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Mortgage Forms Should Include More Transparency, Appraisal Institute Tells Federal Reserve

May 18, 2011 08:00 AM

CHICAGO (May 19, 2011) – To appropriately value potential wetlands, real estate appraisers must explicitly take into consideration the market for mitigation credits, according to an article published this week in The Appraisal Journal’s Spring issue.

The Appraisal Journal is the quarterly technical and academic publication of the Appraisal Institute, the nation’s largest organization of real estate appraisers. The materials presented in the publication represent the opinions and views of the authors and not necessarily those of the Appraisal Institute.

“Valuing Properties with Wetland Potential,” by Michael Cragg, Ph.D., Christine Polek, Ph.D., and Stephen Polasky, Ph.D., examines how federal policy favoring wetland mitigation banks and the sale of wetland credits influences the value of land that has potential use as wetlands.

Regulations adopted in 2008 by the U.S. Army Corps of Engineers and the Environmental Protection Agency make mitigation banking the preferred method for wetland restoration and compensation for wetland losses. Mitigation banks sell parcels as wetlands credits to offset impact of developments.

Between 1998 and 2004, wetlands increased by a net average of 32,000 acres annually; the number of active mitigation banks in the United States more than tripled between 1992 and 2001, the article states.

The authors note that because governmental policies have created a mitigation credit market, property that has potential as a wetland may be treated as income-producing property in a valuation. The authors show how appraisers should consider the market elements of supply and demand, revenue and expenses of land that may be sold as a mitigation credit. They recommend that appraisers consider the impact of government policies on the market for the wetlands and credits.

The study reported in the Journal is significant because prior research has only looked at valuation of wetlands adjacent to development sites, which is not a market commodity.

Click here to read Valuing Properties with Wetland Potential in the Spring 2011 issue of The Appraisal Journal.

Also in The Appraisal Journal’s Spring 2011 issue:

“Price versus Fundamentals – From Bubbles to Distressed Markets,” by Stephen F. Fanning, MAI, John A. Blazejack, MAI, and George R. Mann, MAI, examines how a commercial property appraisal may produce different results depending on whether the valuation uses data from the sales transaction market or relies on analysis of underlying market fundamentals, such as cash flow.

“Projected Rent Spikes: Can You Have the Good without the Bad?” by Michael R. Pecorino, MAI, looks at historical rent growth in office buildings and the unlikelihood of investors achieving projected rent growths.

“Real Estate Valuation in Hong Kong,” by Raymond Lo, views the business and regulatory environment in Hong Kong that affect valuation of real estate in Hong Kong and presents a case study applying valuation techniques to apartment complex and to a hotel complex

“Energising Property Valuation: Putting a Value on Energy-Efficient Buildings” by Gerritt Leopoldsberger, Ph.D., Sven Bienert, Ph.D., Wolfgang Brunauer, Ph.D., Kerstin Bobsin and Christian Schützenhofer looks at how the effect of energy-efficient features can be integrated in the valuation of commercial buildings. The article was awarded The Appraisal Journal Prize for best paper on real estate valuation at the 2010 annual meeting of the European Real Estate Society.




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The Appraisal Institute is a global membership association of professional real estate appraisers, with more than 24,000 members in nearly 60 counties throughout the world. Its mission is to advance professionalism and ethics, global standards, methodologies, and practices through the professional development of property economics worldwide. Organized in 1932, the Appraisal Institute advocates equal opportunity and nondiscrimination in the appraisal profession and conducts its activities in accordance with applicable federal, state and local laws. Members of the Appraisal Institute benefit from an array of professional education and advocacy programs, and may hold the prestigious MAI, SRPA and SRA designations. Learn more at





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