Tauranga valuer George Matua Evans (GM Evans Ltd), who retired in 1991 but did some more recent valuations, has been struck off the valuers’ register and as a member of the NZ Property Institute for the over-valuation of a rural Northland property.
The striking off raises some questions, one being why the Valuers Registration Board should take 21 months to reach this point after finding against Mr Evans in November 2002, when the man himself wanted to hand in his registration.
Decision raises 3 more points
The decision of the registration board’s board of inquiry raises 3 more points â€“ 2 in my mind & the other raised by the chairman of the inquiry board, Evan Gamby of Telfer Young (Auckland) Ltd.
The first concerns the disparity between the 2nd & 3rd valuations: Mr Evans’ valuation was well above the check valuations, but the other 2 were so far apart as to indicate to an innocent observer that nobody had a clue what this block of land was worth.
The inquiry board chose to accept 2 as being good and decided one was bad, a finding which â€“ to the innocent observer â€“ is short on sense.
The 2nd point concerns the mortgage recommendation: If 50% is prudent & nothing above that is prudent – so Mr Evans’ 66.6% definitely wasn’t – why did the inquiry find Russell Garton’s 63% of market valuation & 93% of land value could pass muster?
Gamby points at Valuers Act; the numbers point all over the place
Mr Gamby went on, in the subsequent penalty decision issued in February 2003, to raise questions about the Valuers Act and the ability of people calling themselves registered valuers to practise without any requirement to update their knowledge.
The board of inquiry found Mr Evans’ $775,000 valuation of the 244ha property inland from Mangonui was “grossly excessive” after comparing it with a check valuation by Northland valuer Bill Burgess & another by a Mr Garton, also a Northland valuer, who was commissioned by the Valuer-general after a complaint was lodged.
Mr Gamby said Mr Evans’ valuation was 115% above Mr Burgess’, 220% above Mr Garton’s, and his mortgage recommendation 187% above Mr Burgess’, 263% above Mr Garton’s.
Mr Evans’ $775,000 market value in March 2001 included $627,500 land value, with a $516,000 mortgage recommendation. He said the customer, a Mr Lloyd of River Developments, Auckland, wanted a “personality dimension” in addition to the land value. Barney Papakura Lloyd, of Mangonui, was a director & 50% shareholder of River Development Ltd, incorporated on 6 March 2001 & struck off the Companies Register in November 2002.
Mr Evans understood $75,000/year rent was to be paid, and was provided with details of “project opportunities” such as olive cultivation, manuka aromatic & etheric compounds & oils and production of manuka honey.
In his report, Mr Evans quoted sales found in Quotable Value’s data, but didn’t mention inspecting them or having detailed knowledge of the comparable sales evidence quoted.
Mr Evans told Mr Lloyd the Quotable Value market value figure, $270,000, was about on the mark. My searches show the property was sold by Eric Lloyd for $253,000 under mortgagee sale conditions in May 2002, and that the capital value at that time was given as $305,000, land value $175,000.
For the inquiry, Mr Burgess provided valuations of $360,000 (market), $296,000 (land, reduced by $44,000 for location), $180,000 mortgage recommendation. Mr Garton’s valuations were $242,000 market, $153,000 land, $142,000 mortgage recommendation, $5000 added for 18ha of pines which hadn’t been adequately pruned.
On the figures in the inquiry decision, the value of improvements was $147,500 according to Mr Evans, $20,000 from Mr Burgess, $89,000 from Mr Garton.
The disparity between those figures wasn’t discussed in the inquiry decision.
Comparisons that were discussed in the decision were a number of sales in the 42-86ha range quoted by Mr Burgess, and sales ranging from a 33ha block to a 163ha economic farm unit quoted by Mr Garton.
None of these properties appears â€“ particularly on the basis of size â€“ to be comparable to the Mangonui property in question, making comparison a questionable exercise.
Mr Gamby said in the decision: “The farm unit was vastly superior to the subject property.”
On a straight $/ha basis that’s very obvious â€“ the farm unit was valued at $5061/ha. No detail was given on how much improvement was contained in the calculation.
The land valuations of the 244ha Mangonui block were $2570 (Mr Evans), $1212 (Mr Burgess), $627 (Mr Garton) & $717 (Quotable Value’s land value at the time of sale in May 2002).
Evans found it hard to distinguish between cap & discount rates
On valuation method, Mr Gamby said Mr Evans “had difficulty distinguishing between a capitalisation rate & a discount rate, and had used different capitalisation rates in successive reports without apparent reason or explanation.
“Firstly, in his valuation on 19 March 2001 he referred to a capitalisation rate of 20% but did not apply that rate to the stated rental.
“In a later report dated 16 April 2001 he referred to a capitalisation rate of 9.25% and applied that rate to the rental income stream of $75,000/year.
“Clearly, had he applied his capitalisation rate of 20% to the income stream of $75,000/year, he would have come up with a very much lower valuation of $375,000 as at 19 March 2001.
“Mr Evans was unable to demonstrate to the board a sound knowledge of valuation principles, demonstrate how he arrived at his valuation of $775,000, or provide any supporting market evidence, either by reference to sales or investment calculations.”
“Personality dimension” new to the board
Mr Gamby said the board was “unaware of any valuation principle or methodology that involves taking into account a â€˜personality dimension’ of value. There is no evidence that would indicate a project such as that proposed for the subject land could have been sustainable, or have added to the property’s value.”
And as for the $75,000 lease, the board concluded that & supporting financial data “were a sham, intended to dupe a lending institution. Mr Evans erroneously relied upon this information.
“When Mr Evans finally did obtain a copy of the deed of lease, it was unsubstantiated by financial data that he could understand, could analyse or could have been relied upon.”
The board also found Mr Evans guilty on 2 charges of incompetent conduct in 2002, overvaluing by 50% & 40% above check valuations. Mr Evans was paying off the $4500 costs ordered against him on those occasions, and was ordered to pay another $1000 in costs.
Mr Gamby said Mr Evans had “sought to resign from valuation practice of his own accord, but the registrar has no accepted his resignation while there are outstanding complaints.”
At the end of the penalty decision, Mr Gamby discussed the way registration is run.
“The board is mindful that Mr Evans re-entered public practice as a registered valuer very late in his career, having retained his registration for many years while employed in other work.
“The Valuers Act does not require a registered valuer to be in continuous valuation employment after obtaining registration.
“Provided the prescribed fees are paid to the registrar, there is no provision in the act that prevents a registered valuer applying for a practicing certificate at any time and setting up practice as a registered valuer providing services to the public.
“Regrettably, because of this discrepancy in the act, it would appear that some registered valuers regard the term â€˜registered valuer’ as a qualification that can be utilised as & when it suits them, without ensuring that their knowledge remains current & relevant to the market.”
Gamby suggests re-examination
Mr Gamby said Mr Evans provided no evidence that he’d made any attempt to update his valuation knowledge before setting up practice as a registered valuer.
“In the board’s consideration, valuers who retain registration over many years should not be permitted to obtain a practicing certificate without first submitting to the board an application to practice, the board having a right to re-examine the applicant’s ability to practice.
“It is a matter that should be taken up by the NZ Institute of Valuers Professional Practices Committee.”
While Mr Gamby said the Valuers Act was deficient in this respect, Mr Evans had to take primary responsibility for his actions.Earl Gordon, chairman of the NZ Property Institute (which incorporates that Institute of Valuers) Professional Practices Committee, said in a statement accompanying the striking-off decision: “We are here to protect the public.” He didn’t mention Mr Gamby’s suggestion of re-examination â€“ which would have protected the public in advance instead of hindsight.