ARA Case Analysis & Practical Application 2

Question 1

An appraiser is valuing a 500-acre farm with a contaminated irrigation pond. The owner wants to know the value 'as if clean.' Which approach best addresses this scenario?

Accepted Answer

Estimate market value unaffected and separately quantify contamination stigma and remediation cost

Answer

Proper environmental appraisal separates unaffected market value from remediation costs and any residual stigma discount.

Question 2

A rural property has a gravel pit that has been partially exhausted. When applying the sales comparison approach, which adjustment is most critical?

Accepted Answer

Adjust for remaining extractable reserves relative to comparable sales

Answer

Remaining mineral or extraction reserves directly drive value in extractive-use properties and must be reconciled with comparables.

Question 3

An ARA appraiser is engaged to appraise a ranch under a conservation easement that restricts future subdivision. How does this easement most directly affect value?

Accepted Answer

It reduces the fee simple value by limiting the bundle of rights available to the owner

Answer

Conservation easements encumber the fee interest by removing certain development rights, typically reducing market value of the encumbered property.

Question 4

During a farm appraisal, the appraiser discovers that the subject's crop yields are 20% below county average due to a drainage problem. What is the most appropriate action?

Accepted Answer

Reflect below-average productivity in the income approach and consider a functional obsolescence adjustment in the cost approach

Answer

Below-average productivity caused by a drainage deficiency is a functional issue that should be captured in both income projections and cost approach obsolescence.

Question 5

A timber property sold for $1,200 per acre. Comparable timberland without merchantable timber sold for $400 per acre. The implied timber value per MBF is closest to which calculation method?

Accepted Answer

Subtract land value from total sale price, then divide residual by estimated timber volume

Answer

The residual land technique isolates timber value by subtracting bare land value from total sale price, then divides by timber volume to derive a per-unit price.

(ARA) Accredited Rural Appraiser Practice Test

(ARA) Accredited Rural Appraiser Practice Test

ARA Case Analysis & Practical Application 2