Really, you can’t go into a contest with your state appraisal board alone, naked, and unarmed. Why would you want to? Obviously, you need legal counsel, but you may also need USPAP counsel as well. That’s why I’m here.
Question: “My state board recently charged me with writing a misleading report. I got the client to write a letter to the state indicating my report did not mislead them, yet the state sanctioned me for it anyway! If my client says I did not mislead them, how can the state board say I did?!”
Answer: The answer to this question is one with numerous and subtle twists-and-turns.
Please understand it is your state’s appraisal board, not your client, that determines if an appraisal report is misleading[1]. USPAP is the only metric by which both the client and the state board measure the credibility of the appraisal and whether the report is misleading. However, your client is biased in favor of itself and it wants an appraisal that supports the purchase & sale agreement, closes a deal, and gets everybody paid. It cares far less that you formed your value conclusion credibly, or reported it in a non-misleading manner. Therefore, your client’s opinion as to whether you mislead anybody is both irrelevant and baseless because of the client’s inherent bias favoring itself.
On the other hand, the state appraisal board has no bias (you hope!) since (1) it has no dog in the hunt and (2) it is the only arbiter of what a misleading appraisal/report is. In practice, the state board measures your appraisal against USPAP’s Standard 1, and the manner in which you report it against Standard 2. To do these, the state has trained investigators (not necessarily trained appraisers) whose job it is to ask the questions to determine if you did or did not follow these standards (but they typically do not make that decision). Then your state board and its legal counsel (usually the state’s Attorney General or an assistant AG), decide (1) if there was a violation(s) of USPAP and/or state law and, if there was a violation, (2) what penalty(ies) the board should impose.
Then the state board gives you (and, ideally, your counsel) the opportunity to tell your side of the story. Once you have done this, the state, as part of the sanctioning (i.e. punishing) process, will do anything from drop the charges (not likely) to revoke your certification (also not likely). Once the state has imposed a penalty, there is no appeal[2] from it other than to a court of law (which is the subject of another question and answer – not to mention expensive and time-consuming [two facts the state board knows]).
Now for something you probably did not know. When you sign the Certification in an appraisal report, here (somewhat edited) is what you are certifying (among other things). This is right out of USPAP, SR2-3:
“I certify that, to the best of my knowledge and belief…the statements of fact contained in this report are true and correct…[and]…my analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with [USPAP]” (ibid, lines 731,732, 749, and 750).
What does this have to do with misleading? All the state must do is find one instance in which you did not follow Standard 1 or Standard 2. Then, because you certified you did develop and report your appraisal congruent with those Standards, despite the fact you did not, that failure, coupled with your signed Certification, constitutes misrepresentation (or misleading the client, etc).
Therefore, even though the client concludes you did nothing to mislead it, the client’s conclusion is not part of the state’s decision criteria, due to the client’s own biases. Did you follow Standard 1 in developing your value opinion, and did you follow Standard 2 in reporting it? Because, when you signed the Certification, you certified that you did follow them, if the state concluded that indeed you did not, then you misled the client by misrepresenting the scope and credibility of your actions. The client’s opinion has nothing to do with either the question(s) or the answer(s). USPAP is the only metric by which anyone can measure an appraisal. The state, not the client, if the final arbiter.
In addition, if the final arbiter calls you to account for one (or more) of your appraisals, there is no plausible reason to fight that battle alone. You are likely going to need counsel – legal counsel, USPAP counsel, and E&O counsel. A state’s appraisal board carries the sword and shield of legal counsel. Why should enter that arena alone, naked, and unarmed?
[1] Only the report can be misleading. The appraisal itself is formed credibly or it is not. In reality, though, we refer to a “misleading appraisal”.
[2] The State of Texas has an appeals process prior to taking the matter to a circuit court.