Pre-requisite: Recommend BUSI 331 or a thorough understanding of the theory and application of the three approaches to value.
These three lessons introduce the student to the theory and methods used in the valuation of properties with impairments or detrimental conditions, such as contamination. The first lesson offers a brief overview of environmental concerns as they pertain to real estate. The different types of contamination are described, in addition to the various levels of environmental audits. The second lesson focuses on the valuation of impaired properties in general, outlining valuation tools for analyzing real estate damages and the impaired condition. Bell’s Detrimental Condition Model is introduced. The third lesson builds on the inspection and appraisal information presented earlier and illustrates the specific valuation techniques for analyzing the effect of contamination on real estate value. Case studies illustrate practical examples of how to apply the contents of the appraisal toolbox when faced with valuing an impaired property.
Course Outline
Lesson 1 - Introduction to Property Impairment and Contamination
After completing this lesson, students should be able to:
- Identify common types of hazardous substances and their transportation mechanisms
- Recognize the relevance of contamination liability and its assessment
- Describe the phases of an Environmental Site Assessment (ESA)
- Identify sources of environmental information regarding properties in Canada
- Recognize indicators of possible environmental concerns during property inspection
- Recognize the roles of appraisers in recognizing and reporting contamination
Lesson 2 - Detrimental Conditions and the Appraiser
After completing this lesson, students should be able to:
- Explain the basic property value impacts of property impairment and the methods to analyze these impacts
- Discuss the role of the appraiser in the valuation of impaired property
- Outline considerations from Canadian Uniform Standards of Professional Appraisal Practice (CUSPAP) for the valuation of impaired properties
- Describe the application of the detrimental condition matrix, detrimental condition model, and Bell chart
Lesson 3 - Valuation Techniques for Impaired Properties
After completing this lesson, students should be able to:
- Explain the rationale underlying the valuation analysis of impaired property
- Discuss the methods available for the valuation of impaired property
- Review an impairment situation and determine an appropriate approach to follow in valuing the property
- Carry out the proper steps to value an impaired property using the cost approach, direct comparison approach, and income approach, applying a variety of applicable techniques within each
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