Some appraisers with revoked licenses still working in real estate
by Will Whitehorn
Although Ira C. Gluck was forced by the state to surrender his appraisal license in 2007 amid allegations of deceptive business practices, he still works for the same financial company — selling real estate — according to a recent investigation by the Center of Public Integrity, which discovered this scenario has played out multiple times in California and Florida.
Read Angie's column to learn about the controversy brewing over new appraisal regulations. >>
Gluck, who works for North American Financial Services outside Los Angeles, admitted to the California Office of Real Estate Appraisers that he prepared two inaccurate and deficient appraisals, and falsely certified he had no financial interest in the properties he appraised, according to state OREA documents. The judgment says that if he ever reapplies for a California appraisal license, he must pay $9,000 in fines as a result of these violations.
Gluck told the CPI he didn't think losing his appraisal license should disqualify him working in real estate and claimed he shouldn't have lost his license in the first place, saying only that "the punishment didn't fit the circumstances."
When reached by Angie's List Magazine, Gluck declined to discuss any ethical issues regarding revoked appraisers being permitted to continue on in real estate. "To be honest, that's a part of my life that's behind me," he says. "And I'd rather just keep it there."
The CPI investigation found one in six of every revoked appraiser licensee in California and Florida since 2005 was permitted to retain their real estate sales or broker license, a situation the Center indicated was a lack of coordination between the state-operated appraiser and real estate boards that regulate them. The violations that led to these appraisers losing their licenses ranged from simple incompetence to fraud committed for personal financial interest — breaches of administrative law governing the appraisal regulatory board.
In California, the appraisal office says it shares revocation information with the state real estate board, which must then hold its own investigation to see if real estate regulations were also violated. According to the California OREA, however, it's legal for a revoked appraiser licensee to continue operating in real estate if their real estate license is still valid.
The Chicago-based Appraisal Institute, a global association of appraisers that promotes professional standards, takes a somewhat different stance.
"When an appraiser loses their license, it's usually more than a series of honest mistakes — it usually involves something more sinister," says association president Jim Amorin. "In those cases, it should be on the state to pay attention to make sure that individual doesn't continue working in a related field."
Ted Faravelli, executive director of the California Association of Real Estate, confirms there's no policy in the state prohibiting a person who had their appraisal license revoked from having an interest in another real estate or appraisal firm.
Check with your state's appraisal board before hiring a real estate agent to see if he or she has ever had an appraisal license revoked or suspended. Also check with the Appraisal Institute as they track licenses and revocations across state lines.
However, he says, "We have a zero-tolerance policy for appraisers who have had their licenses revoked because they committed a crime, and we have a pretty firm hand for appraisers who have acted unethically," referring specifically to appraisers found guilty of criminal activity or gross incompetence. "It depends a lot on what they've been charged with," he adds. "But everybody gets their due process."
Numbers may play a part in the disconnect. California has approximately 16,500 licensed appraisers and more than 500,000 licensed real estate agents — the largest numbers for both professions in the U.S. The CPI found 10 cases in California where an appraiser with a revoked appraiser license was still a licensed real estate professional.
While the state's appraisal and real estate boards work to communicate, Faravelli acknowledges it's likely some individuals fall through the cracks. "Does it go on? Of course it does," he says. "You can't stop everybody. It's time for accountability industry-wide."
In Florida, the CPI found nine licensed real estate agents who'd lost their appraisal license. Francois Gregoire, who chaired the Florida Real Estate Appraisers Board from 2000 to 2008, says state law does not require the real estate and appraisal licensing agencies to share information. An appraiser under investigation is allowed to retain their appraisal license until "probable cause" is found, research that can take as long as a year. Gregoire says the state does not have the ability to temporarily suspend licenses for individuals charged with serious fraud. Laws like those in Oklahoma, which allows for emergency summary judgment to be issued to temporarily suspend licenses, might be a valuable tool, he adds.
In Texas, Deloris Kraft-Longoria, enforcement director of the state's Appraiser Licensing and Certification Board, says this issue concerns her. In 11 years, she's witnessed 30 appraisers lose their license. Of those, 11 continued to function as real estate agents, she says, explaining one loophole in the state law that makes it possible. "If the appraiser voluntarily surrenders their license, their record doesn't show a revocation," she says.
The issue appears moot in the Lone Star State anyway. It's one of just a handful that allows real estate agents to appraise property, whether they have a separate appraisal license or not. Nonetheless, Kraft-Longoria believes revocation for wrongdoing in one instance should have across-the-board consequences. "I feel if you lose your appraiser license, all others should go with it," she says.
Georgia is one state that claims to have mastered the fine art of weeding the good from the bad, despite ranking fourth nationally for mortgage fraud in 2008. The two state departments that enforce real estate and appraisal standards are headed by the same individual: Jeff Ledford, the state's Real Estate Commissioner. He says that if an individual is charged with an infraction, an automatic hold is put on their license.
"If their license is revoked, that information also goes out to all the states and provinces in North America," he says. As a result, he says he's aware of no circumstance in the state in which a revoked appraiser was continuing to operate as a real estate agent. "I sign the orders for both," he says.
Joe Eaton, who authored the CPI report, says many officials he talked to across the country indicated this was a big problem in their states — and he doubts Georgia is immune. "If California has two agencies that can't link up, I find it hard to believe that it's linked in Georgia," he says.
Atlanta homeowner Matt Larson says he wouldn't like dealing with an agent who had a related license revoked. Larson's wariness of real estate dealings, in general, leads him to avoid interaction with both appraisers and real estate agents. "From my standpoint, real estate — the way the system is set up — it's not a good system," he says.
Others, like The Appraisal Institute, are unsure how widespread the problem may be. "There are over 100,000 appraisers practicing in the U.S.," says AI spokesman Ken Chitester. "It's a state by state issue."
Pamela Crowley, who runs the website Mortgage Fraud Watch List, told CPI she believes it's a big issue: "Why bother licensing if you are going to allow them to keep hopping from one to another and keep doing the same unethical things that harm our people, harm our consumers, harm the economy?