This week [John Cicero]( discusses the disparity in fines for administrative versus substantive violations.

Disclosure: John is a partner of mine in our commercial real estate valuation concern [Miller Cicero, LLC]( and he is one of the smartest guys I know (although I don’t get out much).

-Jonathan Miller

I just received my January 2006 newsletter from the [New York Department of State [DOS]]( Picture of Pataki on the cover…very official looking. Nearly two pages of the four page newsletter are devoted to identifying individuals who have violated some aspect of our state licensing laws. Here are some of the punishments meted out:

  • A fine of $750 for failure to provide evidence of continuing education
  • A fine of $300 for failure to confirm a closed sale
  • A fine of $750 for failure to retain appraisal reports and supporting data within the prescribed period
  • A fine of $750 for communicating a misleading appraisal report
  • A fine of $1,500 for failing to exercise “reasonable due diligence in developing and preparing an appraisal report”

I find this fascinating
To the DOS, a violation is a violationdoesn’t seem to matter that one violation refers to maintaining files and another refers to doing low quality work and violating ethics rules. In my opinion, the fines for the first three examples above are probably appropriate, a fine to remind the culprit that as professionals we are obligated to abide by a certain administrative process…

But $750 for communicating a misleading appraisal? That’s about as serious as it gets in our business. And while there are appraisers who do get their licenses/certifications revoked, I suspect that the vast majority of the violators get off with a similar fine.

I know that the State Licensing board works hard but has limited resources at their disposal, in fact, I believe that funds generated from license fees are earmarked to other areas of the government. I think the licensing laws needs to be revised to separate out the adminstrative errors from those that are negligent.

Of course, I don’t know the details of these violations and I am not singling out New York as I can imagine there are other states with the same license law structure, however…

…to the impartial observer the implementation of the licensing law seems to give a green light to those appraisers that would bend their ethics when convenient. Chances are, if caught, they’ll only have to pay a fine that amounts to nothing more than a fraction of the appraisal fee…its simply the cost of doing business.

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One Response to “[Commercial Grade] Misleading Appraisal Reports Can Be Treated As The Cost Of Doing Business”

  1. John Philip Mason says:

    Boy did John take the words right out of my mouth. I was outraged when I read the newsletter, but I think you were far too kind to the DOS. While there is no doubt the state has once again absconded with funds intended to safeguard public interests, these are cases where time and money spent on investigations led to negligible results. If these cases are not as serious as we are led to believe, then the newsletter should have offered some commentary to the fact. Without explanation we are left to assume the DOS has done nothing more than slap a few wrists and collect some menial fines. So incompetent and corrupt appraisers keep poisoning the well we all need to drink from. And the fines go back into a general fund, to be spent on anything but safeguarding the public’s interest with regard to the appraisal industry. Nothing changes. Nothing!! Honest appraisers need to realize the problem is not going away, unless we do something. If we don’t complain to DOS, the governor and state legislators, then nothing will happen. That’s right. I’m saying we need to let them know the DOS is not effective or tough enough. If the DOS can’t find at least 1% of the appraisers as being corrupt or completely incompetent, and then revoke their licenses for life, then there is something wrong with the DOS. Look around at the work you see coming across your desks and tell me at least 1 in 100 appraisal reports aren’t fraudulent.

    So say something, or keep drinking from the poisoned well.