Engagement contract language suggestions

[Pat Butler]

I'm doing a divorce appraisal of a subject property where there is an extensive amount of toxic groundwater contamination that was dumped by a nearby mfg plant. It's still an ongoing situation and I've included language in my engagement letter to hopefully make it clear that there are limitations to my appraisal. What do you think of this language??

"You are aware of the Lockformer contamination situation. The research associated with identifying which properties have been contaminated is ongoing and there are still pending lawsuits. Just recently, the Lisle Village Board authorized testing along Inverness Lane. Additionally, some homeowners have tested their water supply using private testing firms and their results may be confidential and not disclosed to the buying public. The scope of this appraisal will include viewing some of the publicly available contamination maps provided by government sources and telephone inquires to the Village of Lisle offices. Reasonable efforts will be made to identify comparable properties that have a similar influence as your property. However, the uncertainty of the situation makes it impossible to be absolutely sure that the comparable properties are indeed subject to the same influences. In fact, different government agencies have produced differing boundary maps of areas of possible contamination and areas of suggested testing and it is nearly impossible to reconcile the results of all of the different tests that have been conducted. Therefore, your appraisal will be developed with an extraordinary assumption that states that the subject property, and all comparable properties, are subject to the same influences with respect to possible groundwater contamination."

 

[Ross (CO)]

Pat, .... Is everybody here on private water wells ? Are other properties actually selling despite their known water (well) toxicity ? Are they selling at super-low prices because of the known problem, and at that specific address ? Is the "plume" of pollution extremely well-documented to show direction of movement over time and therefore enable one to clearly denote affected / unaffected localities ? Are you an environmental engineer ? Are you a hydrogeologist ? Do you have the extra E & O environmental waiver to back you up ? It's not as if this problem will appear, for the first time, after you do your report. It sounds like it is already a known entity......and (?) your subject is smack-dab in the middle of this discomforting and uncertain issue. It would be interesting to discover just how one "adjusts" for the difference between polluted / un-polluted. Back to the question.....why would one buy a property with a toxic/polluted water supply ? I would be inclined to wait till the other people's reports and studies are out....and watch the market a little longer. But, there is a divorce to settle, and this property needs your "help". Tread carefully, my friend, you just may need 3 pounds-worth of supporting documentation and addenda !

 

[Pat Butler]

It's really confusing. Some of the houses are on private wells while other are on the municipal system. Some of the houses on the municipal system got connected approximately 10 years ago. It's impossible for anyone to know when the groundwater became contaminated so even those folks currently on the muni system still have concerns.

What's really weird is that most of the houses in the MLS are advertised as "as-is" and are selling in less than one month. There doesn't seem to be a problem with marketability. As far as the plume goes, that's the particular problem. The subject's street is getting new testing wells installed this week. The known part of the problem stops about 4 blocks north of the subject property. People are now arguing as to whether there could still be a problem with inhaling any gasses when the chemical leaches to the surface. The only consistent thing here is that there are enough unknowns here that I think most of the houses in this market suffer from the stigma whether they're known to be contaminated or not.

I'm trying to limit my liability with proper disclosure in my engagement letter. Otherwise, there would be a lot of litigation work that I'd have to turn down.

 

[Pat Butler]

After reading your post I checked my E&O policy and it doesn't cover environmental issues! Yikes, I'm going to have to turn this one down. My E&O is up for renewal early next year and that's the sort of coverage I'd be looking for. Thanks for the reminder....

 

[Ross (CO)]

Pat, ..... Yeh, the new buzz in E & O is the environmental "protection" premium we are invited to sign up for. Clearly, these providers see plenty of future litigation work in that arena....and it surely could draw appraisers into the fray. Another interesting thing to make note of is the extent to which listing agents are "disclosing" this potential problem to an unsuspecting buyer. Are they ? The aspect of these gasses or vapors coming out of the ground, in general, is not the real problem. Whether they come into a basement level and concentrate there is the greater concern. Now, winter approaches and homes are "locked up" more. So, this kind of thing can affect the private well user and the city-supplied folks as well. Talk about stigma ! .....these kinds can last for a long time. So, why would someone buy a house with a known toxicity presence, or the chance for one, even if it manifested itself 10 months from now ?