Opinion ID: 1931243
Heading Depth: 3
Heading Rank: 2

Heading: Substantial Evidence as to Morgan

Text: As discussed supra, the Circuit Court erroneously remanded consideration of the comparable sales and neighborhood predominant values. We now review whether the Division's findings of Consumer Protection Act violations based on the prior sales histories, comparable sales, and neighborhood predominant values were supported by substantial evidence.
Morgan appeals the Circuit Court's holding that the Division had substantial evidence to find him in violation of the statute for misrepresenting prior sales histories. The Division charged Morgan with failing to note in his appraisals when a property had been transferred within twelve months before the proposed sale. The Uniform Standards of Professional Appraisal Practice requires that appraisers list all prior sales that occurred within the year. Advisory Opinion AO-1, supra. The Uniform Residential Appraisal Report form asks for prior sales of the subject property and comparable properties. The ALJ found that in all thirty-two of the subject appraisals Morgan conducted, he reported that there had been no prior sale. In actuality, thirty of the properties had been sold within the previous twelve months. Administrative Law Judge Spencer rejected Morgan's argument that the discrepancies were caused by a delay between the recording of the deed and the deed reporting service making the information available to appraisers. She based her finding that Morgan's argument was incredible on a number of facts: (1) Morgan listed Shpritz or one of his companies as the deed owner of record on the appraisals, evidence that he was aware of the prior sale transferring the property to Shpritz; (2) for at least five properties, the prior sale was at least seven months prior to the appraisal, ample time for it to be posted by the reporting service; [32] and (3) Morgan testified that he reported that there were no transfers at the suggestion of an American Skycorp employee, even when Morgan was aware of discrepancies between the owner listed on a property's deed and the seller listed on the sales contract. Finally, the ALJ rejected Morgan's argument that consumers did not rely on his appraisals because they did not review the appraisals themselves. She found that Morgan believed that the consumers would have access to his appraisals and that Morgan's failure to report the prior sales would tend to deceive a reviewer of the appraisals. We hold that the Division had substantial evidence to find that Morgan had violated ง 13-301(1) and (3) based on his failure to report the prior sales histories in his appraisals.
We first address Morgan's contention that selection of comparable sales is subjective to the extent that a fact finder cannot determine whether an appraiser misrepresented in the selection. A review of the record indicates that the Consumer Protection Division may find an appraiser to have violated the Consumer Protection Act through his or her selection of comparable sales. Simply because the selection of comparable properties may be a subjective determination does not mean a factual representation using comparables as a measure of value cannot be a misrepresentation. Not all comparables are appropriate. Even if the ALJ accepted the testimony of Morgan's expert that there is a range of acceptable valuations for appraisals, and that the generally accepted range between appraisals is five to ten percent, a fact finder could view comparables leading to a valuation outside the range as an indication of misrepresentation, with the likelihood of misrepresentation increasing as the deviation from the range increases. [33] We conclude that the Division's finding that Morgan violated ง 13-301(1) and (3) through his misrepresentation of comparable sales was supported by substantial evidence. The Division's case relied primarily on Robert Hinton, the Division's expert. Hinton's review of each appraisal was based on the appropriate data bases and records as they existed at the time of the initial appraisal. He concluded that Morgan made inaccurate statements of comparable sales in twenty-eight of the thirty-two appraisals. Hinton indicated that Morgan regularly chose comparable sales relatively far from the subject property, when much closer comparable sales were available. In many instances, Morgan ignored comparable sales on the same street โ including, in some instances, the house next door to the subject house. While Morgan's comparable sales were not far away, often within a half mile of the subject properties, they were far enough away to cause significant discrepancies. As Hinton testified, the value of properties in the Bel Air/Edison area depends upon location, and properties on one block can be worth significantly more or less than properties on the next block. By selecting comparable sales further away from the subject property, Morgan presented an inaccurate and grossly inflated valuation of the subject property. Morgan's explanation that he chose comparables based on bedroom count, bathroom count, square footage, and age, rather than location, is belied by a review of his appraisals. In a number of transactions, Morgan used dissimilar properties as comparable sales and ignored properties that were similar and closer to the subject property. Morgan's willingness to select dissimilar properties to use as comparables is evidenced most dramatically by his selection of a property containing a one-story addition used as a Knights of Columbus Hall with a bar and kitchen area. He listed that property as a comparable in three appraisals of ordinary row-houses. A close look at his appraisals illustrates Morgan's selection of comparables that violated his selection criteria. For example, in his appraisal of 2826 Pelham Avenue, Morgan selected three comparables located respectively one-quarter, one-half, and one-half miles away from the subject property. Hinton identified three comparable sales on the same street as the subject property. Hinton's comparables had the identical number of bedrooms and bathrooms as the subject property, were almost identical sizes, and were the same age. Morgan's first comparable had a modern kitchen and central air conditioning, amenities the subject property did not have. Morgan's second comparable sale was a significantly larger house than the subject property. Hinton noted that the house had an extra half story, was a corner house, had a park view, and was over 1,000 square feet larger than Morgan indicated. Even Morgan noted that the comparable had an additional bedroom and 0.1 more bathrooms. Morgan's third comparable had sold nine months before for only $29,000, but Morgan did not note this sale and valued the property at $78,700. Finally, Morgan viewed his comparables to be sufficiently different from the subject property that they required a large number of adjustments. Morgan argues that Hinton's testimony was based on comparable sales data over six months old and that Morgan adhered to FHA guidelines recommending use of sales data less than six months old. [34] The Division found Morgan's argument meritless because in his appraisals, Morgan frequently used comparable sales older than six months; out of thirty-two appraisals, Morgan chose twenty-five comparable sales older than six months. Morgan's argument that some of the comparable sales Hinton used in reviewing the appraisals might not have been available to Morgan when he conducted his appraisal is not supported by the record. First, Morgan argues that because of delays between the sale of a property and its listing in MRIS or the deed services, the sales were not available to him. This assertion is belied by Hinton's testimony that the entry dates on MRIS show that the prior sales were available to Morgan. Morgan also argues, supported by Vidi, that MRIS is composed of a number of servers, that it takes five to six hours for information inputted into one server to be transferred into the others, and, consequently, that Morgan might not have had access to information inputted into one MRIS server. This argument is unavailing, as Hinton only criticized Morgan for ignoring information inputted into MRIS days, not merely hours, before Morgan's review. Moreover, Morgan does not point to any specific instance in which a comparable sale used by Hinton was not available to him. Instead, Morgan makes a general argument that the data bases might not have posted the sales of the comparable properties in time for him to view them. Without pointing to any particular instance, Morgan has not provided any evidence to explain his failure to consider far superior comparable sales than the ones he selected. Finally, Morgan argues that he could not have misrepresented the value of the property through the comparable sales, because he did not always appraise the property at the Shpritz parties' designated sale price. Morgan points to ten properties he appraised as worth less than the sale prices and notes that under FHA guidelines, an appraisal under the purchase price provides the purchaser an opportunity to cancel or renegotiate the sale price. See HUD-91322.3. Although under-appraisals might indicate that Morgan did not rubber stamp the Shpritz parties' sale price, the mere fact that Morgan appraised some properties for less than the Shpritz parties' artificially inflated prices does not ipso facto absolve Morgan. That an appraisal may be inflated even more is not a defense to an artificially inflated appraisal. We reject Morgan's argument. Accordingly, we hold that substantial evidence existed in the record to support the Division's finding that Morgan had violated the Consumer Protection Act through his selection of comparable sales.
We hold that the Division lacked substantial evidence to find that Morgan had misrepresented neighborhood predominant values. The Division alleged that Morgan misrepresented the neighborhood predominant value in fourteen appraisals. Hinton presented only general testimony about the calculation of neighborhood predominant values. He did not produce any evidence showing how he arrived at his values for any of the properties. On cross-examination, he acknowledged that he had not brought any documents to the hearing to show how he arrived at his values. Similarly, his reports merely state his conclusion of the appropriate neighborhood predominant value. In sum, for each property, the Division's evidence consisted entirely of two numbers. One number was Morgan's calculation of the neighborhood predominant value. The other was Hinton's calculation, a smaller number. The Division's conclusion that Morgan's calculations constitute misrepresentations is not supported by substantial evidence.