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[Commercial Grade] Misleading Appraisal Reports Can Be Treated As The Cost Of Doing Business

This week John Cicero [1] 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 [2] 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] [3]. 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:

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.