Phony Complaint Against Appraiser

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Michael Ford

General Certified Real Estate Appraiser at Michael F. Ford Appraisal
Over 28 years appraising all property types and interests, in Southern California real estate. VP/Chairman National Appraiser Peer Review Committee, American Guild of Appraisers, #44OPEIU/AFL-CIO. - Michael Ford on e-AppraisersDirectory
Michael Ford

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Review Appraiser Flawed Review... Phony Complaint Against Appraiser

…a laundry list of ‘pile on’ purported USPAP “violations” were fabricated deriving for the above oversights ‘confirmed’ by the out of area review appraiser…

In fighting or appealing a false complaint filed against you as an appraiser, truth, factual evidence and professional competency is no longer enough!

More important than all these things, is conformity to the detailed technical rules of a state’s administrative law procedures. In short, in many if not most cases, appraisers MUST HIRE AN ATTORNEY to represent them before any administrative board. Anything less, is playing with fire and your professional career. Worse, E&O won’t cover these costs.

There are many reasons for this trend, but the most fundamental one is bureaucrats cannot admit that they or their agency is in error. They will spend tens of thousands of taxpayers’ dollars to prove they could not be wrong. Let’s talk specifics. Please review the picture below.

unpaved parking

To me, this picture appears to be an unpaved portion of the lawn that is used for parking. It does not meet any known requirement for all weather off street paved parking that I am familiar with. The issue that follows hinges on whether the area where the car is parked, is a driveway or not.

Readers may check online for themselves. The address is reported in court records under Case No.: 24-C-17-003072 (Baltimore, MD) as 507 Dogwood, Glen Burnie, Md. As a matter of public record related to the case it is not confidential information and may be needed by readers to properly form their own opinions and conclusions.

Under no circumstances should existing property owners or tenants be disturbed in any way for any reason. They were not a part to the litigation or complaint. The nonclient prior owner was.

Glen Burnie is not a city. It is a census designated place (CDP) located in the unincorporated County area of Anne Arundel County, MD.

Anne Arundel County residential code (according to our Maryland based AGA researcher) requires 2 spaces per dwelling unit and 1 space per accessory unit. Three code compliant spaces would be required for this property to have a code compliant dwelling plus an in-law quarters or ADU. § 18-3-104. Parking space requirements.

I am told by our Maryland representative that the minimum requirement for a parking space is 10’ x 20’ with gravel to a depth of not less than 3 inches. (I was unable to identify this online however not all development standards appear online; and I may be checking in the wrong place).

This has never been disputed by the Maryland Commission (or even addressed as near as we can determine).

In 2015 (USPAP 2014-2015 applicable) an appraisal of a property was made for lending purposes under FHA guidelines. Approximately two to three feet of snow covered the entire outdoor area of the property. This is a neighborhood in which some properties have driveways, and some do not. It is accepted in the marketplace. The property was vacant at the time of inspection, and neither the owner nor the agent met the appraiser at the property.

The appraiser reported that there was no driveway and adjusted for it. Additionally, there was a finished basement room and a bathroom in the basement. There was no second kitchen there. The appraiser considered the finished room and bath in his analysis but did not refer to it as an “in law quarters,” or otherwise consider it to be a rentable area. There was no permit for this area as an in-law quarters or separate living area.

The appraised value was approximately $10,000 to $15,000 less than a pending sale contract for the property. The comparable sales were the most appropriate; and in my opinion properly analyzed.

The non-client owner objected to the value and filed both a civil suit for damages and a complaint with the State of Maryland. Presumably the state complaint was to buttress their civil suit claiming they were ‘forced’ to accept less than the property was worth due to a deficient appraisal.

The specific allegations stemmed from alleged descriptive errors (1) appraiser did not report & consider the patio (a concrete slab about 8’ x 10’ under the snow); (2) failed to accurately report the driveway and wrongly adjusted for its absence, and lastly (3) failed to report and ‘properly’ adjust for the claimed “in law quarters” in the basement.

snow covered subject property

It is correct that the appraiser did not identify the presence of the not visible small concrete patio slab. Net impact on market value…zero. It is false that he incorrectly reported the driveway status and basement room and bath.

The civil suit was reported by the appraiser to his E&O provider as soon as it was received. The E&O provider opted to settle for $13,000 to $15,000 rather than dispute or litigate the claim, which the appraiser told them was wrongful. As most appraisers know, E&O almost always settle such small claims because their cost of disputing them in court are higher than the settled amount. It is grossly unjust, but the appraiser can do nothing about it. Nothing.

Then the state complaint came in. It was filed by the non-client former property owner (seller). Whether vindictively filed afterward or concurrent with the civil suit makes little difference. Once made, the complaint had to be acted upon by the State of Maryland and right or wrong the appraiser was forced to defend himself.

The State of Maryland sent a review appraiser from 80+ miles away to review the appraiser’s work. This is the reviewer that the State routinely hires to perform reviews, and that is alleged to be a friend of a State Board / Commission Member.

The review appraiser reports driving by in the conduct of the review. The review states that the two-car driveway was not reported by the original appraiser and that the adjustment for its absence was improper.

The review appraiser cited the appraiser as being incorrect for failing to report the patio slab.

The review appraiser also stated very specifically that the original appraiser should have reported and considered the finished basement area as an in-law quarters worth more money than a simple finished basement area with a bath. Because the original appraiser did not view the basement room and bath (which had no door) as a separate in-law quarters the review appraiser selected ‘better comparables’ that had identified in-law quarters or ADUs.

Not surprisingly, a higher value conclusion was concluded. Also, a laundry list of ‘pile on’ purported USPAP “violations” were fabricated deriving for the above oversights ‘confirmed’ by the out of area reviewer.

Keep in mind, the reviewer did a drive-by and never personally observed the purported ‘in law’ quarters. In fact, most of his comments mirrored those of the original complainant, as an advocate for her.

The reviewer did not verify the absence of a permit for the area or whether its mere existence as a finished room was permitted. He certainly never mentioned verifying that a THREE CAR paved or three-inch-deep gravel off street parking area was required for the unpermitted, finished below grade basement area with no kitchen to be considered an in-law quarters.

The state of Maryland offered the appraiser a consent agreement and minimal fine.

The appraiser rejected it in the belief that it was unjust & even dishonest to agree to wrongdoing that he did not do.

A formal complaint was drafted by the State Attorney General’s Office and the appraiser was given an administrative hearing date before the commission / admin law judge.

He lost outright, on procedural grounds. He was not permitted to introduce factual evidence due to the requirement for legal formality to take precedence over substance or truth. When he asked the reviewer for his work file at the hearing, the response was that the reviewer didn’t bring it with him.

The appraiser was required to have a work file in support of his conclusions, but his accuser advocating for the state and the non-client complainant (the reviewer) was not.

Once an Administrative Law Court decision is rendered it is almost impossible to get it reconsidered.

This time an attorney represented the appraiser and a many page summary of facts and review were provided. The Court declined to consider the additional information, as ex parte communications.

The attorney is further appealing that decision in the belief that the court erred in interpreting the cited civil code reasons given.

Shortly prior to the hearing the judicial appeal results, the Maryland Commission had written to the appraiser that may be dropping the entire case and if the appraiser had not heard by September, he could assume that was the case.

The court specifically stated they could not and would not direct the commission to sanction the appraiser, but they did not close the door on that option either.

Make no mistake that the review appraiser will be turned in to the State under a formal and separate complaint for his deceit and egregious error or outright lies when the dust from this case settles.

Maryland has one last opportunity to do the right thing. They can properly claim legal righteousness by their technical victory on the laws of administrative procedure. They can even sanction the original appraiser now.

But to do so in the face of every objective appraiser in the country knowing they did so based on a phony complaint by a non-client; and a terribly flawed review, will undermine the public trust far more than the alleged report deficiencies ever would have…even if they had been true.

The original Maryland State Officer that prosecuted this case has retired (so I am told). The current state officials may see this as little more than judicial house cleaning and just another procedural formality to be checked off a list. I urge them to consider the underlying fundamental injustices that have taken place leading to this point.

Every Appraiser in America should be outraged over missing federal oversight; TAF ‘opinions & training’ & state practices that allow this abuse by non-clients to continue; AND state regulators to exempt themselves from USPAP compliance. It is not possible to credibly measure another appraiser’s compliance if the reviewer is not bound by the same standards.

Appraisers are seeing FNMA and others ‘review’ quality and compliance via improper AVMs daily.

USPAP compliance is no longer viewed in the context of intended use or in the context of what one’s peers would do under similar circumstance.

TAF and ASC have led state agencies to believe that they are exempt from USPAP compliance. AARO reinforces that misconception. USPAP is now a cudgel. It is a weapon against only licensed and certified appraisers. Only licensed/certified appraisers need fear it. Compliance is no protection.

Unlicensed “appraisers”, valuators and AVM operators need not worry about compliance. They are apparently exempt. Right along with state regulators & ‘investigators’ when performing reviews.

Ever appraiser that reads this needs to check their own state laws to (1) see if their procedures call for USPAP compliant appraisal reviews as part of the complaint process; (2) if their state has full time, competent appraisers on staff or whether they outsource, (3) see if their state uses consent agreement coercion to force settlements, rather than seeking truth & (4) does your state look at appraisal review as a prosecutorial exercise to be won at whatever cost; OR does it follow the Ted Whitmer, MAI, JD (TX) recommended reviewer metrics?

Every state coalition; NSAO, AGA, ASA, AI and every other respected appraisal peer / professional organization needs to make USPAP compliance by all state reviewers a priority issue.

Michael Ford

Michael Ford

Over 28 years appraising all property types and interests, in Southern California real estate. VP/Chairman National Appraiser Peer Review Committee, American Guild of Appraisers, #44OPEIU/AFL-CIO. - Michael Ford on e-AppraisersDirectory

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14 Responses

  1. Avatar CJK says:

    So, if they are parking a car in the yard the yard is now to be considered a driveway? Also, is that car sitting on top of a utility easement? Do the covenants allow for the parking cars in the yard? Man, this is getting out of hand, some review “appraisers” are total dimwits.

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  2. Avatar NickB says:

    I have an honest question, would an extraordinary assumption have protected the appraiser in this case, e.g. our findings are subject to the EA that the parking lot is a legal/permitted use?

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    • Nick. the appraiser could not even see a driveway. He did not have reason to believe such an EA could or would be applicable. Legality applied to the purported ‘in-law’ quarters. Not the drive per se. 1. The reviewer either lied about seeing a driveway, or he went to the wrong house. 2. The reviewer had no way of knowing if an inlaw quarters existed or not. The ONLY credible thing he could have done was to check for a permit and compliance BEFORE saying the appraiser was wrong and dictating new comps. The reviewer made a statement of fact on something he did not and could not have known about from the scope of work described.

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  3. Avatar mdwnlk says:

    No doubt

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  4. Matt McCormick on Facebook Matt McCormick on Facebook says:

    Exactly correct

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  5. Avatar CJK says:

    It appears that the zoning does not allow this. I see this all the time, parking the cars in the utility easements, I do not call this a driveway. The the State Board failed again. USPAP is being used as a license to get fast money out of appraisers. The appraisal foundation need to do something about this.

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  6. Avatar TruthBTold says:

    From all of the stories and things I’ve read about what state review boards are doing, a lot of their conclusions appear to be the result of a “money grab”. Those fines they collect keep their office open and everyone with a job.

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    • Avatar CJK says:

      I have also come to the same conclusion, based on what other appraisers have told me about how bad they were treated when they were reviewed. It’s as if the state is using USPAP as a tool to generate income. We are not dealing with plutonium people, all we are doing is reporting what the market is doing. The appraisers who are going to complete the desk top reports will be spending a lot of time and money with these “regulators.” It is going to be a cash cow for them when the complaints start coming in.

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      • Baggins Baggins says:

        The big corporations create all the risk, take all the profit, and leave governments helpless to regulate anyone except individuals whom can not afford equivalent representation. Thereby creating an incentive to ignore the crimes of big corporations and pursue microaggressions against any regular citizen whom dares work for them. Any other revelations? Was there ever a sunset rider to original appraisal regulation?

        There is this thing called anti trust and rico, which should have been levied against lenders a long time ago. It’s never too late. 12/23/1913 That or individual licensing for everyone to level the playing field. Individual licensing for ALL amc workers? For all lender employees involved in the loan process. For all underwriters and associated employees. For all title agency people. For all insurance people and those that work for them. That or no licensing and move back to a strictly tort contractual obligation system. That might slow down this monstrously oversized lending apparatus slightly though.

        The ingenious play of regulating one party individually, but not the other. Us little guys can not bring tort against the government, not normally. And since complaints come through the government and not the courts, the same limited redress availability is imposed. Would that be a federal tort, a state tort, something quasi? f you’ve heard the term; self asking regulation, where big corporations pretend to resist regulation but actually embrace it and actually hire the legal writers whom then implement those laws, that’s how they circumvent tort systems.

        The deck is stacked against the individual. That’s why in appraisal, we should not write reports for the clients exclusively, but should also consider the merits of laborious efforts which shield us from everyone else in the process as well. A 4 hour appraisal report? Remote typing services? Unlicensed help? Trusting hybrid inspectors? It’s not hard to guess who will be in front of the state board, and who will not. The end is near.

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  7. Avatar IMJSAYN says:

    USPAP compliance is a judgment, not a fact. Years ago, a USPAP instructor recommended to include the following in reports:

    “This report represents our good faith effort to comply with the requirements of USPAP as found in the current applicable issue. These standards contain rules and requirements that deal with the procedures to be followed in developing an appraisal, analysis, or opinion of value. Every effort has been made to produce a report that satisfies the requirements of USPAP. Therefore, the determination as to whether or not this, or any, report complies with USPAP cannot be considered to be an objective fact. Compliance is rather a subjective determination which is based upon the perception and interpretation by the client and review appraiser as to what constitutes compliance. This report is our good faith effort to comply with both the letter and intent of USPAP.”

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    • Agreed re subjective interpretation. Good statement, but one that is unnecessary IF an appraisal is reviewed in accordance with USPAP & SR3 and SR4. The ‘protective’ wording is within USPAP itself. It’s that specific wording that is being ignored by state regulators.

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      • Baggins Baggins says:

        There is one tool in the appraisers tool belt regarding this issue. Yes it’s subjective but you can always turn to it, define the problem, define the penalty being imposed, and look it up on the tables.

        The “Disciplinary Action Matrix.” Took a CE on this once. Another long boring read which every appraiser should have read at least once. Actually you should re read it every 2 years… This industry has lost sight of what it’s supposed to be regulating in the first place. These days the lenders and tech companies collude in a way which puts individual fraud in the rear view mirror.

        https://www.appraisalfoundation.org/imis/TAF/Resources/Regulatory_Information/TAF/State_Regulatory_Agency_Resources.aspx

        Can you imagine the sweeping changes to this industry if all individual amc and avm related workers were held to such a standard? Dare to dream.

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Phony Complaint Against Appraiser

by Michael Ford time to read: 8 min