Property Valuation
A Nebraska property with 5 acres zoned for light industrial use that has contaminated soil would most likely be appraised using which method to estimate the value impact of contamination?
AIgnoring contamination — it does not affect appraised value
BEstimating remediation costs and stigma discount, then adjusting the clean value downward✓ Correct
COnly the cost approach with no adjustment for contamination
DAssessing based on adjacent residential values
Explanation
Environmental contamination reduces property value. Appraisers typically estimate the unimpaired value (as if clean), subtract remediation costs, and apply a stigma discount reflecting residual market reluctance even after cleanup.
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Key Terms to Know
Comparable Sales (Comps)
Recently sold properties similar in size, condition, and location used by appraisers and agents to estimate a property's market value.
AppraisalA professional estimate of a property's market value prepared by a licensed or certified appraiser.
Capitalization Rate (Cap Rate)A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
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