’s mentor must be approved by either the Board or its Executive Director. 2. The approved mentor shall review and co-sign all appraisal reports prepared by Respondent during his probationary period. 3. Respondent shall prepare a minimum of 12 appraisal reports during his probationary period. 4. Respondent shall successfully complete 12 hours of coursework in sales approach and analysis, and a six-hour mortgage fraud course. Such coursework shall be completed within six months from the effective date of the Order entered in this matter and shall be in addition to any required continuing education requirements. 5. Respondent shall maintain a monthly appraisal log. 6. Respondent’s approved mentor shall submit a monthly report regarding Respondent’s progress to the Board. 7. Respondent may request an early termination of his probation if the above-described terms have been completed within six months of the effective date of the Order entered in this matter.

Done this day, February 26, 2009

______________________________________ Brian Brendan Tully Administrative Law Judge

Original transmitted by mail this ____ day of ____________, 2009, to:

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

By ___________________________ -----------------------

Office of Administrative Hearings 1400 West Washington, Suite 101 Phoenix, Arizona 85007 (602) 542-9826