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- Residential
- Multi-Family
- Commercial/Industrial
- Special Purpose
- Hazardous-Environmental
- Litigation
- Equipment & Machinery
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Hazardous and Environmental Services
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Public concern about the impacts
of environmental hazards on
human health and natural
resources has grown dramatically
since the 1960's. As a result,
numerous federal, state, and
local environmental regulations
have been promulgated, many of
which affect the operation,
development, and transfer of
real estate.
Buyers, sellers, lenders, and
real estate professionals have
all learned the pitfalls of
ignoring environmental hazards.
Case histories from the past years document disastrous
consequences for many who
unknowingly purchased, invested
in, or loaned on real estate
impaired by chemicals and toxic
compounds. In many instances, the
cost to remediate contamination
has exceeded the market value of
the property.
Uncertainty and Risk
There is strong, repeated
evidence that perceptions of
risk and uncertainty are the
driving forces in the market
responses of households,
businesses, lenders, and
insurers. Such responses arise
from a lack of knowledge and,
subsequently, from fear, the
major influence on market
behavior. Concern over health
hazards and loss of property
value, property income, and
(particularly for lenders and
insurers) capital prompt market
fears.
These adverse effects reflect
the market responses of
potential buyers and lenders to
the character and type of
contamination involved.
Generally speaking, the more
uncertainty there is about the
precise nature of the
contamination, the greater the
likely negative effect on all
impacted properties.
Valuing Contaminated
Properties
In order to approach the
valuation of contaminated
properties effectively, answers
to the following questions must
be obtained:
- What is the nature of
the contaminant?
- Is it traveling or
stable?
- How does this particular
form of contamination
affect the property's
utility?
- How does the particular
form of contamination
affect the property's
marketability?
- How can the effects on
market value or the likely
sale price be
measured?
- What prior evidence is
there that this
measurement procedure (s)
works?
Identifying and Valuing the Stigma Effect
Identifying the value impact
also involves answering a series
of questions:
- What will it take to clean
up or remediate the
contamination on the
property?
- How long will it take to
clean up or remediate the
contamination on the
property?
- How much will it likely cost
to clean up or remediate the
contamination on the
property?
- For how long must the
results of the cleanup or
remediation be monitored for
effectiveness, and how much is
that likely to cost?
- What is the probability of
receiving written
documentation of an effective
cleanup or remediation process
from state or federal
authorities?
- What have been the
experiences with other
properties similarly
affected?
- What is the likely duration
of the stigma?
Measuring the Market Impact
on Values of Nearby Properties
The market impact on properties near the contaminated
site is simply another form of stigma. Its effects can typically be measured
more readily through analysis of market behavior both before and after the
public announcement of the presence of contaminants on the contaminated
property. The questions to be answered here are similar to those considered
above, with the following additions:
- What is the likely
duration of any negative
effects associated with
proximity to the
contaminated
property?
- How far from the
contaminated property does
the negative effect on
surrounding property
values extend?
- Does the negative effect
on the values of
surrounding properties
diminish as distance from
the contaminated property
increases?
- If so, what is the shape
of the distance curve?
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Most recently updated April, 2007