To give readers a better idea of how survey methodology can be used in a real estate valuation context, we thought it would be a good idea to share some of the survey results we’ve found in the past. There have been several cases where we have been able to use survey findings as support for measurements of property value diminution. Several of these surveys produced value estimates that were close to measurements of loss derived through our other methods of valuation. One case of particular interest measured property value losses for homeowners in a relatively small town in the eastern United States where the groundwater had been contaminated as the result of a gas station leak.
To measure the groundwater contamination’s impact on property values, we conducted a contingent valuation (CV) survey of 954 homeowners living near the affected area. Participation in the survey was available to anyone who was living in the same state as the subject area but not directly within the affected area. Homeowners in the affected area represented a particular set of age groups, education levels, income levels, and various other demographic characteristics. After acquiring a pool of survey respondents that had similar demographic characteristics as the homeowners in the affected area, we began administering the surveys. When conducting survey research, particularly CV survey research, it is important that a survey sample is similar to the subject population in order to produce more accurate measurements of how the subject population would act in a given situation. In fact, there are several steps researchers must take to ensure a quality sample, but there will be more on that at a later time.
After receiving the web and telephone survey results and running some initial analyses, we found several noteworthy observations. The survey population not only demanded a discount to live in the area, but approximately 66% of respondents said that they would not want to live in this location at all. The discount demanded for the contaminated homes was, on average, approximately 56% of otherwise unimpaired values.
Further, when comparing the survey measurements to those found through other valuation methods used in our report, we found that results were very similar. The figure below shows a comparison of diminution values derived from the different methods used in our analysis. This is important because the economic literature often suggests that CV surveys overestimate damages. Our results demonstrate the contrary and actually fall into the middle range of the results. We can accredit their accuracy to the extensive guidelines and precautions followed while developing and administering the survey. Our results show that CV surveys can produce accurate measurements in a valuation context when the surveys are conducted properly and with due diligence.
– Abigail Mooney
*** (Note: Some details of this survey, its analysis, and the results have been excluded from this article to protect those living in the affected area.)