DEPARTMENT OF STATE

OFFICE OF THE SECRETARY OF STATE

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In the Matter of

DEPARTMENT OF STATE

DIVISION OF LICENSING,

Respondent,DECISION ON APPEAL

                                                                                                            06 DOSAPP 09

               - against -

ROBERT G. BUCKLES, JR.

                                                Appellant.

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            By Decision dated November 29, 2007 (2212 DOS 07), Administrative Law Judge Scott NeJame (the “ALJ”) determined that Robert G. Buckles, Jr. (the “Appellant”) violated Executive Law §§160-d(2)(a), 160-d(2)(b)(1, 5, 7, 8), 160-d(3)(a)(2, 3, 6), 160-d(3)(c)(3), 160-d(3)(f), 160-u(1)(f), and 160-u(1)(h), and, through 19 NYCRR 1106.1, violated Uniform Standards of Professional Appraisal Practice (“USPAP”) Standards Rules 1-1(b), 1-1(c), 1-5(a), 1-5(b), 2-1(a), 2-1(b), 2-1(c), 2-2, 2-2(c)(i), 2-2(c)(iv), 2-2(c)(ix), and 2-2(c)(xi). The ALJ suspended Appellant’s certification as a general real estate appraiser for a period of one year and ordered Appellant to refund the fees he received for certain appraisals he prepared.

            On December 21, 2007, Appellant applied for a stay pending this appeal. By Decision and Order dated January 2, 2008 (01 DOSAPP 08), the Department of State stayed the suspension of Appellant’s certification “and all other suspensions and fines ordered in the [ALJ’s Decision] . . . pending the outcome of the decision on appeal” (01 DOSAPP 08 at p. 5).

PROCEDURAL BACKGROUND

            The Notice of Hearing and Complaint were served on Appellant by certified mail delivered on June 19, 2006 (State’s Ex. 1). A hearing before the ALJ was originally scheduled for August 14, 2006 (Id.). The hearing was adjourned to September 20, 2006 and then to October 16, 2006 (State’s Ex. 2). Appellant did not appear, in person or by counsel, at the October 16, 2006 hearing. The Division of Licensing Services (“DLS”) appeared, called three witnesses and introduced fifteen exhibits into evidence (State’s Ex.’s 1-15).

            By letter dated October 23, 2006, the attorney then representing Appellant in this matter submitted a notice of appearance and requested the hearing be re-opened and placed back on the ALJ’s calendar. DLS consented to this request, and the ALJ re-opened the hearing. The re-opened hearing was scheduled to be held on November 13, 2006.

            By letter dated October 27, 2006, the attorney currently representing Appellant requested an adjournment of the hearing. The ALJ granted that request, and the hearing was adjourned to December 11, 2006. By letter dated November 13, 2006, Appellant’s attorney requested an adjournment to January 2007. At some point, it became apparent to the parties and the ALJ that it would require more than one day to complete the re-opened hearing. The ALJ adjourned the matter first to January 22, 24 and 29, 2007, then to February 7 and 8, 2007, and finally to February 12 and 15, 2007.

            The re-opened hearing was held on February 12 and 15, 2007. At the conclusion of the hearing, the ALJ granted Appellant’s attorney thirty days from the date that the hearing transcripts were made available to submit a brief containing his closing argument and any law he deemed appropriate. DLS was granted thirty days from the date she received Appellant’s brief to submit a responsive brief.

            On April 26, 2007, the ALJ received both the February 12 and 15, 2007 hearing transcripts from the reporter. The ALJ concluded that Appellants’s brief was due thirty days after that date, or on May 26, 2007 (2212 DOS 07, at p. 2). The ALJ did not receive a brief from either party and, on November 29, 2007, the ALJ issued his Decision.

            On December 7, 2007, Appellant’s attorney faxed a letter to the ALJ asking the ALJ to rescind his November 29, 2007 Decision. Appellant’s attorney argued that he had not yet received the hearing transcripts and, accordingly, that the thirty days within which Appellant’s post-hearing brief was due had not begun to run. By letter dated December 12, 2007, the ALJ denied Appellant’s attorney’s request to rescind the Decision, indicating that it was his (Appellant’s attorney’s) obligation to contact the Reporter and to make arrangements to obtain the hearing transcripts. By letter dated December 17, 2007, Appellant’s attorney again asked the ALJ to rescind his Decision, and by letter also dated December 17, 2007, the ALJ again denied the request.

            As indicated above, on December 21, 2007, Appellant applied for a stay. In the papers submitted in support of the application for a stay, Appellant’s attorney argued that he did not submit a post-hearing brief to the ALJ because he (Appellant’s attorney) had not yet received the hearing transcripts, and was not aware that the transcripts were “available” until he received the ALJ’s Decision. In the January 2, 2008 Decision and Order granting the stay, the Department of State directed Appellant to submit both his post-hearing brief and his memorandum of appeal to the Secretary of State on or before January 31, 2008 (01 DOSAPP 08 at p. 5). The Decision and Order also granted Appellant permission to combine the post-hearing brief and memorandum of appeal in a single document (Id.).

            On January 7, 2008, DLS submitted a Notice of Cross-Appeal.

            On January 29, 2008, Appellant submitted a “Combined Post-Hearing Brief and Memorandum of Appeal.” On February 12, 2008, DLS submitted a “Combined Memorandum of Law in Opposition of Appeal and Motion for Cross-Appeal.” On February 26, 2008, Appellant submitted a “Reply to Combined Memorandum of Law in Opposition of Appeal and Response to Cross-Appeal.”

FINDINGS OF FACT

            Based on the record, the Department of State makes the following findings of fact in this matter:

Appellant’s Certification

            (1) Appellant was, at all relevant times, certified as a general real estate appraiser (State’s Ex. 3).

The Stack Appraisals

            (2) The Town of Walkill, New York sought to appropriate a certain parcel of vacant land in an eminent domain proceeding. Initially, James Stack, the owner of the subject vacant land, obtained an appraisal from an appraiser who was certified by the Department of State as a general real estate appraiser, but was not a member of the Master Appraisal Institute (“MAI”). However, when Mr. Stack attempted to submit that appraisal to the court in the eminent domain proceeding, he was advised by the court that he needed to obtain an appraisal from an appraiser who was a member of the MAI (10/16/06 Transcript [“TR”] at pp. 10-11).

            (3) In or prior to March 2005, Mr. Stack hired Appellant to appraise the subject vacant land. Mr. Stack advised Appellant that he (Mr. Stack) needed an MAI appraiser for the eminent domain proceeding. Appellant assured Mr. Stack that one of the appraisers employed in Appellant’s appraisal business was a member of MAI. Mr. Stack paid Appellant $1,500 for an appraisal of the subject vacant land (10/16/06 TR at pp. 10-12).

            (4) Mr. Stack hired Appellant because of Appellant’s assurance that he (Appellant) would provide Mr. Stack with an appraisal report prepared by an MAI member appraiser.

            (5) Neither Appellant nor anyone in Appellant’s employ was an MAI member appraiser.

            (6) On or about March 22, 2005, Appellant submitted an unbound appraisal report (the “Unbound Appraisal Report”) for the subject vacant property to Mr. Stack. In the Unbound Appraisal Report (State’s Ex. 4), Appellant appraised the subject vacant property at $60,000 as of January 24, 2001. The second page of the Unbound Appraisal Report contains the following statement: “Please note this appraisal is not for court purposes, this appraisal is for preliminary use only.”

            (7) The Unbound Appraisal Report:

            (a)       did not prominently state the type of report (self-contained, summary, or restricted use) it was intended to be;

            (b)       failed to state the real property interest (fee simple, leasehold, etc.) being appraised;

            (c)       failed to give an opinion of the highest and best use of the property;

            (d)       failed to include a signed certification in accordance with Standards Rule 2-3;

            (e)       failed to analyze all sales of the subject property that occurred within the three years prior to the effective date of the appraisal, or to state that there had been no sales of the subject property within that three year period; and

            (f)        used the following as comparables: three lots which were adjacent to each other and which were all sold on the same date, approximately fifteen (15) months after the January 24, 2001 valuation date; one lot which was sold approximately four (4) months after the valuation date; and one lot which was sold approximately twenty two (22) months after the valuation date.

            (8) At some point, apparently after Mr. Stack complained to DLS and a DLS License Investigator paid a visit to Appellant, Appellant sent a bound appraisal report (the “Bound Appraisal Report”) to Mr. Stack. The Bound Appraisal Report (State’s Ex. 5) is dated the same date as the Unbound Appraisal Report (March 22, 2005), values the subject vacant land as of the same date as the Unbound Appraisal Report (January 24, 2001), and uses the same comparables as the Unbound Appraisal Report. However, the Bound Appraisal Report indicates that the value of subject vacant land is $65,000, or $5,000 more than the value indicated in the Unbound Appraisal Report.

The Middletown Appraisal

            (9) Eastview Condominiums is a fully approved 200 unit condominium project located in the City of Middletown, New York (“the City”). Phase I of the project included 64 condominium units (4 buildings, each building containing 16 units). Those 64 units were constructed and sold. No additional units were constructed. In or about 2004, the City acquired the remaining 136 vacant condominium parcels through a tax foreclosure proceeding commenced by the City. The 136 vacant condominium parcels acquired by the City are hereinafter referred to as the “Eastview Property.”

            (10) The City hired Appellant to appraise the Eastview Property and, on or about August 6, 2004, Appellant prepared an appraisal report for the Eastview Property. In his report (State’s Ex. 9), Appellant appraised the Eastview Property at $503,000 as of June 30, 2004.

            (11) The City of Middletown paid Appellant $1,500 for the appraisal (10/16/06 TR at p. 23).

            (12) Appellant’s appraisal report of the Eastview Property:

            (a)       did not prominently state the type of report (self-contained, summary, or restricted use) it was intended to be;

            (b)       failed to state the identity of the client, by name or type;

            (c)       failed to state a prominent use restriction that limits use of the report to the client and warns that the appraiser’s opinions and conclusions set forth in the report may not be understood properly without additional information in the appraiser’s workfile;

            (d)       failed to state the real property interest (fee simple, leasehold, etc.) being appraised;

            (e)       failed to give an opinion of the highest and best use of the property;

            (f)        failed to include a signed certification in accordance with Standards Rule 2-3;

            (g)       failed to analyze all agreements of sale, options, and listings of the subject property current as of the effective date of the appraisal, and failed to mention the status of the City’s sale of the Eastview Property or whether the City had or had not listed the property for sale; and

            (h)       failed to analyze all sales of the subject property that occurred within the three years prior to the effective date of the appraisal, or to state that the property had not been sold within the past three years, and failed to mention the past length of ownership of the property.

            (13) Appellant’s appraisal report included only two comparables. The valuation date in Appellant’s appraisal report was June 30, 2004; however, the sale date for one of the comparables used by Appellant was October 30, 2000 (three years and eight months prior to the valuation date), and the sale date for the other comparable used by Appellant was January 1998 (more than six years prior to the valuation date).

            (14) The comparables used by Appellant in his appraisal report were suggested to him in a letter sent to him by R. J. Smith Realty on May 21, 2004 (State’s Ex. 8, State’s Ex. 9). Brian Rogers, a New York State certified appraiser, reviewed Appellant’s work file at the request of DLS. In response to the question “Was there anything in the work file to indicate that [Appellant] did any independent investigation or considered any comparables other than those suggested by R. J. Smith?” Mr. Rogers answered “There is nothing in this file” (10/16/06 TR at pp. 47-48).

            (15) At the hearing before the ALJ, Appellant claimed that while the entire Eastview Condominium project was initially approved, he “was told” that the Eastview Property (the 136 condominium parcels acquired by the City) needed “to go through the approval process again” (2/12/07 TR at p. 213). However, Appellant’s appraisal report states that: “The subject property was approved for 200 condominiums, however, phase one was completed, but the majority of the project has remained unfinished. The purpose of this appraisal is to estimate the market value of the remaining approved sites which is 136 sites” (State’s Ex. 9, emphasis added). Nothing in Appellant’s appraisal report indicates that the approvals were no longer in effect, that new approvals would have to be obtained, or that the property being appraised was simply vacant land that would have to go through a lengthy approval process, with no guaranty that the approval process would be successful.

            (16) Appellant was aware that the existence of approvals, or lack thereof, would have a substantial impact on the value of the Eastview Property.

            (17) Appellant’s appraisal report also states that “(t)he purpose of the valuation is to estimate the market value of the subject property as of the date of valuation for a possible sale of the property” (State’s Ex. 9). Thus, Appellant was aware that the City intended to sell the property, and that the City would use Appellant’s appraisal in determining the selling price.

            (18) In December of 2004, the City sold the Eastview Property to Emperor Development Co., LLC for $503,000 - exactly the value stated in Appellant’s appraisal report (State’s Ex. 10 [Complaint, paragraphs 22-23, Exhibits B and C]).

            (19) Approximately four months later, Emperor Development Co., LLC sold the Eastview Property to Eagles Point Assoc., LLC for $3,400,000 (State’s Ex. 10 [Complaint, paragraph 24, Exhibit D]).

            (20) After Emperor Development Co., LLC sold the Eastview Property to Eagles Point Assoc., LLC, the City obtained an appraisal of the Eastview Property from Empire State Appraisal Consultants, Inc. (“Empire Appraisal”). On or about September 6, 2005, Empire Appraisal submitted its appraisal report appraising the Eastview Property at $3,125,000 as of June 30, 2004 (State’s Ex. 12).

OPINION

            The Department of State is authorized to investigate the actions of a State certified or licensed real estate appraiser, and to revoke or suspend the rights of a certificate or license holder or otherwise discipline a State certified or licensed real estate appraiser for certain acts or omissions, including violation of any of the standards for the development or communication of real estate appraisals as provided in Article 6-E of the Executive Law (Executive Law §160-u[1][f]), or negligence or incompetence in developing an appraisal, in preparing an appraisal report, or in communicating an appraisal (Executive Law § 160-u[1][h]).

            Executive Law § 160-d(2) directs the State Board of Real Estate Appraisal (the “State Board”) to promulgate rules and regulations prescribing the form and content of each appraisal report, and specifies certain minimum requirements that must be included in the State Board’s rules and regulations. Executive Law § 160-d(3) directs the State Board to establish standards of developing an appraisal, and specifies certain minimum guidelines that must be included in those standards.

            The rules and regulations promulgated by the State Board include 19 NYCRR § 1106.1 (Appraisal Standards), which provides that every appraisal assignment shall be conducted and communicated in accordance with the certain specified provisions and standards set forth in the 2006 edition of the USPAP.

The Stack Appraisals

            The Unbound Appraisal Report did not prominently indicate the type of report (self-contained, summary, or restricted use) it was intended to be, in violation of USPAP Standards Rule 2-2. Assuming that the Unbound Appraisal Report was a restricted use appraisal report, it:

•          failed to state the real property interest (fee simple, leasehold, etc.) being appraised, in violation of USPAP Standards Rule 2-2(c)(iv);

•          failed to state Appellant’s opinion of the highest and best use of the property, in violation of USPAP Standards Rule 2-2(c)(ix); and

•          failed to include a signed certification in accordance with USPAP Standards Rule 2-3, in violation of USPAP Standards Rule 2-2(c)(xi).

            The Unbound Appraisal Report contained no analysis of sales of the subject property that occurred within the three years prior to the effective date of the appraisal. Appellant testified that the subject property was not sold within that three year period. However, the Unbound Appraisal Report failed to state that there had been no sales of the subject property within that period. The Department of State agrees with the ALJ’s determination that this is a defect in the Unbound Appraisal Report.

            The ALJ found that Appellant used unreasonable comparables in both the Unbound Appraisal Report and the Bound Appraisal Report. In response to this finding, Appellant asserts on this appeal that “there is no proof (or allegation) that the use of post-appraisal date comparables resulted in a deficient valuation of the property” (Appellant’s Combined Post-Hearing Brief and Memorandum of Appeal, at p. 13). However, the use of post-valuation date comparables was only one of several factors cited by the ALJ in his determination that Appellant’s comparables were unreasonable. Even then, the ALJ did not condemn the use of any post-valuation date comparables in an appraisal. Indeed, the ALJ expressly stated that “the tribunal does not find that the use of comparables after the date of valuation is a per se violation of the USPAP Standards” (ALJ’s Decision, 2212 DOS 07, Opinion and Conclusion of Law IV [d] at p. 7). What the ALJ found objectionable was the fact that Appellant used only post-valuation date comparables: “Not some but all of the comparables used in the [Appellant’s] appraisal were after the date of valuation” (Id., emphasis added).

            The Appraisal Foundation’s Statement on Appraisal Standards No. 3, which addresses the issue “When a retrospective effective date is used, how can the appraisal be prepared and presented in a manner that is not misleading?,” supports the proposition that the use of only post-valuation date comparables can render an appraisal misleading:

“A retrospective appraisal is complicated by the fact that the appraiser already knows what occurred in the market after the effective date of the appraisal. Data subsequent to the effective date may be considered in developing a retrospective value as a confirmation of trends that would be reasonably considered by a buyer or seller as of that date . . . . (A)t some point distant from the effective date, the subsequent data will not reflect the relevant market. . . . In the absence of evidence in the market that the data subsequent to the effective date were consistent with and confirmed market expectations as of the effective date, the effective date should be used as the cut off date for data considered by the appraiser” (The Appraisal Foundation’s Statement on Appraisal Standards No. 3, emphasis added).

If only post-valuation date comparables are used, the appraiser cannot determine that those sales are consistent with, and confirm, market expectations as of the effective date and, accordingly, the appraiser cannot determine that those sales reflect the relevant market.

            The ALJ also cited the fact that three of the comparables (viz., the three lots which were adjacent to each other and which sold on the same date) were sold one year and three months after the valuation date, and the fact that the remaining comparable was sold almost two years after the valuation date, as reasons for finding that the comparables were unreasonable (ALJ's Decision, 2212 DOS 07, Opinion and Conclusion of Law IV [d] at p. 7).

            The Department of State agrees with the ALJ’s determination that Appellant used unreasonable comparables in both the Unbound Appraisal Report and the Bound Appraisal Report.

            It should also be noted that in the case of Comparable #4, the Unbound Appraisal Report indicated that the selling price was $80,592, while the Bound Appraisal Report indicated that the selling price was $90,000. This indicates that Appellant made a serious error in reporting the selling price of a comparable in (at least) one of the two appraisal reports he prepared for Mr. Stack’s vacant land.

            Appellant notes that the Unbound Appraisal Report was, by its own terms, a “preliminary” report, and Appellant appears to argue that the “preliminary” nature of the Unbound Appraisal Report should excuse the violations found therein. It does not. Executive Law Article 6-E, 19 NYCRR Part 1106 and the applicable USPAP Standards Rules make no allowance for a so-called “preliminary” report, and do not permit an appraiser to ignore the applicable standards when he or she prepares a so-called “preliminary” report. Executive Law §160-d(2) directs the State Board to promulgate rules and regulations “prescribing the form and content of each appraisal report.” USPAP Standards Rule 2-2 provides that “each written real property appraisal report must be prepared under one of the following three options and prominently states which option is used: Self-Contained Appraisal Report, Summary Appraisal Report, or Restricted Use Appraisal Report.” USPAP Standards Rule 2-2(c) specifies that the content of even a restricted use appraisal report must, at a minimum, include the items described in 2-2(c), including a statement of the real property interest (fee simple, leasehold, etc.) being appraised, a statement of the appraiser’s opinion of the highest and best use of the property, and a signed certification in accordance with USPAP Standards Rule 2-3. Appellant’s Unbound Appraisal Report is an appraisal report and, notwithstanding Appellant’s characterization of the Unbound Appraisal Report as “preliminary,” Appellant’s Unbound Appraisal Report is subject to the USPAP standards mentioned above.

            The ALJ found an additional violation not directly related to the content of the appraisals. The ALJ found that Mr. Stack needed an appraisal prepared by a member of the MAI, that Mr. Stack advised Appellant of this need, and that Appellant represented to Mr. Stack that an appraiser employed by Appellant was a member of the MAI and that Appellant could provide Mr. Stack with the required MAI appraisal. This finding is supported by Mr. Stack’s testimony, which the ALJ observed and found credible.

            Appellant’s attorney did not ask Appellant any questions about the allegation that he (Appellant) assured Mr. Stack that he could provide Mr. Stack with an MAI appraisal. Appellant made some unsolicited statements on this matter (2/15/07 TR at pp. 128-130); however, the ALJ observed Appellant’s testimony and expressly found that it was not credible (ALJ's Decision, 2212 DOS 07, Finding of Fact No. 4 at p. 3).

            Under the substantial evidence standard applicable in administrative proceedings, credibility determinations of an ALJ are to be given great weight. The ALJ is in the best position to judge the credibility of the witnesses, and the ALJ’s decision will not be changed on appeal provided it is supported by substantial evidence. Upon reviewing the record in this matter, the Department of State finds no basis for setting aside the ALJ’s findings, and the Department of State adopts those findings for the purposes of this appeal.

            Appellant was not a member of the MAI and did not employ an appraiser who was a member of the MAI. The Department of State concurs with the ALJ’s determination that when Appellant accepted an assignment that he knew called for an MAI appraisal, he violated Executive Law § 160-d(3)(f) and the USPAP Standards Competency Rule.

            Appellant also argues that the ALJ’s findings regarding the Stack appraisals should be overturned because of a “serious disagreement between counsel for [DLS] and Appellant’s counsel as to whether [DLS’s] counsel represented that the Stack incident had been dropped by [DLS]” (Appellant’s Combined Post-Hearing Brief and Memorandum of Appeal, at p. 14). Yet, the portion of the record cited by Appellant for this proposition (2/15/07 TR at pp. 95-105) appears to reflect an attempt by Appellant’s attorney to obtain an agreement to drop the “Stack incident” and not an argument that the matter had in fact already been dropped. Further, after the ALJ stated that “everything that is in the complaint is on the table here before me” (2/15/07 TR at p. 105), Appellant’s attorney requested, and received, a recess to confer with his client (the Appellant), and then proceeded with a detailed direct examination of Appellant on the Stack matter (2/15/07 TR at pp. 108-128). It should also be noted that prior to the February 15, 2007 hearing, Appellant’s attorney had the opportunity to review the transcript of the original hearing in this matter, which contained Mr. Stack’s entire testimony. This afforded Appellant and Appellant’s attorney more than ample opportunity to prepare any defense or rebuttal. The Department of State finds no reason to overturn any of the ALJ’s findings or determinations with regard to the Stack appraisals.

The Middletown Appraisal

            Appellant’s appraisal report for the Eastview Property in the City of Middletown did not prominently indicate the type of report (self-contained, summary, or restricted use) it was intended to be, in violation of USPAP Standards Rule 2-2.

            Appellant indicated at the hearing that this report was a restricted use report. This after the fact assertion does not cure the violation of Rule 2-2 by the report itself. However, even if it is assumed that the report was a restricted use appraisal report, the report:

•          failed to identify the client, by name or type, in violation of USPAP Standards Rule 2-2(c)(i);

•          failed to state a use restriction that limits the use of the report to the client and warns that the appraiser’s opinions and conclusions set forth in the report may not be understood properly without additional information in the appraiser’s workfile, in violation of USPAP Standards Rule 2-2(c)(i);

•          failed to state the real property interest (fee simple, leasehold, etc.) being appraised, in violation of USPAP Standards Rule 2-2(c)(iv);

•          failed to state Appellant's opinion of the highest and best use of the property, in violation of USPAP Standards Rule 2-2(c)(ix); and

•          failed to include a signed certification in accordance with USPAP Standards Rule 2-3, in violation of USPAP Standards Rule 2-2(c)(xi).

            The Eastview Property Appraisal Report failed to state that there had been no sales of the Eastview Property within the three years prior to the valuation date. The Department of State agrees with the ALJ's determination that this is a defect in the Eastview Property Appraisal Report (see USPAP Standards Rule 1-5[b], USPAP Advisory Opinion AO-1, and the discussion at footnote 2 above).

            Appellant used only two comparables in the Eastview Property Appraisal Report. While the use of only two comparables is not, by itself, a per se violation of the applicable standards, the use of only two comparables coupled with the fact that the comparable sales were so remote in time from the valuation date (almost four years for one, more than six years for the other) renders the comparables unreasonable (see USPAP Standards Rule 1-1[b] and 1-1[c]).

            Without minimizing the seriousness of the foregoing violations, the most significant violation reflected in the Eastview Property Appraisal Report is Appellant’s failure to identify correctly the status of the Eastview Property as “approved” or “not approved” (or, for that matter, as “previously approved but needing to go through the approval process again”).

            Executive Law § 160-d(3)(a) provides that all state certified or licensed real estate appraisers conducting certified or licensed appraisals, performing appraisal service or issuing an appraisal shall:

“(1) Be aware of, understand and correctly employ those recognized appraisal methods and techniques that are necessary to produce a credible analysis, opinion or conclusion;

“(2) Not commit a substantial error or omission of commission which results from a significant departure from the recognized appraisal methods and techniques;

“(3) Not commit a substantial error or omission of commission that significantly affects an analysis, opinion or conclusion”.

            These requirements are also reflected in USPAP Standards Rule 1-1, which is made applicable by the State Board’s rules and regulations (19 NYCRR § 1106.1). Stated simply, these requirements mean that “(a)n appraiser must use sufficient care to avoid errors that would significantly affect his or her opinions and conclusions” (Comment to USPAP Standards Rule 1-1[b]).

            USPAP Standards Rule 1-2(e), which is also made applicable by the State Board’s regulations, provides that “(i)n developing a real property appraisal, an appraiser must . . . identify the characteristics of the property that are relevant to the type and definition of value and intended use of the appraisal, including: (i) its location and physical, legal, and economic attributes . . .” (emphasis added).

            Appellant’s Eastview Property Appraisal Report stated that “the purpose of the valuation is to estimate that market value of the subject property as of the date of valuation for a possible sale of the property” (State’s Ex. 9) and that (t)he purpose of the appraisal is to estimate the market value of the remaining approved sites which is 136 sites” (Id., emphasis added). Thus, Mayor DeStefano, the Mayor of the City of Middletown and the addressee named in Appellant’s Eastview Property Appraisal Report, was led to believe that the Eastview Property had been appraised as 136 approved sites, and that the fair market value of those 136 approved sites - and the appropriate price to ask in a sale of those 136 approved sites - was $503,000.

            However, Appellant admits that he used “similar projects with lapsed or defunct approvals” as the comparables in his Eastview Property Appraisal Report (Appellant’s Combined Post-Hearing Brief and Memorandum of Appeal, at p. 11). Accordingly, Appellant used comparables (projects with lapsed or defunct approvals) that were inconsistent with the stated purpose of the appraisal, viz., to appraise the market value of 136 approved sites.

            Appellant himself, through his own testimony and through testimony of witnesses he called, established that in the case of property such as the Eastview Property, the presence or absence of approvals can have an enormous impact on valuation. Thus, the following conclusion is inescapable: by using projects without approvals as the comparables in an appraisal report, but then labeling the appraisal report as one in which property consisting of 136 approved sites was being appraised, Appellant prepared and communicated an appraisal report that was seriously misleading.

            Appellant argues strenuously that he “believed that the [Eastview Property] had lapsed or defunct approvals” (Appellant’s Combined Post-Hearing Brief and Memorandum of Appeal, at p. 11). Yet, even if Appellant did harbor such a belief, and even if he selected the comparables because of that belief, Appellant remains guilty of negligently preparing and communicating an appraisal report that stated that he was appraising approved lots. Because of Appellant’s appraisal, the City of Middletown believed that the fair market value of the 136 approved sites it acquired was $503,000. On December 30, 2004, the City of Middletown sold those sites to Emperor Development Co., LLC for exactly that sum. A few months later, on April 11, 2005, Emperor Development Co., LLC sold those same 136 approved sites to Eagles Point Assoc., LLC for $3,400,000.

            Appellant argues that the difference between the value of the Eastview Property as set forth in Appellant’s appraisal report ($503,000) and the price receive by Emperor Development when it sold the property to Eagles Point ($3,400,000)

“. . . derives from the fact that the ‘bundle of rights’ conveyed by the City to Emperor was vastly different from the ‘bundle of rights’ conveyed by Emperor to [Eagles] Point. . . . (G)ranting approval for subdivision is a lengthy, costly, time-consuming process that offers no promise of ultimate success. As the Emperor to [Eagles] Point conveyance was contingent upon, and actually had set forth in the instrument of conveyance, such approvals, it bears no resemblance to the conveyance from the City to Emperor. To compare the simple ‘quit claim’ deed from the City to Emperor to the subsequent deed from Emperor to [Eagles] Point is to make an unfair comparison between ‘apples and oranges.’ In this case, the oranges were worth considerably more than the apples” (Appellant’s Combined Post-hearing Brief and Memorandum of Appeal, at pp. 11-12).

            In making this argument, it appears that Appellant is attempting to suggest that the Eastview Property approvals had “lapsed” or become “defunct” before the City acquired the property; that those approvals were “lapsed” or “defunct” when the City sold the property to Emperor Development; that Emperor Development was able to go through some “lengthy, costly, time-consuming” approval process in the short time (less than 3 ½ months) between the date it acquired title from the City and the date it transferred title to Eagles Point; and that Emperor Development was able to convey something to Eagles Point that was much more valuable than that which it acquired from the City.

            This argument is entirely without merit.

            The “instrument of conveyance” between Emperor Development and Eagles Point is a bargain and sale deed with covenant against grantor’s acts, a copy of which is attached to the Complaint in the Supreme Court action commenced by the City against Appellant (see Exhibit D attached to State’s Ex. 10). The deed conveys 136 condominium units in

“that certain Condominium known as Eastview Condominium, created by a certain Declaration recorded October 24, 1988 . . . as amended by declaration dated February 12, 1990 . . . TOGETHER with the undivided percentage interests in the Common Elements . . . for each Unit described in the said Declaration . . . TOGETHER WITH and SUBJECT TO all rights, duties, obligations, restrictions and other matters and provisions set forth in said Declaration, By-Laws and Floor Plans filed and recorded therewith as the same may be amended from time to time . . .” (emphasis added).

The “approvals” referred to in the “instrument of conveyance” are the condominium declarations, by-laws and floor plans, all of which were recorded in 1988 and 1990; the “instrument of conveyance” makes no reference to any “approval” obtained between December 30, 2004 (when Emperor Development obtained title from the City) and April 11, 2005 (when Emperor Development transferred title to Eagles Point).

            The “simple” quit claim deed used by the City to convey the Eastview Property to Emperor Development conveyed the City’s entire interest, and nothing less. The “instrument of conveyance” used by Emperor Development to convey the Eastview Property to Eagles Point conveyed Emperor Development’s entire interest, and nothing more. The Emperor Development to Eagles Point deed, after describing the units being conveyed, the percentage interests in the common areas, and the rights, duties, obligations, restrictions and other matters and provisions set forth in the 1988 - 1990 Declaration, By-Laws and Floor Plans, as quoted above, described that “bundle of rights” as follows:

“BEING and intended to be the same premises described in a deed from the City of Middletown to Emperor Development Co., LLC dated December 30, 2004 and recorded in the Orange County Clerk’s Office on February 28, 2005 in Liber 11763 of deeds at Page 794” (Exhibit D attached to State’s Ex. 10).

            Thus, the “bundle of rights” conveyed by the City to Emperor Development was precisely the same as the “bundle of rights” conveyed by Emperor Development to Eagles Point.

            Finally, even if the approvals for the Easview Property were “lapsed” or “defunct” when Appellant prepared his appraised report, the report would have been seriously misleading because the report described the property being appraised as 136 approved sites.

            The ALJ’s determination that Appellant violated the statutory and regulatory provisions and the USPAP Standards Rules discussed above is supported by substantial evidence, and is hereby confirmed by the Department of State.

Appropriateness of the Penalty Imposed

            The standard of review regarding the appropriateness of the penalty imposed in an administrative proceeding was established in the Matter of Pell v. Board of Education, 34 N.Y.2d 222 (1974). As stated in Pell, the test is whether such penalty is “so disproportionate to the offense, in light of all the circumstances, as to be shocking to one’s sense of fairness” (34 N.Y.2d at 233). “A result is shocking in this sense if the sanction imposed is so grave that its impact on the individual is disproportionate to the individual’s transgression, also in consideration of the harm or risk of harm to the agency or to the public generally” (Specht v. Department of Licensing Services, 02 DOS APP 05).

            Appellant argues that the ALJ’s decision to suspend Appellant’s certification for one year is excessive. Appellant cites Division of Licensing Services v. Winslow, 1344 DOS 07, and Division of Licensing Services v. Gosnell, 400 DOS 03, in support of his argument that a more lenient penalty is warranted.

            In Winslow, the Administrative Law Judge determined that Mr. Winslow, a State certified residential real estate appraiser, prepared “an appraisal report which was inaccurate and misleading” because he

“. . . used comparable properties that were not truly comparable to the subject property and that were located outside the area of the subject property, . . . ignored comparable sales in close proximity to the subject property, and . . . failed to adequately justify why those comparable properties were ignored. All of this resulted in an overstatement of the value of the subject property” (1344 DOS 07).

The Administrative Law Judge suspended Mr. Winslow’s certification for two months.

            In Gosnell, an Administrative Law Judge determined that Mr. Gosnell, a licensed residential real estate appraiser, signed an appraisal report which overstated the value of the property by $20,000 and negligently gave DLS’s investigator an older business card which incorrectly stated that he was a licensed real estate broker. The Administrative Law Judge imposed a $500 fine.

            Yet, Winslow and Gosnell each involved a single appraisal. In the matter being considered on this appeal, the ALJ determined that Appellant prepared not one, but three misleading appraisal reports. Further, in this matter the ALJ determined that Appellant did not merely use unreasonable comparables; the ALJ also determined that Appellant’s appraisal reports violated numerous statutory and regulatory provisions and USPAP Standards Rules. The ALJ also determined that Appellant accepted his assignment from Mr. Stack despite the fact that he (Appellant) was unable to deliver the MAI appraisal that Mr. Stack needed. Therefore, Winslow and Gosnell are clearly distinguishable from this matter.

            Department of Licensing Services v. Specht, 910 DOS 04, is an example of a proceedings involving more than one appraisal, each of which contained numerous violations. In Specht, the Administrative Law Judge determined that Mr. Specht, a licensed residential real estate appraiser,

“prepared two appraisal reports which were grossly inaccurate and misleading. One report listed purported comparable properties which were actually located in a county other than that which was stated in the report and in which the subject property was located, and, among other things, inaccurately described the neighborhood in which the property was located, misstated the zoning classification of the property, and substantially overstated the value of the property. Among other things the other report used two purported comparables which were larger than indicated, overstated the size of the subject property, failed to report a sale which occurred 14 months earlier, misstated the room count of the subject property, failed to report a fireplace in one of the purported comparables, and indicated that property values in the area were stable while appraising the property for $180,000.00 after it had been purchased only 14 months earlier for $98,000.00. By preparing and communicating such inaccurate and misleading appraisal reports the respondent violated Executive Law §§160-u [1] [f] , [g], and [h], 19 NYCRR 1106.2 [a] [2] [ii] and [iii], and 19 NYCRR 1106.1 and 1106.2 (910 DOS 04, at p. 3).

The Administrative Law Judge revoked Mr. Specht’s license, and the revocation was affirmed on appeal (Specht v. Department of Licensing Services, 02 DOS APP 05).

            Even in a case involving a single appraisal, revocation may be appropriate if that single appraisal report contains several serious violations. For example, in Division of Licensing Services v. West, 81 DOS 05, the Administrative Law Judge revoked the license of a residential real estate appraiser who prepared an appraisal report that used improper comparables, stated a sales price for one of the comparables which did not reflect a later sale for $202,000.00 less, used recording dates rather than sale dates for the comparables, and substantially overvalued the property. Similarly, in Division of Licensing Services v. Cocomello, 846 DOS 03, the Administrative Law Judge revoked the certification of a certified residential real estate appraiser who prepared an appraisal report that “misrepresented and misstated the condition of the house” by failing to note eight serious negative conditions.

            Specht, West and Cocomello support the proposition that in a case involving appraisal(s) containing several serious violations, a penalty more severe than a fine or relatively short (two month) suspension is in order. At first blush, Specht, West and Cocomello appear to support the position urged by DLS in its cross-appeal, viz., that Appellant’s certification should be revoked. However, Specht, West and Cocomello can also be distinguished from the matter being considered on this appeal.

            In Specht, the Administrative Law Judge stated that: “In determining what penalty to impose for the respondent’s violations I have considered his obvious attempts to mislead the tribunal through dishonest and evasive testimony” (910 DOS 04, at p. 3). No such finding has been made by the ALJ in this matter.

            In West and in Cocomello, the respondent failed to appear at the hearing, and offered no defense to the charges or explanation for their conduct. In West, the Administrative Law Judge noted that the respondent “. . . failed to appear and offer any explanation for his conduct. In the absence of such an explanation it is appropriate to impose the maximum penalty permitted by the statute” (81 DOS 05 at p. 3).

            Of course, merely appearing at the hearing and offering a defense or explanation gives no guaranty that the maximum penalty will not be imposed. However, in this case, the ALJ heard Appellant’s defense and explanations and, while the ALJ determined that Appellant was guilty of numerous violations, the ALJ also determined that suspension for one year, rather than revocation, was the appropriate penalty. The Department of State finds no reason to disturb the ALJ’s determination. Under the facts and circumstances presented in this matter, the one year suspension of Appellant’s certification is warranted.

            The ALJ also provided that upon termination of the one year suspension, Appellant’s certification would remain further suspended until Appellant demonstrated that he had refunded the fees he charged for the subject appraisals, with interest. The Department of State has inherent authority to impose such conditions. In Gold v. Lomenzo, 29 N.Y.2d 468 (1972), where a real estate broker’s license was suspended, and the broker was ordered to return the excessive fees he charged, the Court of Appeals stated:

“It is, of course, true that no specific authorization is to be found in the statute. However, given the general power to suspend licenses, there is an inherent power to impose conditions (Matter of Edelstein v. Department of State, 16 A.D.2d 764, 227 N.Y.S.2d 987). Such a power is not unlimited, but rather must be restricted by a requirement that conditions be reasonable and relate to the broker’s professional activities as to matters which are within respondents’ official province and area of control” (29 N.Y.2d at 479).

In the opinion of the Department of State, requiring an appraiser to refund fees he changed for appraisal reports that violated numerous statutory and regulatory provisions and USPAP Standards Rules as a condition to the restoration of his certification is reasonable, and relates to the appraiser’s professional services as to matters which are within the Department of State’s official province and area of control.

            The Department of State does not have jurisdiction to determine the amount of any damages sustained by Appellant’s clients by reason of the subject appraisal reports, and the Department of State does not have jurisdiction to make a damage award to Appellant’s clients. Such matters must be left to such civil litigation as Appellant’s clients may wish to commence.

DETERMINATION

            For the foregoing reasons:

            (1) the stay granted by Decision on Motion for Stay and Order dated January 2, 2008 (1 DOSAPP 08), is hereby terminated;

            (2) the first day of the period of the suspension of Appellant’s certification shall be April 1, 2009, and the first full sentence on page 13 of the Decision of Administrative Law Judge Scott NeJame dated November 29, 2007 (2212 DOS 07) is hereby amended to read as follows: “Accordingly, pursuant to Executive Law §160-u, Robert G. Buckles, Jr.’s certification as a general real estate appraiser is suspended commencing April 1, 2009 and terminating one year after receipt, by certified mail, by the Department of State of his certification.”; and

            (3) the Decision of Administrative Law Judge Scott NeJame dated November 29, 2007 (2212 DOS 07), as so amended, is hereby confirmed.

So ordered on March __, 2009                                   ___________________________________

                                                                                    Daniel E. Shapiro

                                                                                    First Deputy Secretary of State