Department of Labor and Revenue

Title - South Dakota Appraiser Certification Program

News Articles - August 2012

Appraiser Certification Program Mission, Purpose and Intent

Appraiser Certification Program Advisory Council

New Licensees - April - May 2012

Information Regarding Disciplinary Actions

Anonymous Complaints

Review of Cases - January 1, 2012 through August 18, 2012

Appraisers - 2012 Renewal

Supervising Appraisers - 2012 Renewal

Appraisal Practices Board Adopts Voluntary Guidance: APB Valuation Advisory # 3: Residential Appraising in a Declining Market

Appraiser Qualifications Board Questions and Answers

Appraiser Certification Program Mission, Purpose and Intent

Program was implemented July 1, 1990, pursuant to enactment of Title XI of the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) by Congress. The mission of the Program is to certify, license and register appraisers to perform real estate appraisals in the state of South Dakota pursuant to Title XI (FIRREA). The purpose of the Program is to examine candidates, issue certificates, investigate and administer disciplinary actions to persons in violation of the rules, statutes and uniform standards, and approve qualifying and continuing education courses. Title XI intends that states supervise all of the activities and practices of persons who are certified or licensed to perform real estate appraisals through effective regulation, supervision and discipline to assure their professional competence.

Effective July 1, 2011, pursuant to the Dodd-Frank Wall Street Reform Act, the Program was granted legislative authority to register and supervise the activities of Appraisal Management Companies doing business in South Dakota.

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Appraiser Certification Program Advisory Council


Council members provide recommendations to the Secretary of the Department of Labor and Regulation in the areas of program administration in order to sustain a program that is consistent with Title XI. The Council meets quarterly in public forum. See our Advisory Council Web page for meeting information.

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New Licensees - June 2012/July 2012

Alexis Konstant, State-Registered - Spearfish, SD
Travis Rypkema, State-Registered - Rapid City, SD
Kevin J. Kennedy, State-Registered - Sioux Falls, SD
Steven L. Bales, State-Registered - Huron, SD
Hans Detlefsen, State-Certified General - Chicago, IL
James H. Rothermich, State-Certified General - West Des Moines, IA
Peter L. Wysong, State-Certified General - Salmon, ID
Michael F. Amundson, State-Certified General - Bloomington, MN
Joseph B. Leedom, State-Registered - Sioux Falls, SD
Scott C. Gardner, State-Certified General - Harrisonville, MO
Timothy J. McGuire, State-Certified General - Holstein, IA

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Information Regarding Disciplinary Actions

Public information regarding disciplinary action taken against an appraiser is available upon written request to:

Department of Labor and Regulation

Appraiser Certification Program

445 East Capitol Avenue

Pierre, SD 57501

or email Sherry.Bren@state.sd.us.

Include in the request for information the name of the appraiser and the appraiser's city and state of residence. (Disciplinary action may include denial, suspension, censure, reprimand, or revocation of a certificate by the department.) (Administrative Rule of South Dakota (ARSD) 20:14:11:03)

The following disciplinary action has been taken by the Department of Labor and Regulation, Appraiser Certification Program:

James E. Bailey, Sioux Falls, South Dakota - Complaint Cases #11-382 and 11-396. The Department of Labor and Regulation entered into a Consent Agreement with James E. Bailey to accept the voluntary surrender of his State-Certified Residential Appraiser Certificate for thirty (30) months effective June 21, 2012.

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Anonymous Complaints

ARSD 20:14:11:01.01. Anonymous complaints. Initiation of an investigation may be commenced upon receipt of an anonymous complaint if it meets the following criteria:

  1. The allegations of violations of any provision of this article are considered credible and based upon factual information which is independently verifiable.
  2. The complaint is accompanied by a copy of the appraisal report or other documents which contain clearly identifiable errors or violations of the provisions of this article.

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Review of Cases - January 1, 2012 through August 18, 2012

For the period January 1, 2012 through August 18, 2012, the Department received four upgrade applications and initiated six complaint investigations.

Upgrades - Three upgrades pending, one agreed disposition executed, and two upgrades issued.
Complaints - Five cases pending, one case pending hearing, and consent agreements executed in two cases.

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Appraisers - 2012 Renewal

NOTICE! The 2012 appraiser renewal applications were mailed the first week in July. The applications were due in the Appraiser Certification Program office by August 17, 2012 for renewal of certificates for state-certified general, state-certified residential, state-licensed and state-registered appraisers. If you have not submitted your 2012 renewal, please do so as soon as possible to avoid a late renewal penalty fee and possible lapse in authority to appraise.

2013 Renewal - Appraisers are required to complete the 2012-2013 Edition of the 7-hour National Uniform Standards of Professional Appraisal Practice (USPAP) Update Course during the period of January 1, 2012 through June 30, 2012. The certificate of completion is to be submitted with your 2013 renewal application. Do not submit verification of completion of the course during this renewal period. If the course is not completed by June 30, 2012 the applicant for the 2013 renewal period will be assessed a $100 administrative penalty fee.

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Supervising Appraisers - 2012 Renewal

NOTICE! The 2012 supervising appraiser endorsement renewal applications were mailed the first week in July. The applications were due in the Appraiser Certification Program office by August 17, 2012 for renewal of the supervising appraiser endorsement. If you have not submitted your 2012 renewal, please do so as soon as possible to avoid a late renewal fee and possible lapse in authority to be an endorsed supervisor.

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Appraisal Practices Board Adopts Voluntary Guidance: APB Valuation Advisory # 3: Residential Appraising in a Declining Market

The Appraisal Foundation is pleased to announce that the Appraisal Practices Board (APB) has adopted APB "Valuation Advisory #3: Residential Appraising in a Declining Market." The APB is an independent Board of The Appraisal Foundation, which is responsible for developing voluntary guidance on recognized valuation methods and techniques.

"APB Valuation Advisory #3: Residential Appraising in a Declining Market" includes guidance on:

  • How should an appraiser define a declining market?
  • What databases are available to support a market trend conclusion?
  • What are some alternative value definitions?
  • Defining a market vs. a neighborhood
  • Verification of data
  • Support for adjustments
  • Integration of the opinion of market trends in the appraisal analysis
  • Using statistical sools to develop a rate of change in the market

The "APB Valuation #3: Residential Appraising in a Declining Market" is available on the Foundation website.

Questions? Please contact Staci Steward, Practices Administrator, at 202.624.3052.

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Appraiser Qualifications Board Questions and Answers

The Appraiser Qualifications Board (AQB) of The Appraisal Foundation establishes the minimum education, experience and examination requirements for real property appraisers to obtain a state certification. The AQB Q & A is a form of guidance issued by the AQB to respond to questions raised by appraisers, enforcement officials, users of appraisal services and the public to illustrate the applicability of the Real Property Appraiser Qualification Criteria and Interpretations of the Criteria in specific situations and to offer advice from the AQB for the resolution of appraisal issues and problems. The AQB Q & A may not represent the only possible solution to the issues discussed nor may the advice provided be applied equally to seemingly similar situations. AQB Q&A does not establish new Criteria. AQB Q & A is not part of the Real Property Appraiser Qualification Criteria. AQB Q & A is approved by the AQB without public exposure and comment.

June 2012 (Revised) - Vol. 4, No. 1.

General Requirements

Question 1: I hold a Certified Residential credential and I am pursuing a Certified General credential in the same jurisdiction. Does the AQB require any supervised experience to upgrade from Certified Residential Appraiser to a Certified General Appraiser?

Question 2: I am pursuing a Certified General credential in my state. I have already satisfied the college education (via the in-lieu of option) and the 300 hours of qualifying education requirements under the current 2008 Real Property Appraiser Qualification Criteria. I expect to complete (pass) the National Uniform Certification Exam next year. At my current pace of work, it will take until late 2014 to finish my experience. If I submit my application to my state at that time, will my state have adequate time to process my application?

Continuing Education

Question 1: I am a certified appraiser and my certification does not need to be renewed until 2013. I have not yet taken the 2012-13 7-Hour National USPAP Update Course. Does this mean that my credential is invalid until I complete the course?

Question 2: My appraiser license renewal date is September 3, 2012. Is continuing education I completed in February 2010 too old? Where can I find the timeframe during which my continuing education must be completed?

Question 3: Does the AQB require successful completion of a final exam in order to receive continuing education credit for an online appraisal course?

2015 REAL PROPERTY APPRAISER QUALIFCATION CRITERIA-RELATED ISSUES

Supervisory Appraiser/Trainee Appraiser Education

Question 1: I am currently a credentialed Trainee Appraiser. Am I required to take a Supervisory Appraiser and Trainee Appraiser course prior to January 1, 2015, in order to remain a Trainee Appraiser?

Question 2: I am currently a supervisory Appraiser of a Trainee Appraiser. Am I required to take a Supervisory Appraiser and Trainee Appraiser course prior to January 1, 2015, in order to continue to supervise Trainee Appraisers?

Supervisory Appraiser Eligibility

Question 1: I am a state-certified appraiser who is also a Supervisory Appraiser. My appraiser credential has been suspended. Is this considered a sanction that restricts the Supervisory Appraiser's "legal eligibility to engage in appraisal practice?"

Question 2: I am a state-certified appraiser who is also a Supervisory Appraiser. My appraiser credential has been placed on "probation" by the state which limits the types of assignments I am allowed to appraise. Is this considered a sanction that restricts the Supervisory Appraiser's "'legal' eligibility to engage in appraisal practice?"

Question 3: I am a state-certified appraiser who is also a Supervisory Appraiser. My state appraiser regulatory agency has levied a fine against me and required me to take an additional course. Is this considered a sanction that restricts the "'legal' eligibility to engage in appraisal practice?"

Question 4: Is a Supervisory appraiser's eligibility to supervise Trainee Appraisers only evaluated when they initially become a Supervisory Appraiser, or is the Supervisory Appraiser's eligibility evaluated on an ongoing basis?

Examination

Question: Under the 2015 Real Property Appraiser Qualification Criteria, I understand that all education and experience must be completed and approved prior to taking the National Uniform Licensing and Certification Examination. Once I pass the examination, within what time period must I submit the application for my credential?

The AQB Q & A is posted on The Appraisal Foundation website.

Know Your Limitations

[Article by Peter T. Christensen published in the Valuation Magazine, First Quarter 2012 - reprinted with permission from the Appraisal Institute]

Statute of limitations may determine an appraiser's liability

AN EPIDEMIC OF BUYER'S REMORSE - and sometimes banker's remorse - relating to properties purchased or money loaned during the real estate bubble continues to fuel lawsuits alleging appraisal negligence.

A bank might claim that it innocently relied on a flawed appraisal in 2005 when it originated a 110 percent loan-to-value mortgage that soon defaulted. And if we consider the approximately 500 appraisals at the center of pending lawsuits by the Federal Deposit Insurance Corp., nearly every appraisal was delivered between 2004 and 2008. The fact is that most appraisal negligence claims continue to concern appraisals delivered years ago.

Appraisers frequently ask us if such claims can be defended based on the statute of limitations - the time period in which one party who wants to sue another has to file a lawsuit. It's not uncommon to hear something along the lines of: "I did the appraisal in 2005, which is more than six years ago. I don't even have the work file anymore. Will the complaint be dismissed based on the statute of limitations?"

The answer is usually not what the appraiser wants to hear.

The applicable statute of limitations for an appraisal-related claim varies depending on the type of claim (negligence, fraud or breach of contract), where the claim is filed and, in a few cases, who is making the claim. Based on these factors, the statute of limitations could be as short as one year or more than 10 years. To make things more difficult, the date on which the statute of limitations begins to run also varies from state to state and frequently depends on case law.

One thing that doesn't vary: The record-keeping rule in the Uniform Standards of Professional Appraisal Practice has no relevance to the time period in which a borrower, lender or anyone else can file a lawsuit. The USPAP requirement that appraisers "retain the work file for a period of at least five years after preparation or at least two years after final disposition of any judicial proceeding in which the appraiser provided testimony related to the assignment, whichever period expires last," has no bearing on the statute of limitations for appraisal claims.

CASE IN POINT
A recent unpublished decision by the Court of Appeals of Indiana sheds light on how a typical state's statute of limitations law will apply to an appraisal negligence claim - the most common professional liability claim alleged against appraisers.

In First Savings Bank v. Baird Realty, the bank hired the defendants in 2003 to appraise 25 single-family rental properties for loans to one borrower. After receiving the appraisal, the bank questioned the values. The bank's vice president testified that he "did not like these appraisals from the start," and the bank's president said that "the average person" could look at photographs of the subject properties and comparable properties and conclude that the appraisals overvalued the properties. The bank, however, made the loans anyway based on the strength of the borrower's credit.

In January 2004, apparently after taking a closer look at the appraisals, the bank decided it would no longer use the appraisers and advised them of that fact. In 2006, the borrower defaulted and the bank suffered substantial monetary losses. In January 2007, the bank filed a lawsuit against the appraisers. After three years of litigation, the trial court granted summary judgment in favor of the appraiser defendants, and ruled that the statute of limitations had expired on the bank's negligence claim.

The bank appealed, and in considering the appeal, the Indiana Court of Appeals recognized that the state's applicable statute of limitations for professional negligence is two years. This period of time is at the shorter end of periods that apply in most states - the statute of limitations in Massachusetts is three years, for example, and in Ohio it's four years. In Kentucky, the period is as short as one year. (Appraisal Institute members can review the statute of limitations for each state on the Institute's website.)

The Indiana Court of Appeals then addressed the question of when the statute of limitations begins to run. Here, the court recognized that Indiana follows what is called the "discovery rule." As the court explained, "Under Indiana's discovery rule … the statute of limitations begins to run when a claimant knows, or in exercise of ordinary diligence, should have known of the injury."

The majority of states follow this discovery rule, which means that in most appraisal negligence claims, the time period in which a plaintiff, such as a borrower or a lender, has to file a lawsuit does not begin to run until the plaintiff discovered that the appraisal was flawed or should have discovered that harm. Lenders and borrowers often argue - successfully - that the time period for filing their claim did not start running until years after they received the appraisal and pulled it out of a file cabinet (or electronic storage) following a loan default.

In the Indiana case, the defendant appraisers were fortunate. The trial court found and the appellate court agreed that the bank's two-year period in which to file a lawsuit began to run when the bank looked closely at the appraisal and decided that problem merited discontinuing future use of the appraisers' services - back in January 2004. Because the bank filed its complaint in January 2007, the lawsuit was a year too late and the negligence claim was properly dismissed. That "winning" result on the negligence claim, however, took three years of litigation and surely cost many thousands of dollars in legal fees.

EXCEPTION TO THE RULE
Not all states follow the discovery rule, however. In Ohio, as previously mentioned, the applicable period for negligence claims is four years, but the clock starts ticking when the negligence allegedly occurred - in most cases, that's the date the appraisal was performed.

The Ohio Supreme Court recently upheld the dismissal of two lawsuits filed by Flagstar Bank against appraiser defendants in the case Flagstar Bank v. Airline Union's Mortgage. In one of the cases at issue, Flagstar sued appraisers for three appraisals performed during 2001 and 2002 for three loans that defaulted in 2003 and 2005. Flagstar blamed the appraisers for its financial losses but did not file a lawsuit until 2008 - seven years after the first appraisal.

On appeal, Flagstar unsuccessfully argued that the statute of limitations should not begin to run until the full extent of the alleged damage was discovered. However, the Ohio Supreme Court ruled in favor of the appraisers and confirmed that the period in Ohio begins to run when the appraisal is delivered. It's important that appraisers understand that this rule is not the norm. In fact, a federal court sitting in Ohio recently chose not to apply the rule when an Ohio appraiser delivered an appraisal of an Ohio property to out-of-state investors.

The statute of limitations can also be affected by the entity filing a claim. For example, under the Federal Deposit Insurance Act, the FDIC receives an extension of any state statute of limitation relating to its potential claims as a receiver for failed banks - an additional three years for tort claims (e.g., negligence) and an extra six years for breach of contract claims, running from the date of the FDIC's receivership. As a result, the FDIC will continue to be a litigation threat for years to come.

ADVICE FOR APPRAISERS
While the two cases discussed here resulted in "wins" for the defendant appraisers, statutes of limitations should not be considered a reliable safety net, and such wins are rare in practice. Yes, this defense will certainly be argued, but appraisers are far better off being prepared to defend their work based on quality and accuracy.

I strongly advise appraisers to retain their work files for eight or more years - remember USPAP's minimum five-year record keeping requirement has nothing to do with the period of the time an appraiser can be sued. A good work file is a better defense.

[Peter Christensen is LIA Administrators & Insurance Services' general counsel. A graduate of the University of California, Berkeley's Boalt Hall School of Law, he has been an attorney since 1993 and maintains the blog www.appraiserlawblog.com. LIA has been offering E & O insurance and loss prevention information to the appraisal profession nationally since 1977.]

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Marcia Hultman, Secretary
700 Governors Drive
Pierre, SD 57501-2291
Tel. 605.773.3101
Fax. 605.773.6184