Wrist Slapping Time

Hope you all had a good weekend; I enjoyed the time off.


In case anybody is wondering whether the State of Ohio takes violations of the Uniform Standards of Professional Appraisal Practice (USPAP) seriously, the following is an excerpt from the Division of Real Estate And Professional Licensing Newsletter - Winter 2006-2007. Notice that the wheels of justice grind slowly; it took the State of Ohio three years to catch up to this appraiser, and that is a typical scenario. There were eleven such disciplinary actions reported in that one edition.

I see these kinds of errors on a regular basis in my technical review work. The only reason this was reviewed by the State was because somebody filed a complaint; probably a lender who got burned when the loan went south. The text is a verbatim "cut-n-paste" from the newsletter, which is a public record.

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MICHAEL S. KANGAS, a Licensed residential real estate appraiser from Montville, Ohio, was found to have done the following with respect to an appraisal report:


1. He violated ORC 4763.11(G)(4), 4763.11(G)(5), 4763.11(G)(6), 4763.11(G)(7) and/or 4763.11(G)(8) as those sections incorporate 2003 USPAP Standards Rule 1-1(b), 1-1(c), 1-2(f), 2-1, 2-2(b)(vii), and/or the Conduct Section of the Ethics Rule for 2003 USPAP by operation of OAC 1301:11-5-01 when he indicated in his signed Statement of Limiting Conditions and Appraiser Certification that he had inspected the Subject property, both inside and outside, when in fact he did not and he failed to summarize the extent of assistance by his appraiser assistant in the appraisal report for the Subject property;


2. He violated ORC 4763.11(G)(5), 4763.11(G)(6) and/or 4763.11(G)(7) as those sections incorporate 2003 USPAP Standards Rule 1-1(a), 1-1(b), 1-1(c), 1-4(c), 1-6(a), 2-1(b), and/or 2-2(b)(ix) by operation of OAC 1301:11-5-01 when he developed the Income Approach in his appraisal report for the Subject property, but he failed to include in his appraisal report and his work file a summary of the information analyzed, the appraisal procedures followed, and the reasoning that supports his analyses, opinions and conclusions associated with the Income Approach;


3. He violated ORC 4763.11(G)(5), 4763.11(G)(6) and/or 4763.11(G)(7) as those sections incorporate 2003 USPAP Standards Rule 1-1(b), 1-1(c), and/or 2-1(b) by operation of OAC 1301:11-5-01 when he did not verify the zoning for the Subject property, but rather reported the Subject's land use;


4. He violated ORC 4763.11(G)(5), 4763.11(G)(6) and/or 4763.11(G)(7) as those sections incorporate 2003 USPAP Standards Rule 1-1(b), 1-1(c), 1-6(a), and/or 2-1(b) by operation of OAC 1301:11-5-01 when he failed to report a prior sale for Comparable Sale #2 that occurred within a year of his appraisal of the Subject property and such sale was published in County Records which he indicated in the appraisal report he consulted in the completion of the Sales Comparison Approach;


5. He violated ORC 4763.11(G)(5), 4763.11(G)(6) and/or 4763.11(G)(7) as those sections incorporate 2003 USPAP Standards Rule 1-1(a), 2003 USPAP Standards Rule 1-1(b), 1-1(c), 1-4(b), 2-1, and/or 2-2(b)(ix) by operation of OAC 1301:11-5-01 when he reported, without stating the basis for the representation, an effective age for the Subject property of 20 years despite the fact that the actual age of the Subject property at the time of the appraisal report was 91 years;


6. He violated ORC 4763.11(G)(5), 4763.11(G)(6) and/or 4763.11(G)(7) as those sections incorporate 2003 USPAP Standards Rule 1-1(a), 1-1(b), 1-1(c), 2-1 and/or the Conduct Section of the Ethics Rule for 2003 USPAP by operation of OAC 1301:11-5-01 when he used comparable sales which were superior to the Subject property and he did not substantiate his reasons for using those properties as comparable sales or make appropriate adjustments for the differences between the Subject property and the comparable sales;


7. He violated ORC 4763.12(C) when he failed to include the disclosures or information required by ORC 4763.12(C);


8. He violated ORC 4763.11(G)(5), 4763.11(G)(6) and/or 4763.11(G)(7) as those sections incorporate 2003 USPAP Standards Rule 1-1(c), 1-2(e), and/or 2-1 by operation of OAC 1301:11-5-01 when he indicated in one part of the appraisal that the Subject's neighborhood was "Suburban" but in another part of the appraisal report, he indicated the Subject's Location was "Urban";


9. He violated ORC 4763.11(G)(5), 4763.11(G)(6) and/or 4763.11(G)(7) as those sections incorporate 2003 USPAP Standards Rule 1-1(c), 1-4(b), and/or 2-1 by operation of OAC 1301:11-5-01 when he failed to sufficiently support his basis for assigning a $10,000 value to the Subject's site in the Cost Approach and his work file;


10. He violated ORC 4763.11(G)(5), 4763.11(G)(6) and/or 4763.11(G)(7) as those sections incorporate 2003 USPAP Standards Rule 1-1(c) and/or 2-1 by operation of OAC 1301:11-5-01 when he indicated in one part of the appraisal report that the Subject is a "two story structure with a heated, finished attic that is accessible by stairs" but he failed to take into consideration in the Sales Comparison Approach or in the alternative, failed to explain in the appraisal report his basis for not considering this in the Sales Comparison Approach;


11. He violated ORC 4763.11(G)(5), 4763.11(G)(6) and/or 4763.11(G)(7) as those sections incorporate 2003 USPAP Standards Rule 1-1(b), 1-1(c), 1-2(e), 1-4(a) and/or 2-1 by operation of OAC 1301:11-5-01 when he indicated the Subject's exterior is frame but according to PACE, a named source of information in his appraisal report, the Subject's exterior consists of asbestos or in the alternative, he failed to explain the reason for difference;


12. He violated ORC 4763.11(G)(5), 4763.11(G)(6) and/or 4763.11(G)(7) as those sections incorporate 2003 USPAP Standards Rule 1-1(a) by operation of OAC 1301:11-5-01 when he failed to correctly employ recognized methods and techniques that are necessary to produce a credible appraisal;


13. He violated ORC 4763.11(G)(5), 4763.11(G)(6) and/or 4763.11(G)(7) as those sections incorporate 2003 USPAP Standards Rule 1-1(b) by operation of OAC 1301:11-5-01 when he committed substantial errors of omission or commission that significantly affected the appraisal report for the Subject property;


14. He violated ORC 4763.11(G)(5), 4763.11(G)(6), and/or 4763.11(G)(7) as those sections incorporate 2003 USPAP Standards Rule 11(c) by operation of OAC 1301:11-5-01 when he rendered appraisal services in a negligent or careless manner that affected the credibility of the appraisal report for the Subject property; and


15. He violated ORC 4763.11(G)(5), 4763.11(G)(6) and/or 4763.11(G)(7) as those sections incorporate 2003 USPAP Standard Rule 2-1 and/or the Conduct Section of Ethics Rule for 2003 USPAP by operation of OAC 1301:11-5-01 when he completed a misleading appraisal report as a result of the appraisal report's insufficient information and analyses.


For all the violations, the Board ordered Michael S. Kangas to pay a fine of $2,100.00 and to complete 59 hours of additional education consisting of the following: a 15 hour course relating to the USPAP pre-licensure course including passing the course examination; 30 hours in a course related to Appraisal Procedure including passing the course examination; and a 14 hour course on Site Valuation and Cost Approach.

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