An appraiser discovers that a property is located within 500 feet of a known contaminated site listed on the National Priorities List (Superfund site). What should the appraiser do with this information?
Correct Answer
A) Report the verified facts, investigate uncertainty and analyze effects
Verify and report relevant proximity and known conditions, investigate material uncertainty as appropriate to credible scope, and analyze any supported market effect. Distance of 500 feet alone does not prove subject contamination, establish migration or justify a fixed discount. Qualified environmental information may be needed. A disclaimer is not a substitute for necessary inquiry and analysis.
Why This Is the Correct Answer
Option A is correct because the appraiser should report the verified proximity, investigate material uncertainty as credible scope requires, and analyze any market effect supported by evidence. Fannie Mae guidance requires appraisers to note known hazardous conditions on the subject or on sites in the vicinity. Distance alone does not prove contamination of the subject, so analysis rather than assumption is required.
Why the Other Options Are Wrong
Option B: Conceal it from the report to protect local property prices
Option B, concealing it from the report to protect local property prices, is wrong because hiding a known relevant condition is misleading and conflicts with the duty to note known hazardous conditions in the report.
Option C: Apply a flat 50% reduction to the subject’s value
Option C, applying a flat 50% reduction to the subject's value, is wrong because any adjustment must be supported by market analysis; a 500-foot distance alone does not prove contamination or justify a fixed discount.
Option D: Ignore it, since conditions outside the subject’s boundary do not matter
Option D, ignoring it because conditions outside the subject's boundary do not matter, is wrong because conditions in the vicinity can affect value and known hazardous conditions near the subject must be noted.
Report, research, reason
Report the known condition, research the uncertainty, and reason from market evidence about any effect.
How to use: Use this three-step sequence for any nearby environmental hazard question.
Exam Tip
Choose the answer that discloses known facts and calls for supported analysis; reject concealment and arbitrary fixed discounts.
Common Mistakes to Avoid
- -Leaving out off-site hazards because they are outside the property lines
- -Applying a flat percentage discount without market support
- -Assuming nearness proves the subject is contaminated
Concept Deep Dive
Analysis
This question tests an appraiser's duty when a known environmental condition exists near the subject. Proximity to a listed contaminated site should be reported, investigated as appropriate to a credible scope of work, and analyzed for any supported market effect. Reject answers that conceal the fact, ignore it, or apply an arbitrary fixed discount.
Background Knowledge
External environmental conditions can affect market value through stigma, perceived risk or actual contamination. Appraisers are not environmental experts, so qualified environmental information may be needed, and a disclaimer does not replace necessary inquiry and analysis.
Real-World Application
While researching a neighborhood, an appraiser finds a Superfund site a short distance from the subject. The appraiser notes it in the report, reviews available environmental information, and studies paired sales to see whether the market shows any effect.
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