ARA Risk Assessment & Mitigation 2

Question 1

A rural property sits in a 100-year floodplain with no flood insurance. Which adjustment best reflects this risk in a market value appraisal?

Accepted Answer

Deduct for required flood insurance cost capitalized over the holding period

Answer

The appraiser should capitalize the ongoing flood insurance cost as a market-supported deduction reflecting the financial burden on buyers.

Question 2

When appraising farmland near a confined animal feeding operation (CAFO), which risk factor most directly affects market value?

Accepted Answer

Odor and nuisance externalities that reduce buyer pool and price

Answer

CAFOs create odor, air quality, and nuisance risks that reduce the pool of willing buyers and typically cause measurable price discounts.

Question 3

Which technique is most appropriate to measure market risk associated with isolated rural parcels that have limited comparable sales?

Accepted Answer

Exposure time analysis combined with interviews of active market participants

Answer

Exposure time analysis and market participant interviews capture liquidity risk and buyer depth in thin rural markets where paired sales are scarce.

Question 4

A rural appraisal assignment involves property with a pipeline easement crossing the primary tillable acreage. The most significant risk this creates is:

Accepted Answer

Permanent encumbrance restricting land use and reducing productivity

Answer

Pipeline easements permanently restrict certain uses, may limit crop selection, and typically depress per-acre value in the encumbered strip.

Question 5

Which environmental risk is most commonly associated with rural properties that previously operated as dry-cleaning businesses or fuel distribution sites?

Accepted Answer

Soil and groundwater contamination from chlorinated solvents or petroleum hydrocarbons

Answer

Dry cleaners and fuel sites commonly leave chlorinated solvent or petroleum contamination in soil and groundwater, creating significant remediation liability.

(ARA) Accredited Rural Appraiser Practice Test

(ARA) Accredited Rural Appraiser Practice Test

ARA Risk Assessment & Mitigation 2