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Commercial Real Estate Joplin Missouri

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Commercial Real Estate Joplin Missouri document sample

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									                              Before the
                  Administrative Hearing Commission
                           State of Missouri



MISSOURI REAL ESTATE                             )
APPRAISERS COMMISSION,                           )
                                                 )
                      Petitioner,                )
                                                 )
       vs.                                       )           No. 08-1445 RA
                                                 )
VINCENT CANTRELL,                                )
                                                 )
                      Respondent.                )


                                           DECISION

       There is cause to discipline Vincent Cantrell for violation of the Uniform Standards for

Professional Appraisal Practice (“USPAP”), violation of statutes regarding USPAP, gross

negligence, and violation of professional trust or confidence.

                                            Procedure

       The Missouri Real Estate Appraisers Commission (“MREAC”) filed a complaint on

August 7, 2008, seeking this Commission’s determination that Cantrell’s real estate appraiser

certification is subject to discipline. Though Cantrell received a copy of the complaint and our

notice of complaint/notice of hearing by certified mail on or about August 18, 2008, he did not

file an answer to the complaint.

       This Commission convened a hearing on the complaint on February 11, 2009. Assistant

Attorney General Kevin Hall represented the MREAC. Cantrell represented himself. The

MREAC filed the last written argument on June 1, 2009.
                                         Findings of Fact

       1. Cantrell has been a state certified real estate appraiser since January 1, 2002. His

certification was current and active and in good standing at all relevant times.

                         Count I: 3402 W. Junge Road, Joplin, Missouri

       2. Cantrell performed an appraisal of a residential property at 3402 W. Junge Road,

Joplin, Missouri, and prepared a uniform residential appraisal report. Global Mortgage requested

the appraisal due to a foreclosure on the property.

       3. Under “Neighborhood Description,” Cantrell stated: “The subject property is located

in Joplin, Missouri which has a good supply of amenities such as healthcare, shopping,

employment, and entertainment.”

       4. In response to the question, “Is the highest and best use of subject property as

improved . . . the present use?” Cantrell placed an “X” in the box indicating “yes,” and also

noted “The subject site has previously been utilized as a car lot.” Cantrell did not analyze the

impact of this on the property and whether the property could be converted to commercial use.

       5. Under “Utilities,” for “sanitary sewer,” Cantrell did not place an “X” in the box for

“public” or “other (describe),” and did not include any description. Cantrell’s field notes

indicate that the property had a septic system.

       6. In response to the question, “Are the utilities and off-site improvements typical for the

market area?” Cantrell placed an “X” in the box indicating “no.”

       7. Cantrell described the design style as “ranch” and correctly stated that the house was

built in 1980.

       8. In the section of the report for the sales comparison approach, Cantrell noted that the

subject property had a gross living area of 2,712 square feet and had a two-car detached garage.

Cantrell noted that the quality of construction and condition of the property were average.




                                                  2
       9. The subject property has a low roofline.

       10. Comparable 1, at 3626 Notting Drive, Joplin, Missouri, was valued at $298,500.

Cantrell noted the quality of construction as average + and made a downward adjustment of

$29,850 on that basis. Cantrell noted that the effective age was three years and made a

downward adjustment of $7,000. The attached photograph of Comparable 1, though very dark

and hard to see, shows several gables and a high-pitched rooftop.

       11. Comparable 2, at 3130 Abigail, Joplin, Missouri, was valued at $344,900. Cantrell

noted the quality of construction as average and made a downward adjustment of $34,490 on that

basis. Cantrell noted that the effective age was three years and made a downward adjustment of

$7,000. The attached photograph of Comparable 2, though very dark and hard to see, shows

gables and a high-pitched rooftop.

       12. Cantrell’s report does not discuss why he used Comparables 1 and 2 instead of better

comparables.

       13. Based on the sales comparison approach, Cantrell valued the property at $289,000.

       14. The value of homes in the immediate area of the property was approximately

$150,000.

       15. In the section of the report for the cost approach stating: “Support for the opinion of

site value (summary of comparable land sales or other methods for estimating site value),”

Cantrell stated: “The site value was estimated based upon the comparable sales ratio of land

value to improvement value. Also, we have compared the subject site with the comparable sales

to find an appropriate fair market value for the contributing land.” For “opinion of site value,”

Cantrell stated $25,000. Cantrell noted depreciation of $39,185. Under “comments on cost

approach,” Cantrell stated: “cost approach estimates derived from Marshall and Swift residential

cost manual using average quality. Site values based on area sales and listings.”




                                                 3
       16. Based on the cost approach, Cantrell valued the property at $235,875.

       17. In the section of the report for “reconciliation,” Cantrell stated: “The income

approach to value was not utilized in this report as homes of this nature are not typically bought

and sold for their income producing capabilities.” Cantrell placed an “X” in the box indicating

that the appraisal of the property was made “as is.”

       18. Cantrell valued the property at $289,000. His report does not summarize why he

chose the sales comparison approach as the best determination of the value of the property.

       19. Cantrell incorrectly stated that the date of inspection and effective date was

November 8, 2005. The report is dated November 4, 2005.

                    Count II: 601 North Brown Avenue, Springfield, Missouri

       20. Cantrell performed an appraisal of a residential property at 601 North Brown

Avenue, Springfield, Missouri, and prepared a uniform residential appraisal report dated June 1,

2005. Global Mortgage requested the appraisal.

       21. Cantrell understood that the property was very much in distress. He observed that

the floor was missing in certain parts of the interior.

       22. In the section of the appraisal for “Condition of the improvements, depreciation

(physical, functional, and external), repairs needed, quality of construction,

remodeling/additions, etc.,” Cantrell noted: “. . . home will have new renovations. Therefore

physical depreciation observed was minimal. No functional or external depreciation noted at

time of inspection.”

       23. Cantrell placed an “X” in the box indicating that the appraisal was made “as is,”

rather than “subject to the repairs, alterations, inspections or conditions listed below,” or “subject

to completion per plans & specifications.” Under “Conditions of Appraisal,” Cantrell stated:

“See limiting conditions. This report is subject to . . . renovations currently in progress.”




                                                  4
       24. The Statement of Limiting Conditions on the pre-printed appraisal report form states:

               The appraiser has noted on the appraisal report adverse conditions
               (such as, needed repairs, depreciation, the presence of hazardous
               wastes, toxic substances, etc.) observed during the inspection of
               the subject property or that he or she became aware of during the
               normal research involved in performing the appraisal. Unless
               otherwise stated in the appraisal report, the appraiser has no
               knowledge of any hidden or unapparent conditions of the property
               or adverse environmental conditions (including the presence of
               hazardous wastes, toxic substances, etc.) that would make the
               property more or less valuable, and has assumed that there are no
               such conditions and makes no guarantees or warranties, express or
               implied, regarding the condition of the property. The appraiser
               will not be responsible for any such conditions that do exist or for
               any engineering or testing that might be required to discover
               whether such conditions exist.

       25. Cantrell left blank the portion of the appraisal stating:

               INDICATED VALUE BY INCOME APPROACH (if Applicable)
               Estimated Market Rent $_____/Mo x Gross Rent Multiplier ____
               = $_____.

       26. Cantrell prepared a “Single Family Comparable Rent Schedule” that he attached as

part of his appraisal report. His data source for Comparables 1, 2 and 3 was Walker Realty,

which had a partnership interest with the buyer and/or seller of the property. This data would

support the income approach, but Cantrell did not value the property according to the income

approach.

       27. Based on the cost approach, Cantrell reached a valuation of $80,814. Based on the

sales comparison approach, Cantrell reached a valuation of $71,000. Cantrell stated that the

sales comparison approach was the best indicator of value as it reflected current activities

between buyers and sellers in the specific market. Therefore, Cantrell appraised the property at

$71,000.




                                                 5
                                            Conclusions of Law

        We have jurisdiction of the complaint.1 The MREAC has the burden to prove facts for

which the law allows discipline.2 The MREAC must prove its contentions by a preponderance of

the evidence.3

                 Preponderance of the evidence is that which is of greater weight or
                 more convincing than the evidence which is offered in opposition
                 to it; that is, evidence which as a whole shows the fact to be proved
                 to be more probable than not.[4]

         Section 339.5355 provides:

                 State certified real estate appraisers and state licensed real estate
                 appraisers shall comply with the Uniform Standards of
                 Professional Appraisal Practice promulgated by the appraisal
                 standards board of the appraisal foundation.

Section 339.532.26 authorizes discipline for:

                 (6) Violation of any of the standards for the development or
                 communication of real estate appraisals as provided in or pursuant
                 to sections 339.500 to 339.549;

                 (7) Failure to comply with the Uniform Standards of Professional
                 Appraisal Practice promulgated by the appraisal standards board of
                 the appraisal foundation;

                                                    * * *

                 (10) Violating, assisting or enabling any person to willfully
                 disregard any of the provisions of sections 339.500 to 339.549 or
                 the regulations of the commission for the administration and
                 enforcement of the provisions of sections 339.500 to 339.549[.]

The USPAP, 2005 edition, governs Cantrell’s appraisals and appraisal reports on the properties.



        1
          Section 621.045. Statutory references are to RSMo Supp. 2008 unless otherwise noted.
        2
          Missouri Real Estate Comm'n v. Berger, 764 S.W.2d 706, 711 (Mo. App., E.D. 1989).
        3
          State Board of Nursing v. Berry, 32 S.W.3d 638, 642 (Mo. App., W.D. 2000).
        4
          Id.
        5
          RSMo 2000.
        6
           The 2008 amendments to § 339.532 do not affect any of the provisions that were current in 2004 and on
which the MREAC relies. Laws 2008, H.B. 2188, § A.

                                                        6
                             Count I: 3402 W. Junge Road, Joplin, Missouri

           A. Standard 1 and SR 1-1(b) – Significant Errors of Omission and Commission

       The MREAC argues that Cantrell made substantial errors of omission and commission in

the preparation of the appraisal report in violation of SR 1-1(b), which states:

                   In developing a real property appraisal, an appraiser must:

                                                  * * *

                   (b) not commit a substantial error of omission or commission that
                   significantly affects an appraisal[.]

       The MREAC contends that the effective date of the report is after the date signed, which

is inconsistent with the “as-is” condition of the report. Cantrell admits that he made an error in

stating the inspection date.

       The MREAC contends that the neighborhood boundaries are overly broad in describing

the neighborhood as the City of Joplin. The MREAC’s expert made no criticism of this, and in

fact argued that the comparables should have covered a wider area due to Cantrell’s description

of the neighborhood.

       The MREAC contends that the site value stated in the cost approach of the report is

unsupported. When asked if any of the information stated in the cost approach section was

problematic, the MREAC’s expert stated:7

                   Simply that site sales, comparable sales, if you had an attached list,
                   a CMA, a little bit more detail would have been better to have
                   documented the subject’s site value. I don’t consider that a major
                   problem.

The expert further stated:8

                   The addition of some listings or particular site sales would have
                   helped in that area.

       7
           Tr. at 66.
       8
           Tr. at 87.

                                                     7
Because the expert did not consider this to be a “major problem,” we find no error in the site

value. The expert further stated that a site value of $25,000 for the subject property “doesn't look

too far out of line.”9

          The MREAC argues that “the sales comparison approach did not use appropriate sales in

that the subject property was compared to property with superior quality and condition.”

Comparables 1 and 2 were three years old and were designed with gables and higher-pitched

roofs. They also had attached garages. The subject property was 25 years old, had a detached

garage, and a lower roof. Cantrell did not use appropriate comparable sales.

          The MREAC’s complaint, paragraph 10b, states that the appraisal form is not accurately

completed and that data in the report contains errors. This paragraph of the complaint is not

specific as to what information is wrong. Paragraph 10c states that the actual age of the property

is incorrectly stated. Cantrell stated that the property was built in 1980. The MREAC’s expert

stated that a listing indicated “about the same age,” so he was “not going to feel like that is

adverse to Mr. Cantrell.”10 Therefore, we conclude that the age of the property was correctly

stated.

          The MREAC contends that the property is noted to have been used as a car lot, but there

is no analysis regarding its potential for commercial use. Cantrell did not analyze the impact of

this prior use of the property and whether the property could be converted to commercial use.

This is an error of omission.

          The MREAC argues that the square footage of the property is incorrectly stated and that

the site verification does not support the stated site size. The MREAC presented no evidence to

support these claims.


          9
              Tr. at 57.
          10
               Tr. at 43-44.

                                                  8
       The MREAC correctly notes that the site description does not state that the property is on

a septic sewage system. This is an error of omission.

       Based on the errors mentioned above, Cantrell violated SR 1-1(b).

                                     B. SR 1-1(a) – Failure to Employ
                                    Recognized Methods and Techniques

       The MREAC argues that based on the errors and omissions, Cantrell violated SR 1-1(a),

which states:

                   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[.]

We rely on the expert testimony as to what methods and techniques produce a credible

appraisal.11 The MREAC’s expert testified that Cantrell violated this rule by selecting

inappropriate comparable sales. Therefore, we conclude that Cantrell violated SR 1-1(a).

       Similarly, Standard 1 states:

                   In developing a real property appraisal, an appraiser must identify
                   the problem to be solved and the scope of work necessary to solve
                   the problem, and correctly complete research and analysis
                   necessary to produce a credible appraisal.

Again, based on the expert testimony, we conclude that Cantrell’s failure to use appropriate

comparable sales resulted in an appraisal that was not credible. Cantrell violated Standard 1.

                                    C. SR 1-1(c) – Careless or Negligent

       SR 1-1(c) states:

                   In developing a real property appraisal, an appraiser must:

                                                     * * *



       11
            Perez v. State Bd. of Regis’n for the Healing Arts, 803 S.W.2d 160, 164 (Mo. App., W.D. 1991).

                                                         9
                (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, in the
                aggregate affects the credibility of those results.

The MREAC’s expert testified that Cantrell violated this rule because his report failed to reflect

that the garage was converted into living space and that there were no windows in the dining

area.12 This conduct is not in the complaint, and we cannot find cause for discipline for conduct

that is not set forth in the complaint.13

        However, the appraisal report contains a series of errors and omissions, as we have

already discussed. These errors show a careless and negligent manner of appraising and

completing the appraisal report. Based on these errors, Cantrell violated SR 1-1(c).

                         D. SR 1-2(e)(i) and 2-2(b)(iii) – Characteristics of Property

        SR 1-2(e)(i) states:

                In developing a real property appraisal, an appraiser must:

                                                 * * *

                (e) 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[.]

SR 2-2(b)(iii) states:

                The content of a Summary Appraisal Report must be consistent
                with the intended use of the appraisal and, at a minimum:

                                                 * * *

                (iii) summarize information sufficient to identify the real estate
                involved in the appraisal, including the physical and economic
                property characteristics relevant to the assignment[.]


        12
         Tr. at 85.
        13
         Duncan v. Missouri Bd. for Arch’ts, Prof’l Eng’rs & Land Surv’rs, 744 S.W.2d 524, 538-39 (Mo. App.,
E.D. 1988); Regulation 1 CSR 15-3.350(2)(A)3.

                                                    10
The MREAC’s expert testified that Cantrell violated SR 1-2(e)(i) by failing to explain how the

location affected the value of the property.14 He also testified that Cantrell violated SR 2-

2(b)(iii) by failing to state the property’s proximity to a flood area and a race track, 15 but because

this conduct is not set forth in the complaint, we cannot find cause for discipline on that basis.16

The expert also testified that the failure to include neighborhood information violated SR

2-2(b)(iii), but the complaint, though setting forth that conduct as a rule violation, does not cite it

as a violation of SR 2-2(b)(iii).

        The MREAC asserts that: the actual age of the property is incorrectly stated, the property

is noted to have been used as a car lot but there is no analysis regarding its potential for

commercial use, the square footage of the property is incorrectly stated, the site verification does

not support the stated site size, and the site description does not state that the property is on a

septic sewage system. We have already found that the age of the property was correctly stated

and that there is no evidence to support the MREAC’s assertions that the square footage of the

property is incorrectly stated and that the site verification does not support the stated site size.

However, by failing to analyze the potential for commercial use and failing to state that the

property was on a septic system, Cantrell failed to identify the physical or economic attributes of

the property, in violation of SR 1-2(e)(i) and 2-2(b)(iii).

                              E. SR 1-4(a) – Comparable Sales Analysis

        SR 1-4(a) states:

                When a sales comparison approach is applicable, an appraiser must
                analyze such comparable sales data as are available to indicate a
                value conclusion.




        14
           Tr. at 86.
        15
           Tr. at 89.
        16
           Duncan, 744 S.W.2d at 538-39; Regulation 1 CSR 15-3.350(2)(A)3.

                                                    11
       The MREAC asserts that Comparables 1 and 2 should not have been compared to the

subject property because they were superior and not similar to the subject property, and there

was no use of comparison property from locations with a similar price range as the subject

property. As we have already noted, Comparables 1 and 2 were not suitable comparables

because they were not even close to the same age as the subject property and had a completely

different design with attached garages. Cantrell valued the property at $289,000, but home

values in the area were approximately $150,000. Comparable 1 was valued at $298,500, and

Comparable 2 was valued at $344,900. Cantrell did not use appropriate comparable sales. These

deficiencies constitute a violation of SR 1-4(a).

                          F. SR 1-4(b)(i) – Site Value in Cost Approach

       SR 1-4(b)(i) states:

               When a cost approach is applicable, an appraiser must:

               (i) develop an opinion of site value by an appropriate appraisal
               method or technique[.]

As we have already discussed, the MREAC’s expert stated that Cantrell’s failure to support the

site value was not a “major problem” and that Cantrell’s valuation was “not too far out of line.”

Therefore, we find no violation of SR 1-4(b)(i).

                              G. SR 1-6(a) and (b) – Reconciliation

       SR 1-6(a) and (b) state:

               In developing a real property appraisal, an appraiser must:

               (a) reconcile the quality and quantity of data available and
               analyzed within the approaches used; and

               (b) reconcile the applicability or suitability of the approaches used
               to arrive at the value conclusion(s).

Cantrell valued the subject property using the sales comparison analysis and the cost approach.


                                                    12
He did not use the income approach. Cantrell failed to reconcile the quality and quantity of the

data used within the sales comparison analysis and cost approach and failed to

reconcile the applicability and suitability of each approach.

       In the sales comparison analysis, Cantrell did not discuss why he used Comparables 1

and 2 instead of better comparables.

       Similarly, Cantrell did not compare the approaches to value used in the appraisal report

and did not explain why the cost approach resulted in a value so much lower than the market

approach.

       Cantrell’s failure to analyze these factors in his reconciliation constitutes a violation of

SR 1-6(a) and (b). This conduct also violated SR 1-1(b) and (c). Due to lack of expert testimony

on the subject, we do not find that this violated SR 1-1(a) by failing to employ methods and

techniques necessary to produce a credible appraisal.

                                H. Standard 2 and SR 2-1(a) and (b) –
                           Misleading Appraisal and Understandable Report

       Standard 2 states:

               In reporting the results of a real property appraisal, an appraiser
               must communicate each analysis, opinion, and conclusion in a
               manner that is not misleading.

SR 2-1(a) and (b) state:

               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; [and]

               (b) contain sufficient information to enable the intended users of
               the appraisal to understand the report properly[.]

The MREAC argues that the errors and omissions that we have already addressed violated these

rules. The MREAC’s expert specifically testified that the use of Comparables 1 and 2 resulted in


                                                 13
an appraisal that was misleading. Based on the errors and omissions that we have discussed,

Cantrell violated Standard 2 and SR 2-1(a) and (b).

           I. SR 2-2(b)(ix) – Failure to Support Analysis, Opinions, and Conclusions

       SR 2-2(b)(ix) states:

               (b) The content of a Summary Appraisal Report must be consistent
               with the intended use of the appraisal and, at a minimum:

                                             * * *

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

The MREAC asserts that Cantrell violated this rule by failing to provide adequate support for the

reasoning and conclusions in the sales comparison approach and the cost approach. The

MREAC’s expert testified that the appraiser should summarize what approach would be

strongest and best, and why he selected that approach. Cantrell’s report does not summarize why

he chose the sales comparison approach as the best determination of the value of the property.

Based on this deficiency, Cantrell violated SR 2-2(b)(ix).

                                     J. USPAP Ethics Rule

       An appraiser must conform his appraisals to the USPAP Ethics Rule, which states in part:

               An appraiser must perform assignments ethically and competently,
               in accordance with USPAP and any supplemental standards agreed
               to by the appraiser in accepting the assignment.

                                             * * *

               An appraiser must not communicate assignment results in a
               misleading or fraudulent manner. An appraiser must not use or
               communicate a misleading or fraudulent report or knowingly
               permit an employee or other person to communicate a misleading
               or fraudulent report.




                                                14
        Fraud is an intentional perversion of truth to induce another to act in reliance upon it.17 It

requires the intent that others rely on the misrepresentation.18 We may infer fraudulent intent

from the circumstances of the case.19 We find no indication that Cantrell intended to falsely state

anything in his report.

        However, the errors in the appraisal report, described above, render the appraisal report

misleading. Particularly significant was Cantrell’s choice of inappropriate comparable sales.

The appraisal report is misleading and, therefore, Cantrell has violated the USPAP Ethics Rule.

                                     K. Conclusion as to USPAP Violations
                                      and Statutory Grounds for Discipline

         Section 339.53520 requires state certified real estate appraisers to comply with USPAP

standards. Section 339.532.2(6) and (7) allow discipline for failure to comply with USPAP

standards. Section 339.532.2(10) allows discipline for “[v]iolating . . . any of the provisions of

sections 339.500 to 339.549.” Because Cantrell violated USPAP standards, there is cause to

discipline his certification under § 339.532.2(6), (7) and (10).

                         L. Incompetence, Negligence, Failure to Exercise
                     Reasonable Diligence and Professional Trust or Confidence

        Section 339.532.2 allows discipline for:

                 (5) Incompetency, misconduct, gross negligence, dishonesty,
                 fraud, or misrepresentation in the performance of the functions or
                 duties of any profession licensed or regulated by sections 339.500
                 to 339.549;

                                                   * * *

                 (8) Failure or refusal without good cause to exercise reasonable
                 diligence in developing an appraisal, preparing an appraisal report,
                 or communicating an appraisal;

        17
           Hernandez v. State Bd. of Regis’n for Healing Arts, 936 S.W.2d 894, 899 n.2 (Mo. App., W.D. 1997).
        18
           Sofka v.Thal, 662 S.W.2d 502, 506 (Mo. banc 1983); see also Missouri Dental Board v. Bailey, 731
S.W.2d 272, 274-75 (Mo. App., W.D. 1987).
        19
           Essex v. Getty Oil Co., 661 S.W.2d 544, 551 (Mo. App., W.D. 1983).
        20
           RSMo 2000.

                                                      15
                 (9) Negligence or incompetence in developing an appraisal, in
                 preparing an appraisal report, or in communicating an appraisal;

                                                   * * *

                 (14) Violation of any professional trust or confidence[.]

        Incompetence is a general lack of professional ability, or of disposition to use an

otherwise sufficient professional ability, to perform in an occupation.21 Incompetence is an

inability or unwillingness to function properly.22 Misconduct is the commission of wrongful

behavior, intending the result that actually comes to pass or being indifferent to the natural

consequences.23

        Dishonesty is a lack of integrity, a disposition to defraud or deceive.24 Dishonesty

includes actions that reflect adversely on trustworthiness.25 A misrepresentation is a falsehood or

untruth made with the intent of deceit rather than inadvertent mistake.26 To “deceive” is “to

cause to accept as true or valid what is false or invalid.”27

        Because we find no intentional wrongdoing, we find no misconduct, fraud,

misrepresentation or dishonesty.

        Gross negligence is a deviation from the standard of care so egregious as to demonstrate

a conscious indifference to a professional duty.28 Negligence is a lesser degree of improper

conduct than gross negligence.29 Negligence is the failure to use the degree of care required

under the particular circumstances involved.30


        21
           Tendai v. Missouri Bd. of Regis’n for the Healing Arts, 161 S.W.3d 358, 369 (Mo. banc 2005).
        22
           Albanna v. State Bd. of Regis’n for the Healing Arts, 2009 WL 1872121 (Mo. banc 2009).
        23
           Grace v. Missouri Gaming Comm’n, 51 S.W.3d 891, 900 (Mo. App., W.D. 2001).
        24
           MERRIAM-WEBSTER’S COLLEGIATE DICTIONARY 359 (11 th ed. 2004).
        25
           See In re Duncan, 844 S.W.2d 443, 444 (Mo. banc 1992).
        26
           Hernandez, 936 S.W.2d at 899 n.3.
        27
           MERRIAM-WEBSTER’S COLLEGIATE DICTIONARY 321 (11 th ed. 2004).
        28
           Duncan v. Missouri Bd. for Arch'ts, Prof'l Eng'rs & Land Surv'rs, 744 S.W.2d 524, 533 (Mo. App.,
E.D. 1988).
        29
           State ex rel. Pulliam v. Reine, 108 S.W.3d 148, 160 (Mo. App., W.D. 2003).
        30
           Duncan, 744 S.W.2d at 532.

                                                      16
        The MREAC’s expert testified in general that Cantrell was negligent in preparing the

Junge Road appraisal report. Cantrell’s erroneous dates, failure to analyze the potential for

commercial use, failure to choose appropriate comparable sales, and failure to note the septic

system show failure to use the degree of care required under the circumstances. This also shows

a lack of reasonable diligence. Cantrell’s failure to use appropriate comparable sales rises to the

level of gross negligence because Comparables 1 and 2 were completely different from the

subject property.

        However, the evidence does not show a general lack of ability amounting to an inability

or unwillingness to function properly as an appraiser. Therefore, we do not find cause to

discipline for incompetence. Accordingly, we find cause for discipline under § 339.532.2(5),

(8), and (9).

        Professional trust is the reliance on the special knowledge and skills that professional

licensure evidences.31 It may exist not only between the professional and his or her clients, but

also between the professional and his or her employer and colleagues.32 By his negligent

performance of his duties in performing the appraisal and in writing the appraisal report, Cantrell

violated the trust or confidence that his client placed in him. Accordingly, there is cause for

discipline under § 339.532.2(14).

                             Count II: 601 North Brown Avenue, Springfield, Missouri

        We have made findings of fact, based on the cross-examination of Cantrell, that he

understood that the property at 601 North Brown Avenue was very much in distress and that he

observed that the floor was missing in certain parts of the interior. The MREAC also relies on

testimony of its expert based on a review appraisal performed two years after Cantrell’s


        31
             Trieseler v. Helmbacher, 168 S.W.2d 1030, 1036 (Mo. 1943).
        32
             Cooper v. Missouri Bd. of Pharmacy, 774 S.W.2d 501, 504 (Mo. App., E.D. 1989).

                                                       17
appraisal, resulting from a foreclosure on the property. We cannot take a review appraisal

performed two years later as evidence of the condition of the property at the time of Cantrell’s

appraisal.

                            A. Standard 1 and SR 1-1(b) – Significant
                              Errors of Omission and Commission

       The MREAC argues that Cantrell made substantial errors of omission and commission in

preparing the appraisal report, in violation of SR 1-1(b), which states:

               In developing a real property appraisal, an appraiser must:

                                               * * *

               (b) not commit a substantial error of omission or commission that
               significantly affects an appraisal[.]

The MREAC argues that the report includes repairs to be completed for the subject property, but

the report is not marked as subject to completion. Cantrell marked “as is,” rather than “subject to

completion per plans & specifications.” Cantrell admits that he checked the wrong box.

However, Cantrell also noted that “this report is subject . . . to renovations currently in progress.”

Therefore, checking the wrong box was not a substantial error that significantly affected the

appraisal.

       The MREAC also asserts that the report fails to disclose hypothetical conditions

regarding repairs. The MREAC did not prove what hypothetical conditions should be disclosed

and why.

       The MREAC asserts that the report fails to appraise the property subject to

improvements. We disagree because the report notes that the appraisal was subject to

renovations.

       The MREAC also contends that repairs that the subject property needed are not disclosed.

The MREAC’s expert testified that “[i]t would be much better” if a list of the repairs or

                                                 18
renovations were included in the report.33 This does not show that this was a substantial error

that significantly affect the appraisal. Cantrell did not violate SR 1-1(b).

                                    B. SR 1-1(a) – Failure to Employ
                                   Recognized Methods and Techniques

       The MREAC argues that based on the errors and omissions, Cantrell violated SR 1-1(a),

which states:

                  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[.]

The MREAC’s expert testified that by checking the box “as is,” this means that the property is

worth the appraised value of $71,000 without anything further needing to be done. However, the

report states that the appraisal is subject to further renovations to be completed on the property.

We found no failure to disclose hypothetical conditions or to appraise the property subject to

improvements.

       The expert also testified that the property is incorrectly described as a ranch house, but

because this conduct is not set forth in the complaint, we cannot find cause for discipline on that

basis.34 We find no violation of SR 1-1(a).

                                   C. SR 1-1(c) – Careless or Negligent

       The MREAC argues that based on the errors and omissions, Cantrell violated SR 1-1(c),

which states:

                  In developing a real property appraisal, an appraiser must:

                                                   * * *




       33
            Tr. at 145.
       34
            Duncan, 744 S.W.2d at 538-39; Regulation 1 CSR 15-3.350(2)(A)3.

                                                      19
               (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, in the
               aggregate affects the credibility of those results.

The MREAC’s expert stated: 35

               I think it was careless to check “as-is,” possibly.

Because this testimony is equivocal, we find no violation on that basis. We found no failure to

disclose hypothetical conditions or to appraise the property subject to improvements. The expert

also stated that it was careless to leave off Comparable 3 sales information and to leave off

adjustments on the bathroom count, but because this conduct is not in the complaint, we cannot

find cause for discipline on that basis.36 Cantrell did not violate SR 1-1(c).

                            D. SR 1-4(a) – Comparable Sales Analysis

       SR 1-4(a) states:

               When a sales comparison approach is applicable, an appraiser must
               analyze such comparable sales data as are available to indicate a
               value conclusion.

The MREAC asserts that Cantrell compared the subject property to renovated property despite

the fact that the subject property was in a condition of serious disrepair and that the use of

superior comparable properties resulted in an inflated value of the subject property and misled

the intended users of the report. When asked whether Cantrell complied with SR 1-4(a) in

regard to the Brown Avenue property, the MREAC’s expert stated:37

               The comparable sales were not analyzed correctly, in my opinion,
               in that, for condition, likely. I mean I’m not absolutely sure of
               this, but likely for condition and bathroom count.




       35
          Tr. at 140.
       36
          Duncan, 744 S.W.2d at 538-39; Regulation 1 CSR 15-3.350(2)(A)3.
       37
          Tr. at 142.

                                                   20
This testimony does not make sense, and the expert stated that he was “not absolutely sure.” We

find no violation of SR 1-4(a).

       The MREAC also asserts that this conduct violates SR 1-1. Because the expert’s

testimony is unclear, we find no violation of SR 1-1(a), (b) or (c) either.

                                   E. SR 1-4(c) – Income Approach

       SR 1-4(c) states:

                  When an income approach is applicable, an appraiser must:

                  (i) analyze such comparable rental data as are available and/or the
                  potential earnings capacity of the property to estimate the gross
                  income potential of the property[.]

The MREAC’s complaint asserts that Cantrell violated this rule because:38

                  In using the Income Approach, the subject property was compared
                  to lease purchase properties resulting in an inflated market rent, the
                  market for the subject property was inadequately researched, and
                  all comparable properties used were provided by an interested
                  party[.]

When asked whether Cantrell violated SR 1-4(c), the expert testified as follows:39

                          A: The income approach, if applicable, now, the income
                  approach was not completed on this appraisal, only the rent
                  analysis and operating income statement; so I don’t know if he’s
                  in violation of that or not. I just checked it, just now.

                          But the income approach, on Page 2, right under the
                  market approach, was not completed; however, he did provide
                  rental information and an operating income statement, which is
                  part of the income approach but not a complete part, likely per the
                  lender request. But in the fact that the data may be corrupted by
                  some individual that had an interest in the property, I don’t think
                  the data in the report complies.

                         Q: Are you, yourself, clear as to whether or not the income
                  approach was done in this report?


       38
            Compl. ¶ 29(d).
       39
            Tr. at 143-44.

                                                   21
                             A: Yeah. I can see it right here. On Page 2, Page 2 --

                             Q: Page 2 of Exhibit 4?

                             COMMISSIONER KOPP: Of Exhibit 4?

                             THE WITNESS: Yes, sir. At Page 2 of Exhibit 4, about 2
                     inches up from the lower right corner, where it says, “$71,000,”
                     right below that line of $71,000, it says, indicated value by income
                     approach, (if applicable), and it says, estimated market rent, which
                     is blank, times gross rent multiplier equals. And that line has not
                     been completed, and therefore, I do not believe the income
                     approach was completed on this appraisal.

(Emphasis added).

          The MREAC’s expert stated that Cantrell was careless because the rental information

was likely biased in favor of somebody getting a loan. However, SR 1-4(c) applies only “[i]n

using the income approach.” The expert stated that the income approach was not completed.

Because Cantrell did not use the income approach on this appraisal, we find no violation of SR

1-4(c).

          The MREAC also asserts that Cantrell violated SR 1-1, but because the MREAC has not

proven the conduct, we find no violation of SR 1-1 either.

          The MREAC argues that Cantrell should have used the income approach. However,

because that conduct is not asserted in the complaint, we cannot find cause to discipline on that

basis. 40

                                     F. SR 2-2(b)(iii) – Characteristics of Property

          SR 2-2(b)(iii) states:

                     The content of a Summary Appraisal Report must be consistent
                     with the intended use of the appraisal and, at a minimum:

                                                      * * *


          40
               Duncan, 744 S.W.2d at 538-39; Regulation 1 CSR 15-3.350(2)(A)3.

                                                         22
                   (iii) summarize information sufficient to identify the real estate
                   involved in the appraisal, including the physical and economic
                   property characteristics relevant to the assignment[.]

The MREAC asserts that this rule was violated because the repairs that the property needed were

not disclosed. The MREAC’s expert testified as follows:41

                          Q: Does Mr. Cantrell’s report include a list of repairs or
                   renovations?

                             A: Not that I could find.

                          Q: Is there any mention of what those repairs or
                   renovations, if needed, would cost?

                             A: No, sir, not that I could find.

                          Q: If significant repairs or renovations were required,
                   would it be proper to then include such information in the report?

                          A: It would add to the clarity of the report, it would be less
                   misleading, and it would prevent any kind of confusion. It would
                   be much better if that would have been in there.

                           Q: And then also Standards Rule 2-2(b), which -- I’m
                   sorry. Refer to Page 26 of Exhibit 2. Beginning with (b)(iii), does
                   the report comply with that provision?

                          A: No, I don’t believe it does for similar reasons as have
                   already been mentioned but I’ll outline real quick. It would have
                   been another opportunity for the appraiser to clarify exactly what
                   was going on.

The expert’s testimony is equivocal and does not explain how the failure to list the repairs

resulted in a failure to summarize information sufficient to identify the real estate involved in the

appraisal. Therefore, we conclude that Cantrell did not violate SR 2-2(b)(iii).

                          G. Standards 1 and 2 and SR 2-1(a) – Misleading Appraisal

       Standard 1 states:



       41
            Tr. at 145.

                                                         23
                   In developing a real property appraisal, an appraiser must identify
                   the problem to be solved and the scope of work necessary to solve
                   the problem, and correctly complete research and analysis
                   necessary to produce a credible appraisal.

Standard 2 states:

                   In reporting the results of a real property appraisal, an appraiser
                   must communicate each analysis, opinion, and conclusion in a
                   manner that is not misleading.

SR 2-1(a) states:

                   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[.]

The MREAC argues that Cantrell’s errors and omissions resulted in a violation of Standards 1

and 2 and SR 2-1(a). The MREAC’s expert testified:42

                   I don’t think the report was clear and may not have been accurate
                   in describing the condition of the subject property at the time of his
                   inspection. And if it was in poor condition, it would have been
                   very misleading, the report, in my opinion.

       Cantrell’s report recognizes that repairs were needed. Therefore, his report is not

misleading. Cantrell did not violate Standard 1 or 2 or SR 2-1(a).

                                 H. SR 2-1(b) – Understandable Report

       SR 2-1(b) states that the report must:

                   contain sufficient information to enable the intended users of the
                   appraisal to understand the report properly[.]

Again, the MREAC argues that Cantrell’s errors and omissions resulted in violations of this rule.

We have not found any errors or omissions, except that Cantrell failed to list the repairs needed




       42
            Tr. at 144.

                                                     24
for the property, which we have not found to be a violation of the rules thus far. The MREAC’s

expert testified specifically that this failure violated SR 2-1(b) as follows:43

                         Q: Do you think it [the report] contains sufficient
                  information to enable a user to understand it?

                          A: No. I would find -- a non-appraiser, an underwriter
                  with three or four or five years’ experience, I think they would be
                  confused out of their mind because I am! I don’t know what it is!
                  So I don’t think there’s sufficient information.

                           If the renovations need to be completed, best thing to do is
                  get a list from somebody, put it in the appraisal report, have them
                  fax it to you, put down some kind of cost estimate, shift the
                  liability of the responsibility of that from you to them somehow
                  because in this it just looks like $71,000 is what the value is today.

                         Q: Does Mr. Cantrell’s report include a list of repairs or
                  renovations?

                           A: Not that I could find.

Cantrell violated SR 2-1(b) by failing to disclose the repairs needed on the subject property.

                                  I. SR 1-2(g), SR 2-1(c), and SR 2-2(b)(x)

         SR 1-2(g) provides that an appraiser must “identify any extraordinary assumptions

necessary in the assignment[.]” SR 2-1(c) states:

                  Each written or oral real property appraisal report must:

                                                       * * *

                  clearly and accurately disclose all assumptions, extraordinary
                  assumptions, hypothetical conditions, and limiting conditions used
                  in the assignment.

         The MREAC’s complaint asserts that Cantrell violated SR 1-2(g) and 2-1(c) by failing to

disclose hypothetical conditions regarding repairs.44 The MREAC’s expert testified that Cantrell


         43
          Tr. at 144-45.
         44
          The MREAC’s written argument quotes USPAP definitions of “extraordinary assumptions” and
“hypothetical conditions,” but provides no citations, and we do not find these definitions in Exhibit 2, which is a
copy of the USPAP 2005 edition that begins on page 7.

                                                          25
violated SR 1-2(g) by commenting that the home would have new renovations and that physical

depreciation was therefore minimal. He also stated that if floors were missing and repair work

needed to be done on the property, the report would have to identify those conditions if they

were needed to achieve a value of $71,000. This is not the conduct cited in the complaint as a

violation of SR 1-2(g). Further, although the report does not identify the repairs in detail, it does

state the assumptions that resulted in the valuation. Therefore, Cantrell did not violate SR 1-2(g)

or SR 2-1(c).

       SR 2-2(b)(x) states:

                   (b) The content of a Summary Appraisal Report must be consistent
                   with the intended use of the appraisal and, at a minimum:

                                                  * * *

                   (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, summarize the support and
                   rationale for the appraiser’s opinion of the highest and best use of
                   the real estate[.]

The MREAC asserts that Cantrell violated this rule because “Hypothetical condition of repairs

were [sic] not disclosed [.]” It is unclear what the MREAC means by “hypothetical condition,”

and the MREAC offered no expert testimony in support of this assertion. The report discloses

that it was made subject to renovations. The MREAC’s expert testified that Cantrell

“marginally” complied with this rule.45 Therefore, we find no violation of SR 2-2(b)(x).

                                   J. SR 2-2(b)(ix) – Failure to Support
                                   Analysis, Opinions, and Conclusions

       SR 2-2(b)(ix) states:

                   (b) The content of a Summary Appraisal Report must be consistent
                   with the intended use of the appraisal and, at a minimum:


       45
            Tr. at 147.

                                                     26
                                              * * *

               (ix) summarize the information analyzed, the appraisal procedures
               followed, and the reasoning that supports the analyses, opinions,
               and conclusions[.]

The MREAC asserts that Cantrell violated this rule “[b]y failing to provide adequate support for

the reasoning and conclusions in the Sales Comparison Approach and the Cost Approach.”

When asked whether Cantrell complied with this rule in regard to the Brown Avenue appraisal,

the MREAC’s expert stated:46

               In a very minimal way and probably lacks. Based on this older
               form, it didn’t really give you a lot of room to go over that. But in
               a minimal way, I think maybe.

Because the expert’s testimony is equivocal, we find no violation of SR 2-2(b)(ix).

                                        K. USPAP Ethics Rule

       An appraiser must conform his appraisals to the USPAP Ethics Rule, which states in part:

               An appraiser must perform assignments ethically and competently,
               in accordance with USPAP and any supplemental standards agreed
               to by the appraiser in accepting the assignment.

                                              * * *

               An appraiser must not communicate assignment results in a
               misleading or fraudulent manner. An appraiser must not use or
               communicate a misleading or fraudulent report or knowingly
               permit an employee or other person to communicate a misleading
               or fraudulent report.

       Fraud is an intentional perversion of truth to induce another to act in reliance upon it.47 It

requires the intent that others rely on the misrepresentation.48 We may infer fraudulent intent

from the circumstances of the case.49 We find no indication that Cantrell intended to state

anything falsely in his report.


       46
          Tr. at 146.
       47
          Hernandez, 936 S.W.2d at 899 n.2.
       48
          Sofka, 662 S.W.2d at 506.
       49
          Essex, 661 S.W.2d at 551.

                                                27
       Further, we have already found that Cantrell stated that repairs were needed; thus, the

report was not misleading. Cantrell did not violate the USPAP Ethics Rule in regard to the

Brown Avenue appraisal.

                                   L. Conclusion as to USPAP Violations
                                    and Statutory Grounds for Discipline

        Section 339.53550 requires state certified real estate appraisers to comply with USPAP

standards. Section 339.532(6) and (7) allow discipline for failure to comply with USPAP

standards. Section 339.532.2(10) allows discipline for “[v]iolating . . . any of the provisions of

sections 339.500 to 339.549.” Because Cantrell violated SR 2-1(b), there is cause to discipline

his certification under § 339.532.2(6), (7) and (10).

                         M. Incompetence, Negligence, Failure to Exercise
                     Reasonable Diligence and Professional Trust or Confidence

       Section 339.532.2 allows discipline for:

                 (5) Incompetency, misconduct, gross negligence, dishonesty,
                 fraud, or misrepresentation in the performance of the functions or
                 duties of any profession licensed or regulated by sections 339.500
                 to 339.549;

                                               * * *

                 (8) Failure or refusal without good cause to exercise reasonable
                 diligence in developing an appraisal, preparing an appraisal report,
                 or communicating an appraisal;

                 (9) Negligence or incompetence in developing an appraisal, in
                 preparing an appraisal report, or in communicating an appraisal;

                                               * * *

                 (14) Violation of any professional trust or confidence[.]

Because we find no intentional wrongdoing, we find no misconduct, misrepresentation or

dishonesty.


       50
            RSMo 2000.

                                                  28
       Cantrell admitted that he checked the wrong box, indicating the condition “as is,” but he

also indicated that renovations were to be completed on the property. The MREAC’s expert was

equivocal as to whether checking the wrong box was careless. He testified that it would have

been better to include a list of needed repairs, but did not testify that this was necessary. This

does not show a lack of reasonable diligence or failure to use the degree of care required under

the circumstances. We find no negligence, gross negligence, or lack of reasonable diligence.

       Similarly, the evidence does not show a general lack of ability as an appraiser.

Therefore, we find no cause to discipline for incompetence. We find no cause for discipline

under § 339.532.2(5), (8), or (9).

       Cantrell disclosed that repairs were needed, and the expert did not testify that the listing

of the repairs was required. Therefore, Cantrell did not violate the trust or confidence that his

client placed in him. There is no cause for discipline under § 339.532.2(14).

                                              Summary

       There is cause to discipline Cantrell under § 339.532.2(5), (6), (7), (8), (9), (10), and (14).

       SO ORDERED on October 7, 2009.



                                                   ________________________________
                                                   JOHN J. KOPP
                                                   Commissioner




                                                 29

								
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