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					NYS Department of State                                                                             Volume 1, Number 2 — Fall 2004

 Real Estate Appraisal Newsletter
                                 Department of State Enforcement Update
                             Note: Article 6-e of the Executive Law requires the Department of State to regulate the
                             conduct of Licensed/Certified Appraisers and Appraiser Assistants and to establish dis-
                             ciplinary proceedings in conjunction with the Board of Real Estate Appraisal.

                             Pending Cases
                             Currently, charges are pending against eight appraisers for various violations of
                          the Uniform Standards of Professional Appraisal Practice (USPAP) and Article 6e,
                          NYS Executive Law:
George E. Pataki               Two complaints against a Certified Residential Appraiser for conveying mis-             Randy A. Daniels
Governor                    leading appraisal reports. This individual was also arrested in Nassau County and         Secretary of State
                                         charged with five felonies for inflating value estimates in a scheme to
                                         defraud lenders.
 Real Estate Appraisal                      A Certified Residential Appraiser for rendering appraisal services in a careless and negli-
 Board Members                           gent manner.
                                            A Licensed Residential Appraiser for failure to properly gather factual information, render-
 D. Rex Bryce, Chair                     ing appraisal services in a careless and negligent manner, and failure to analyze all agree-
                                         ments of sale, listings or options.
 Peter Goold, Vice-Chair                    A Certified General Appraiser for accepting a fee and failing to render appraisal services.                  A Certified Residential Appraiser for conveying a misleading appraisal report and failure
                                         to cooperate with an investigation.
 Robert Galliher, MAI, SRA                  Three Certified General Appraisers for failure to properly gather factual information, ren-                      dering appraisal services in a careless and negligent manner, and failure to set forth appraisal
                                         reports in a clear and understandable form.
 Wilson Kimball
                                             Discipline - Fines
 Dominick Pompeo, SRPA, SRA, CSA             2003-0439        On March 22, 2004 a Licensed Residential Appraiser was fined a total of                            &            $1,000 in two complaints for the failure to adequately describe the condition
                                             2003-0834        of two subject properties; acknowledge prior reports with the same date; prop-
 Jack Rose, IFAS, CSA                                         erly support the income approach and indicate appropriate title and license                                       number on the appraisal reports.
                                             2003-1150        On June 30, 2004 a Certified General Appraiser was fined $500 as part of a
 Matthew Smith, MAI, SRA                                      Consent Order for rendering appraisal services in a careless and negligent                                      manner.
                                             2003-2431        On March 25, 2004 a Certified General Appraiser was fined $750 for failure
                                                              to: properly analyze sales data on an original report; use a correct effective
                                                              date for a second report of the same property; and, provide a correct descrip-
                                                              tion of improvements in the second report.

Appraiser Examination Schedule                                                                          Appraisal Board to Meet
  Appraiser walk-in examinations will be held in Albany, Buffalo, Franklin Square,                     The New York State Board of Real
Hauppauge, New York City and Syracuse at 9:30 a.m on the following remaining                         Estate Appraisal has scheduled its next
dates in 2004:                                                                                       meeting for 10:30 am on Friday, De-
                           November 8 * December 20                                                  cember 10, 2004 at the Department of
                                                                                                     State, 123 William Street, 19th Floor
   An appraiser applicant may only take the examination for the classification indi-
                                                                                                     Conference Room, New York City, NY.
cated on the admission notice. If an applicant has subsequently completed additional
education for a different category, he or she may contact the Albany phone center at                    If you plan on attending this meet-
(518) 474-4429 for information on obtaining an updated admission notice. Appraiser                   ing, please check the Department of
Assistants should note that federal Appraiser Qualifications Board (AQB) guide-                      State Website (
lines specify that qualifying examinations results are only valid for 24 months                      prior to the meeting date to confirm the
from the date the test was taken. If an applicant has not applied for a license/certi-               meeting.
fication within this time period, a new test will be required.
The Unseen Cost of Careless Appraisal Practices
   In our last edition of the Appraisal Newsletter, we addressed the            for their expertise and familiarity with market conditions in
significant increase in Uniform Standards of Professional Appraisal             certain areas of the state.
Practice (USPAP) violations and appraisal fraud that have occurred
                                                                             The cost of appraisal investigations has increased so significantly
over the last several years, and the steps being taken by the Depart-
                                                                          that a number of states have instituted a fine/fee policy into their
ment and the Appraisal Board to alleviate this situation. Most ap-
                                                                          disciplinary proceedings. Individuals who are found in violation
praisers understand the harmful consequences that incompetent
                                                                          of USPAP or state license law are assessed a fine amount to cover
appraisal practice can inflict on individuals and communities. How-       the cost of the investigation, in addition to any other imposed pen-
ever, an often overlooked detail is the cost to government (and
                                                                          alties. Careless appraisal practices can have the same impact as
ultimately the taxpayer) of investigating appraisal complaints.
                                                                          those of a more serious or intentional nature because the Depart-
   The Department of State has administrative jurisdiction over           ment must follow specific guidelines and allocate financial resources
more than twenty licenses and registrations. Real Estate Appraisal        in a similar manner for most complaints. Consequently, the Ap-
complaints are among the most costly to administer both finan-            praisal Board and the Department are committed to the enforce-
cially and in terms of hours required per investigation. This is due      ment of USPAP. To avoid penalties, appraisers should be mindful
to various factors:                                                       of the following points:
  • federal oversight of appraiser licensing in all states;                 •    observe the Ethics Rule and the Competency Rule. Do not
                                                                                accept assignments in unfamiliar locations or with a specific
  • large amount of documentation that must be examined such
    as appraisal reports, letters, statements from parties to the com-          type of property that you do not have the requisite experi-
                                                                                ence. Seek the guidance of other knowledgeable appraisers
    plaint and data used to develop the appraisal;
                                                                                when necessary;
  • complexity of the appraisal process and required adherence
                                                                            •   do not “bend the rules” to please a client;
    to applicable USPAP Standards and New York State License
    Law (Article 6e, NYS Executive Law);                                    •   when required, spend the necessary time to perform a com-
                                                                                petent property inspection. Be sure of all sources and the ac-
  • federal enforcement guidelines which advise a full Standard
                                                                                curacy of your information; and
    3 Review in many types of complaints; and
                                                                            •   perform the appropriate level of due diligence as required in
  • use of compensated regional appraiser advisors who review
    many value disputes for the Department. Advisors are chosen

Appraisal Standards Board to Phase Out the Departure Rule
   From it’s inception in the early 1990’s,      clarified the minimum development re-            Work in January, 2003. The feedback re-
the Departure Rule has been a source of          quirements in an appraisal assignment, they      ceived from interested parties made clear
confusion and controversy for many ap-           did not eliminate the use of the terms “com-     the importance of a proposed Scope of
praisers. It was originally assimilated into     plete appraisal” and “limited appraisal”.        Work Rule. Basically this proposal would
Uniform Standards of Professional Ap-            The Appraisal Standards Board (ASB)              replace the Departure Rule with a set of
praisal Practice (USPAP) to meet the in-         pointed out that these terms often imply         minimum core standards that must be fol-
creasing demand for appraisal services           improper meaning to those not familiar with      lowed in every appraisal assignment. The
other than the typical appraisal valuation       the definitions in USPAP. The word “com-         ASB states that while this conceptual shift
product. Departure was viewed as the best        plete” is mistakenly viewed as a reference       away from departure will result in numer-
mechanism to provide the necessary flex-         to the entire scope of work and not a dis-       ous changes to USPAP, the fundamental
ibility while at the same time preserving        closure related only to the degree of com-       requirements (of USPAP) will not change.
professional appraisal standards. Basically      pliance with non-binding specific require-       The scope of work will continue to be based
it allows for the exclusion of specific          ments. The term “Limited Appraisal” can          on what is required to produce a credible
non-binding requirements (specific require-      also imply an inferior appraisal product to      appraisal assignment, however there will be
ments) in an appraisal assignment, under         many users of appraisal services.                no label (“complete” or “limited”) placed
certain circumstances. Subsequent changes           Consequently, appraisers, regulators and      on the provided service. No significant
clarified that departure was not permitted       users of appraiser services expressed the        changes to USPAP from this project are
from any Standards Rule which was neces-         need for clarification on this issue. The ASB    expected until 2006 or later. Accordingly,
sary to produce creditable results in a spe-     responded by issuing a Concept Paper on          please note that the Departure Rule is in
cific assignment. While these revisions          the Role of Departure and the Scope of           effect until officially replaced.

Continuing Education Update                                               Quick Note about Renewing on Time
                                                                          Each appraiser should be aware of the importance of renewing their
As reported in the previous Newsletter, as of January 1, 2004, all        license/certification as soon as possible after receiving the renewal
appraisers are required to complete a seven-hour National USPAP           form. The Division of Licensing Services mails each appraiser their
Update Course in order to renew their license. To facilitate the          renewal application approximately three months prior to the expi-
transition into this new continuing education requirement, the Ap-        ration date of the license/certification. Once your license/certifica-
praiser Qualifications Board also allowed appraisers to complete          tion has been renewed with this office, your renewal information is
the 15-hour National USPAP Course in lieu of the seven-hour               electronically transmitted to the National Registry for inclusion on
course. The completion of the 15-hour course to satisfy the re-           their database of Licensed/Certified Appraisers approved to per-
quirement is only admissible for the calendar years 2003 and 2004.        form Federal-Related Transactions. The later you renew your li-
As of 2005, all appraisers must complete the seven-hour National          cense the longer it will take for your name to appear on this regis-
USPAP Update Course to fulfill this requirement.                          try, thus delaying your authority to perform these transactions.
Number of Appraiser Assistants Continues to Rise
   In the early 1990’s, the Board of Real         sification. With the increase in assistants,      •    personally inspect each appraised
Estate Appraisal and the Department of            the Department has also experienced a cor-            property with the Appraiser Assistant
State recognized the need to establish an         responding rise in the number of complaints           until he or she is competent to do
Appraiser Assistant (trainee) category in         against them and inquiries concerning their           alone.
New York. Since federal oversight of the          responsibilities. Most of the problems can         Appraiser Assistants obligations.
appraisal profession (in federally covered        be traced to situations where Appraiser
                                                                                                     • must work only under the supervision
transactions) was now law, an entry level         Assistants are not properly supervised.
category was needed to provide field train-       Accordingly, the Department of State will             of a Licensed or Certified Appraiser
                                                                                                        on each appraisal assignment.
ing for candidates, document their experi-        monitor the activities of assistants and su-
ence and assist appraisers with their assign-     pervisory appraisers to ensure compliance          • maintain an appraisal log with re-
ments. Initially, the Department registered       with the following:                                   quired information for each appraisal
about 300 individuals. The numbers began                                                                and a separate log for each supervis-
                                                     Supervisory appraisers responsibilities.
to increase as appraisal professionals ac-                                                              ing appraiser.
knowledged the functionality of the new              • train the Appraiser Assistant in the
                                                        correct development and reporting of         • adhere to USPAP in all areas of re-
classification and began to use Assistants                                                              sponsibility.
                                                        an appraisal in accordance with
on a more regular basis. Consequently, on                                                            • disclose Appraiser Assistant status
January 1, 2000, an amendment to Article                                                                when required and in a manner that is
6e of the Executive Law became effective             • accept responsibility for the appraisal
                                                                                                        not misleading.
which formally recognized the Appraiser                 report by signing and certifying the
Assistant category.                                     report.                                      As noted in the last newsletter, some
                                                     • review the Appraiser Assistants work       qualifying criteria for Appraiser Assistants
   Presently, there are about 3,600 Ap-                                                           (trainees) will be changing on January 1,
praiser Assistants in New York. This has                and reports.
                                                                                                  2008 or earlier.
become the largest appraiser license clas-

ASB Advisory on the Clarification of
the Client in a Federally Related                                         Wealth of Appraiser Information
Transaction                                                               Available at DOS Website
An article in the last edition of the Appraisal Newsletter focused           Up to the late 1980’s, appraisers were for the most part, unregu-
on Appraisal Standards Board (ASB) Advisory Opinions 26 and               lated, and quietly carried on their trade. With establishment of the
27 which concerns the transferring of an appraisal report to an-          Federal Institutions Reform, Recovery, Enforcement Act of 1989
other party and appraising the same property for a new client. No         (FIRREA), came licensing, formal recognition of Uniform Stan-
less important for appraisers is Advisory Opinion 25 which con-           dards of Professional Appraisal Practice (USPAP), and a myriad
cerns the Clarification of the Client in a Federally Related Trans-       of federal and state regulations that required the appraiser’s atten-
action. The basis for this interpretation are federal appraisal rules     tion. An appraiser’s time is important. So how can he or she get
adopted in 1990 to comply with Title XI, which imposes a require-         immediate answers to questions on appraisal matters or renew a
ment on regulated institutions that “if an appraisal is prepared by a     license/certification any time of the day or night? Go to the De-
fee appraiser, the appraiser shall be directly engaged by the regu-       partment of State website. Here, appraisers will find most of the
lated institution or its agent.” In some circumstances, however, a        information and forms they need without the inconvenience of call-
property owner may directly engage the services of an appraiser           ing or visiting a Department of State office. Our interactive website
for one intended use, but later want to use the appraisal report in a     allows appraisers to carry out the following functions:
federally related loan transaction. The ASB advises that in such a
                                                                             • Renew a license or certification (mastercard or visa accepted);
situation, the appraiser must make proper disclosure to the prop-
erty owner that the lender or its agent is required to directly engage       • Search the list of active license/certification holders by ID
the appraiser. The appraiser must also divulge to the client that it is         number or name;
unethical to later change or readdress the report to indicate the            • Download initial and renewal applications;
lender as the client when the appraisal report was prepared for              • Read a column on frequently asked questions and obtain the
another party (see Advisory Opinions 26 and 27). If a client still              latest information on federal AQB and ASB policy changes;
wants to proceed with the appraisal after the appraiser has made
                                                                             • Obtain a list of Appraisal Board Members;
the proper disclosures, the appraiser can accept the assignment.
The complete text of Advisory Opinion 25 and related references              • Find examination information and schedules;
can be found in USPAP 2004. All appraisers should familiarize                • Read or download Appraiser License Law (Article 6e), reci-
themselves with this information to ensure compliance with these                procity list, Appraisal Board meeting summaries, and current
guidelines.                                                                     edition of the appraisal newsletter;
              Licensed and Certified                                         • Obtain appraisal instructor and approved course forms; and,
                                                                             • Download complaint forms.
              Real Estate Appraisers
                                                                             There is also substantial information available for all other De-
 Certified General Real Estate Appraiser                1,529             partment of State licenses (such as real estate salespersons and bro-
 Certified Residential Real Estate Appraiser            1,957             kers ) and divisions. The link to our Division of Corporations may
 Licensed Real Estate Appraiser                           464             prove helpful to many of our licensees. Our web address is
 Real Estate Appraiser Assistant                        3,556   
        Total                                           7,507                Give it a try!
 Department of State                                                                                             PRESORTED STANDARD
 Division of Licensing Services                                                                                      U S POSTAGE
 84 Holland Avenue                                                                                                       PAID
 Albany, NY 12208                                                                                                   PERMIT NO. 366
                                                                                                                      ALBANY, NY

Frequently Asked Questions
   The Department of State receives com-            • summaries of any oral reports or tes-        is sufficient to meet the requirement. How-
munications from appraisers and other in-              timony, or a transcript of testimony,       ever, this is a minimum requirement and does
terested parties concerning the Uniform                including the appraiser’s signed and        not prohibit full disclosure of the amount of
Standards of Professional Appraisal Practice           dates certification; and                    the fee.
(USPAP), licensing regulations and other            • all other data, information, and docu-       Question 3:
matters. We will provide responses to those            mentation necessary to support the          I am a licensed trainee with approximately
inquires of greatest interest.                         appraiser’s opinions and conclusions        six months of experience. My supervisory
   Note: The following information is pro-             and to show compliance with this            appraiser recently deemed me competent to
vided by the Appraisal Standards Board                 Rule and all other applicable Stan-         perform inspections on my own; however,
(ASB). If you have additional questions                dards, or references to the location(s)     many of our clients require the supervisory
about USPAP or other related topics, please            of such other documentation.                appraiser to physically inspect the property
go to the Appraisal Foundation Website at           As long as an electronic workfile con-         as well. If I do the inspection by myself but                    tained these items, it would be sufficient.        take numerous representative photos of the
Question 1:                                         An appraiser must also be mindful of the       interior of the subject property, may my su-
Recently I have considered maintaining only     requirement to have access to the workfile         pervisory appraiser check the box indicat-
electronic workfiles (i.e. saving only elec-    for the applicable required time period. The       ing that he “Did Inspect” the interior of the
tronic versions of my reports and support-      appraiser must ensure that the proper soft-        property?
ing data, and scanning any paper documents      ware is maintained to allow access to the          Response:
used so that copies may be stored on elec-      electronic files.                                  No. A physical inspection of the interior of
tronic media). Is this prohibited by USPAP?     Question 2:                                        the property is not the same a s a physical
Response:                                       The Management section of the ETHICS               inspection of photographs of the interior of
No. There is nothing in USPAP that would        RULE requires an appraiser to disclose,            the property. It would be misleading for an
prohibit an appraiser from maintaining only     ...fees, commissions, or things of value... paid   appraiser to indicate that a physical inspec-
electronic versions of workfiles.               in connection with the procurement of an           tion was performed when in fact the ap-
The Record Keeping section of the ETH-          assignment. If a referral fee was paid in con-     praiser viewed photographs of the property.
ICS RULE states, in part:                       junction with an assignment, must the amount       An appraiser who only inspects photographs
The workfile must include:                      of the fee be disclosed, or is it sufficient to    of a property, but signs a certification indi-
   • the name of the client and the iden-       simply disclose that a fee was paid?               cating that he or she physically inspected the
      tity, by name or type, of any other in-   Response:                                          subject property, is in violation of USPAP’s
      tended users;                             Disclosing the fact that a payment was made        prohibition against the communication of a
   • true copies of any written reports,        in the appraisal certification and any trans-      misleading or fraudulent report (Conduct
      documented on any type of media;          mittal letter where the conclusions are stated     section of the ETHICS RULE).