Chapter 8: Detrimental Conditions and Impaired Properties Flashcards
Geoffrey Lang owns a single-family property in Townsville. Recently, a serious crime took place on the property, and Mr. Lang wants to sell the property to distance himself from the associated bad memories. Which category in the Bell Chart does this property fall under?
1.) Market condition
2.) Imposed condition
3.) Temporary condition
4.) Environmental condition
3.) Temporary condition
If the remediation of an oil leak se the Kochanek family to be displaced from their home for several months, which type of cost contamination is incurred?
1.) Disruption
2.) Operating costs
3.) Liability
4.) Control
1.) Disruption
Which of the following statements regarding market surveys is FALSE?
1.) In a civil litigation case, the defendant has the burden of proof to demonstrate the causal link between an impairment and the loss in value
2.) Surveys can be used to show a link between negative value in sales data and negative perceptions about the subject property
3.) Contingent valuation has been widely used to assess damages to direct use environmental benefits and passive use benefits resulting from hazardous substance releases
4.) Conjoint analysis is a survey method that uses research into people’s real estate choices to infer how people value different attributes
1.) FALSE - In a civil litigation case, the defendant has the burden of proof to demonstrate the causal link between an impairment and the loss in value
In Bell’s detrimental condition model, the estimated value of the subject as if unimpaired is known as which of the following?
1.) Point A
2.) Point B
3.) Point C
4.) Point D
1.) Point A
A property in an unimpaired state has a market value of $740,000. Assessment costs are $8,000. Repair stage costs are $54,000. Ongoing costs are $3,400. Market resistance (part of the ongoing stage) is $12,000 (market evidence is analyzed to estimate this figure). The property owner is not responsible for $35,000 of the costs. What is the impaired value of the property using the impaired cost approach?
1.) $627,600
2.) $662,600
3.) $697,600
4.) $674,600
3.) $697,600
740,000
-8000
-54,000
-12,000
-3,400
+35,000
Jem Gosal is appraising a property in Pembleton, Ontario, that is adjacent to the Pembleton River. Due to extraordinary high rainfalls, the river recently flooded onto the property. Which category in the Bell Chart does this property fall under?
1.) Natural condition
2.) Environmental condition
3.) Building construction condition
4) Imposed condition
1.) Natural condition
Which of the following BEST defines the term “impaired value”?
1.) Value prior to some event that adversely affects its value when compared with the “before condition”.
2.) Value in its “after condition” following some event that adversely affects its value when compared with the “before condition”.
3.) Value where a loss is caused by environmental contamination and measured as the difference in market value before and after the contaminating event or events other than those conditions capable of being cured by remediation of the property.
4.) None of the above
2.) Value in its “after condition” following some event that adversely affects its value when compared with the “before condition”.
When an appraiser is relying on the work of other professionals, a/an ______ should be stated.
1.) hypothetical condition
2.) self-assessment
3.) extraordinary assumption
4.) ordinary assumption
3.) extraordinary assumption
In applying the cost approach to an impaired property valuation, the costs to consider involve which of the three potential states?
1.) Appraisal, repair, and completion
2.) Discovery, appraisal, and repair
3.) Damage, repair and valuation
4.) Assessment, repair and ongoing
4.) Assessment, repair and ongoing
Which of the following statements regarding value impacts due to cost is FALSE?
1.) For contamination, liability may arise from the requirement to clean up the site or from clean-up costs of nearby sites polluted by contamination spilling over the boundaries of the property.
2.) Remediation assessment and repair costs are typically determined by the appraiser.
3.) The party responsible for payment of remediation assessment and repair costs should be identified, and this may affect the property’s value.
4.) Contamination has the potential to decrease the stream of future benefits, such as higher tenant turnover and higher vacancy.
2.) FALSE - Remediation assessment and repair costs are typically determined by the appraiser.
note - these are typically determined by professionals
In the context of appraising impaired properties, which of the following BEST describes the term “causality”?
1.) Any change in value detected is due to the impairment itself and not to any other factor, such as changing market conditions.
2.) The impaired property’s value will be affected by changes in the market conditions, transportation patters, and locations of employment centres.
3.) Changes in the value of an impaired property are caused by changing market conditions.
4.) All of the above
1.) Any change in value detected is due to the impairment itself and not to any other factor, such as changing market conditions.
Which of the following examples would NOT fall under the Imposed Condition category in the Bell Chart?
1.) Greenville Estates is located in close proximity to the Greenville Airport and is subject to considerable airport noise.
2.) Mr. Hanger’s single-family home is located next door and downhill from an industrial property and over the years, the soil on his property has become contaminated.
3.) Ms. Hambleson’s bungalow is situated across the road from the Risby Regional Jail.
4.) A condo building is situated on leased land adjacent to a sewage treatment plant.
2.) Mr. Hanger’s single-family home is located next door and downhill from an industrial property and over the years, the soil on his property has become contaminated.
(environmental)
In completing a sale/resale analysis, an appraiser is analyzing the sale of a comparable impaired property at 802 Meadow Lane. The property sold in June 20X4 for $530,000, then became impaired on January 6, 20X5. It re-sold in October 20X5 for $405,000. Between June 20X4 and October 20X5, property prices in the area generally decreased by 2.5% due to market factors. What is the percentage change due to impairment for the Meadow Lane property?
1.) -23.6%
2.) -21.1%
3.) -26.1%
4.) -25.6%
2.) -21.1%
Narci has decided to appeal the tax assessment on her home. In preparation for her appeal, she has deducted an amount for her view of the Rocky Mountains because she has a fear of tall things. In terms of impaired property valuation, is this a reasonable deduction?
1.) No, because Narci has a phobia which is a persistent and irrational fear that does not reflect the legal definition of market value.
2.) Yes, because the property has a stigma that represents a variety of intangible factors ranging from possible public liability and fear or additional health hazards to the simple fear of the unknown.
3.) Yes, because phobias must be taken into consideration when valuing a house since future purchasers may also have the same phobias.
4.) No, because the market response to may of the most notorious environmental conditions affecting real estate is phobia.
1.) No, because Narci has a phobia which is as persistent and irrational fear that does not reflect the legal definition of market value.
According to the detrimental condition matrix, the first step is to recognize that real property affected by an impairment may have a life cycle that involves three potential states: assessment, repair and ongoing. Within each stage, the appraiser then considers cost, use and risk issues. Which of the followings statements regarding the application of the matrix is FALSE?
1.) It helps identify those costs not easily measurable in impacted real estate such as a change in highest and best use.
2.) The key factor in use analysis in whether or not a property’s utility has been impacted.
3.) A clear understanding of those costs arising from contamination, and the party responsible for those costs enables the appraiser to apportion fiscal responsibility when required to do so.
4.) Market resistance associated with ongoing market reluctance is an ongoing issue with no mechanisms available for lessening its impact on value.
4.) Market resistance associated with ongoing market reluctance is an ongoing issue with no mechanisms available for lessening its impact on value.
