REDI leaders sought biased opinions for appraisal reports about impact of blight
COLUMBIA, 5/4/12 (Special Report) -- If you've ever bought or sold a home or other property, you probably relied on an appraisal from a disinterested, third-party appraiser.
Non-biased appraising is a key part of professional appraiser ethics, particularly Canon 3
: "In Providing Services (Appraisal, Appraisal Review, Appraisal Consulting, or Real Property Consulting), A Member Must Develop and Report Unbiased Analyses, Opinions, and Conclusions."
Investors pay between $500 to $10,000 annually to buy into REDI
, an unusual combination of City Hall department and private business lobby. REDI leaders sought appraiser-investors to write the report who were favorable to
a so-called EEZ proposal that legally blights
over 60% of Columbia and portions of Boone County, emails obtained under the Sunshine Law have revealed.
Written by Moore and Shryock principal Allan J. Moore
, the blight impact report
appears to have been part of a larger REDI strategy to exclude unbiased consultants
For virtually every opinion on the EEZ/Blight Decree, REDI either borrowed work from other communities or did the work in house. So far, the group has used a legal opinion from Rolla; economic data from Springfield; a Mizzou intern; and now, a report from one of its own member-investors to support the EEZ. The approach is a striking contrast to City Hall's usual practice of hiring consultants for new projects.
Appraisers have an absolute duty to disclose "any real and/or perceived
conflict of interest," said Joseph Chatham
, a mortgage and real estate services analyst at Gerson-Lehrman Group Research
and president of Chatham Mortgage Partners in Westlake Village, Calif.
Regulators today are so careful about bias and the perception of bias, in fact, that "appraisers are not even allowed to speak to mortgage brokers, for fear of values being inflated," Chatham said.
Moore's close association with REDI -- he's essentially a part owner -- wasn't disclosed in his report, in part he says because "no bias was involved or intended. Since REDI was my client for the research performed and they knew I was a member, I did not address [disclosure]."
But the public didn't know Moore was a REDI investor. After reviewing the report and the relationship, GLG Research's Chatham told the Heart Beat he "completely disagrees with Mr. Moore. I can assure you that there is a potential conflict of interest."
Appraisal Institute representatives declined to comment. "Our policies prevent us from publicly discussing individual members," said Brent Roberts, the Institute's senior communications manager.
The need for government transparency may have created an additional onus for Moore to disclose his relationship with REDI, which came to light after emails suggested REDI leaders were looking for appraisers who would write biased reports, in violation of several Appraisal Institute ethical codes
"I spoke with Jack Blaylock
, whose firm is our other MAI appraisal company
....He graciously accepted my plea for his assistance and is in support of our plan
!" REDI chairman Dave Griggs
emailed REDI directors Mike Brooks, Bernie Andrews,
and REDI advisor Bob Black
of Sircal Contracting
February 28, three weeks after the Columbia City Council approved the Blight Decree.
"I told him that I had asked Allan Moore to do the same and had received a report from Allan," Griggs wrote, instructing the others to "assist" Mr. Blaylock with his appraisal, another Appraisal Institute no-no. "If you will email Jack at jackblylck@ with a few communities that have EEZ's, he will gladly make some contacts and GIVE us a report," Griggs wrote. "Might list 7 to 10 communities and hopefully he will have a few contacts out of that list."
No report has surfaced from Blaylock or his firm. But Moore's report has surfaced in several places, even helping guide a decision by the Columbia Board of Realtors (CBOR) to disregard the impact of blight on property values.
"We asked Allan Moore to contact some of the leading appraisal and/or real estate brokers in Missouri communities where EEZ's currently exist," Griggs emailed CBOR director Lee Terry. "The purpose was to get an independent and honest report on the issue of 'blight' causing adverse impacts on property values within an EEZ. I think you find his report to be quite interesting from two prospectives (sic).
"First there is no negative impact on property values and the 'blight' designation is not shown on a listing form in these communities. Obviously not every one of the 118 EEZ zones was contacted by Allan but the ones he selected are surely legitimate enough to help the board feel far more comfortable about this issue."
Though he asks Terry to distribute the report to CBOR members, Griggs does not disclose Moore's relationship to REDI.
"Thanks! This is great," Terry responded to Griggs. "I've been hearing rumors that appraisers are so against this. What a help."
When Moore means less
Allan Moore's report is an informal survey of four anonymous "real estate appraisers and real estate brokers" in Rolla, Jefferson City, and Springfield, commenting on the impact of the EEZ and blight on property values. He did not gather his own data, nor did he use the most common appraisal tool: a close comparable or "comp."
Instead, his report excludes Columbia, which has a long history with blight. "I do not consider any historical blight decrees in Columbia to be as similar as recent adoption of EEZ's in other comparable towns," Moore said.
The report's most controversial feature may be its use of unidentified interviewees. "What strikes me the most is Mr. Moore never gives the names of the people he interviewed," said Columbia builder and central city developer Amir Ziv, who opposes the EEZ and blight decree. "Who are they?"
Moore, however, won't say. "Whom did you interview? And why the anonymity?" the Heart Beat asked. "You've never provided enough information about your process to provide for verification."
"I've answered your questions to the best of my ability," he responded. "I have no further comments at this time."
Assumptions and hypotheticals
The Appraisal Institute
that certifies Moore admonishes against using techniques that are outside the norm, which may include anonymous interviews. The Institute's code openly worries
that "deviations from reasonable real property consulting practices" reflect bias, and should be avoided except in the most extreme circumstances.
The Institute also has strong admonitions in its Canon of Ethics, sections ER-6 and ER-7, against "hypothetical situations" and "strong assumptions."
The exclusion of Columbia as its own comparable in favor of arguably dissimilar communities assumes conditions in those communities apply to Columbia, and hypothesizes that a blight decree there is comparable to a blight decree here.
Moore sees it differently, however.
"I do not consider gathering data from the noted communities to be hypothetical," he told the Heart Beat. "I consider Springfield and Jefferson City to be generally comparable to Columbia in their real estate prices and trends. Rolla is less comparable in real estate prices because it is a smaller town, but there are similar trends and other factors, such as the university [Missouri University of Science and Technology]. I selected the communities because in my opinion, they are more similar to Columbia than smaller or larger towns."
But attorney Jeremy Root
, who opposes the Blight Decree, says that's not logical. "One cannot reasonably rely on data from communities where the existence of blight and an EEZ is greeted with indifference
to interpret the impact on our community, where the existence of blight and an EEZ is contested
," he explained. "In appraisal, the idea of using comparables is very important. I would say that Rolla, Jefferson City, and Springfield are not comparable to Columbia."
In several places, Moore's report contradicts itself and the goal of the EEZ program: to persuade companies and developers to build in EEZ-designated land.
On the one hand, Moore writes, "Market participants do not recognize EEZs in their decisions to buy or develop property."
But in the next paragraph, "There have been many developments that may not have occurred had it not been for the EEZs. Most knowledgable participants understand the benefits of the EEZs and the overall real estate markets indirectly or directly benefit from their existence."
So which is it: Does the EEZ impact real estate values -- or not? In Rolla, the EEZ has had an adverse impact, Roger Smith -- a Rolla resident for 40 years, "35 as a business owner" -- told the Columbia City Council at an April meeting.
Newly relocated to Columbia's Vanderveen subdivision, Smith's testimony directly contradicted Moore's report. "Most of the people I know in Rolla, including the business people, do not like this EEZ designation at all," Smith said. "It attaches too many strings to private property."
Back to Bias
Though Dave Griggs apparently secured appraiser Jack Blaylock's support for the EEZ before asking him to analyze it, Allan Moore says he and Griggs had no similar conversations.
Moore also doesn't view his REDI report in the same way he views an appraisal.
"I do not consider market research through interviews to be an appraisal, but gathering market data," he told the Heart Beat. "As a real estate appraiser, I do this type of research every day to remain knowledgeable about market trends."
But the MAI Code of Ethics is broad, covering not only appraisals but "real property consulting," which the Appraisal Institute defines on page 10
as "The act or process of developing and reporting an analysis, recommendation, or opinion concerning real property, where an opinion of value is not a component
of the analysis, recommendation, or opinion."
Precisely the definition of Allan Moore's report.
More importantly, clause after clause of the Appraisal Institute code emphasizes the importance of keeping bias, the potential for bias, and the perception of bias, out. "Given the role that Members serve in our society and the global economy, the public interest demands that each Member develop and report unbiased analyses, opinions, and conclusions," the Appraisal Institute code says.
If the potential for bias must enter a proceeding, it must be fully disclosed.
"It is unethical to agree to provide or to provide a service (appraisal, appraisal review, appraisal consulting, or real property consulting) if a Member has any direct or indirect, current, or prospective personal interest in the subject or outcome of the service or with respect to the parties involved in the service, unless such personal interest is fully and accurately disclosed in each report resulting from such service."
Given the historical involvement of appraisers in Columbia's redevelopment history; the power they have to set prices during eminent domain and condemnation proceedings; and past controversies about their objectivity as employees
of Columbia's Land Clearance for Redevelopment Authorities, Columbia's small appraisal community may owe the public an additional duty, especially when working on the public's business.
After all, we are their clients -- and their community. Aren't we worthy of their fullest attention?
*The author is a member of CiViC, a group that opposes the Blight Decree.