Contamination Effect

[SanDiegoBrian]

Hello all, appraising a property that is a full service car wash. The tenant is buying the land and I am appraising the site as if vacant. I was just made aware that the site has contamination, but no clean up is required unless the site undergoes a change in use. Improvements were constructed in 2006 and the business is profitable, so no projected change of use in the short term.

This does not negate the fact that 20-30 years from now the bill will come due, so some affect upon value seems warranted.
Secondly, does appraising the site 'as if vacant' require ignoring the existing improvements and therefore the contamination issue is viewed in the present tense.

 

[Red Flint]

I would use a hypothetical condition, as if vacant (and potential use is approved use causing no contamination remediation in the analysis).
I would also use an extraordinary assumption for no contamination, probably would not discount an effect in future, because the use may not change in 20-30 years.

These problems hinge heavily on credible results for the intended appraisal use. Think carefully about peers approach, and what could go wrong, to cover your license liability.

 

[Red Flint]

Whoops, extraordinary assumption that contamination need not be remediated (continual use).

 

[nstanbru]

You mentioned the tenant is buying the land. Is there a current ground lease in place?

 

[Terrel L. Shields]

What kind of contamination is on the site? Is it registered with the EPA or state pollution control?

 

[Deleted member 152047]

Go to your client and ask them what they want you to do. Realistically, you can appraise it both ways. However, if they want you to appraise it "as though vacant" with the current level of contamination, you will need some additional information from the owner and/or guidance by the client as to remediation costs (and additional fee).

If they set an assignment condition that says that you should utilize a hypothetical condition that the site is not contaminated, you are good to go.

The client can provide you guidance and then you decide how to solve the appraisal problem.