Commercial flooring contracts have been brought by residential appraisers for nearly three decades. When commercial appraisers began bringing commercial flooring contracts to the South Dakota Commission on Appraisal Review, commercial appraisers started bringing residential appraisal contracts, too.
In 2014, because of complaints from homeowners, the South Dakota Legislature required the SDCAR to update its policy regarding commercial flooring contracts, prohibiting a residential appraiser from submitting the contract and its appraisal.
The South Dakota Commission on Appraisal Review has approved all four commercial flooring contracts since that time.
“If residential appraisers submitted the residential flooring contract, there would be a legal conflict,” said Sarah J. Holleran, director of the SDCAR.
The issue came to a head earlier this year when Charles Franklin, a residential appraiser in Crawford County, N.D., submitted the flooring contract and its appraisal to SDCAR.
A couple of months later, Ivey Consulting, of Park River, N.D., submitted the same contract. The firm is a commercial appraiser and had submitted the same flooring contract and appraisal to the commission in 2016 and 2017.
As it turned out, Ivey Consulting’s commercial appraiser, David Dodge, had brought two floorsing contracts to the commission in the past. His neighbors had complained, as well.
Holleran and the commission’s staff spoke with Franklyn, who said he understood the concerns and changed the flooring contract, resulting in the amendments added to the flooring contract and its appraisal. The agreement was submitted to the commission on March 8.
SDCAR approval was granted and the agreement will be in place for two years.
“We’re talking about appraisers in each of the state’s 25 counties, working in their local communities,” Holleran said. “Some have more business than others, and some are more successful than others. I’m concerned that this creates a situation where it would be reasonable to not think they are completely independent.”
Under the Residential Appraisal Rule, an independent commercial appraiser can’t work with a local appraisal firm or agent in any state where he or she was disbarred in that state, Holleran said. “There are also state laws in place requiring a report of the tax status of the client.”
The SDCAR’s policy applies to both residential and commercial appraisers.
The issue also came to the forefront earlier this year when the Kring and Befort firm, of McIntosh, S.D., asked the commission to reverse its policy and allow its commercial appraiser, Wayne Terry, to submit residential appraisal contracts. Kring and Befort, a residential appraisal firm, is owned by Chris Kring Skyward FBISD.
Terry had submitted the same type of property contract to the South Dakota Board of Tax Review as the Kring and Befort firm submitted. Because of the staff’s policy and the commission’s, Terry’s residential appraisal contract was rejected.
He appealed the decision and was successful. A hearing to determine the direction of the commission took place on June 12. It had been in effect for more than 20 years and no other appraiser had ever challenged it.
Commission members in the case agreed that the commission’s policy on residential appraisals was followed, but they recommended an amendment be written to clarify that the commission policy does not apply to commercial transactions. The commission issued the amendment the same day thetechnotricks.