[spieldberg]

This is a fun one..
the subject is on a contaminated site and is in the process of being remediated. Should the Appraiser make a Hypothetical Condition or Ext.Assumption that this does not effect market value? And/or Hypothetical Condition or Ext.Assumption that this situation has been remediated?

[PropertyEconomics]

I would make it a Hypothetical Condition (if that is in fact the scope of your assignment) that the site has been cleaned. EAs will not work because you know something different.

[David Wimpelberg]

Nobody can answer the question without knowing the Scope of Work.

It's not up to the appraiser to make such a decision. The appraiser has to consult with the client on what needs to be done.

As far as the contamination goes, since it is being remediated, they property owner should have all of the necessary paperwork regarding the cleanup, as well as the costs associated with cleanup. Likely an attorney is involved, so you may also be able to obtain an opinion as to future liability associated with owning the property.

[aussie ken]

Originally Posted by spieldberg

This is a fun one..
the subject is on a contaminated site and is in the process of being remediated. Should the Appraiser make a Hypothetical Condition or Ext.Assumption that this does not effect market value? And/or Hypothetical Condition or Ext.Assumption that this situation has been remediated?

Having done a few of these over the years in Wollongong (which is Australia's steel making capital) I have been inclined to supply both figures and to have a meeting with the financier to explain the assumptions made for both.This lets the financier make a prudential lending decision with all the facts in front of them.

[PropertyEconomics]

Originally Posted by Ken Jackson

Having done a few of these over the years in Wollongong (which is Australia's steel making capital) I have been inclined to supply both figures and to have a meeting with the financier to explain the assumptions made for both.This lets the financier make a prudential lending decision with all the facts in front of them.

Ken .. that is great advice and how I have been instructed to do it in the past. One requires the hypothetical condition its clean and one as is value of the contaminated site. The banker can sure make a decision then ... or the owner or whomever is the client.

[Howard Klahr]

The issue is not about whether the site is clean or contaminated but rather what is necessary to obtain a No Further Action letter from the applicable regulatory agency. In addition liability does not end at the property line. Have any adjacent property owners been impacted by the contamination? If so, liability will remain.

[spieldberg]

Good- thanks for your posts everyone. The client decided to have it appraised under a Hypothetical Condition.

[CCAAMO]

Originally Posted by spieldberg

This is a fun one..
the subject is on a contaminated site and is in the process of being remediated. Should the Appraiser make a Hypothetical Condition or Ext.Assumption that this does not effect market value? And/or Hypothetical Condition or Ext.Assumption that this situation has been remediated?

If the contamination is in the process of being removed and it is reasonable to assume the work will be completed, then it would be reasonable to base the value "subject to" the completion of the remediation.

I did a recycling facility several years ago for a bankruptcy proceeding. The site had gas facilities and a storage tanks at one time. The lender based their appraisal on the hypothetical condition that the site was contaminated, and the property owner based their appraisal based on the hypothetical condition that the site was not contaminated.

Because the property was upside down, neither side wanted to pay for an environmental company to take core samples to settle the matter and instead hired environmental " experts" to testify why they thought it was or was not contaminated.

It just goes to show it can be reasonable, in some situations, to make a Hypothetical condition either way.

[Metamorphic]

Originally Posted by spieldberg

Good- thanks for your posts everyone. The client decided to have it appraised under a Hypothetical Condition.

That makes it easier, but you shouldn't forget to consider whether there will be any diminished utility associated with the ongoing remediation process.

Having done that work for 15 years I know the remediation activities can be a no brainier for the tenant, or they can seriously diminish the occupant's unencumbered use of the property. If you've got drill rigs and excavators digging up your parking lot and blocking entrances on a regular basis, issues that restricting the kind of development you can do on portions of the site, activities that wont tolerate the physical hazards (excavations, fumes, etc) that are sometimes created, etc, the property can have significantly less utility than you'd think at first glance. Just something to consider.

[aussie ken]

Originally Posted by PropertyEconomics

Ken .. that is great advice and how I have been instructed to do it in the past. One requires the hypothetical condition its clean and one as is value of the contaminated site. The banker can sure make a decision then ... or the owner or whomever is the client.

Thanks PE I am humbled......