Real estate appraisal practice stresses three traditional approaches (cost, sales comparison, and income) to value contaminated properties. This paper discusses a fourth approach: the contingent valuation method (CVM). This method is useful in the estimation of losses for contaminated properties when market data are not available or market failure is suspected. Transactions of impaired properties often represent a small sample of all properties under consideration; efficient market assumptions, such as an adequate level of information, are usually not met. In such circumstances, stated values derived from surveys may offer complementary and valid evidence of market value. Where transactional evidence and survey results differ, further analysis of market conditions may be helpful to determine which represents the most credible value conclusion.
Authors: Clifford A. Lipscomb, Max Kummerow, Will Spiess, Sarah Kilpatrick, and John A. Kilpatrick
Originally published in the Journal of Real Estate Literature, Vol. 19, No. 2 (2011)