The segment of the market interested in purchasing homes in these sites compares the advantages and disadvantages of other outlying or isolated locations.


The study of future utility is typically covered in the appraiser's Highest and Best Use Analysis and includes:

  • Selecting possible uses
  • Rejecting uses that are obviously lower or higher than the most probable use
  • Analyzing differing motives of those buyers

The study of the future uses and utility of a particular property will lead the appraiser to the property's Highest and Best Use.


When estimating value, account for general taxes and special assessments:

  • General real estate taxes related to specific sites are a recurring periodic expense in the ownership of taxable real property and must be accounted for in the value estimate.
  • Special assessments of various types are frequently an additional expense of ownership and must similarly be accounted for in the value estimate.

Determine the relative effect of the real estate tax and/or special assessment's burden on the desirability of the site. Enter this information on the URAR.

1. Assessment

The real estate tax liability is computed by multiplying the assessed value by the tax/millage rate, which is typically expressed in dollars per hundred or dollars per thousand of assessed value. In the addendum to the VC, state the assessment, real estate tax liability and tax year. State the assessed market value of the subject property in the addenda.

  • If there is no method to relate the assessment to market value, such as new construction where reasonable assessment may not exist, mark the assessed market value response as "N/ A".

2. Special Assessment

A special assessment can be calculated in two ways:

  • The same way as real estate taxes, or
  • On a pro-rated basis

Determine how the special assessment is calculated and report the special assessment liability on the URAR.

  • If the property does not have special assessment, mark the URAR "N/A".

For example: An organization that services a community creates an annual operating budget. Each property becomes liable for its percentage of that budget based on the percentage of front feet their property has compared to the total amount of front feet as a special assessment in this community.


Physical conditions in some neighborhoods are hazardous to the personal health and safety of residents and may endanger physical improvements. These conditions include unusual topography, subsidence, flood zones, unstable soils, traffic hazards and various types of grossly offensive nuisances. When reporting the appraisal, consider site hazards and nuisances.

  • If site hazards exist and cannot be corrected but do not meet the level of unacceptability, the appraisal must be based upon the current state.
  • If the hazard and/or nuisance endangers the health and safety of the occupants or the marketability of the property, mark "YES" in VC-1 and return the unfinished appraisal to the lender.

The lender, who is ultimately responsible for rejecting the site, relies on the appraiser's site analysis to make this determination. Guidelines for determining site acceptability follow. The appraiser is required to note only those readily observable conditions.


FHA guidelines require that a site be rejected if the property being appraised is subject to hazards, environmental contaminants, noxious odors, offensive sights or excessive noises to the point of endangering the physical improvements or affecting the livability of the property, its marketability or the health and safety of its occupants. Rejection may also be appropriate if the future economic life of the property is shortened by obvious and compelling pressure to a higher use, making a long-term mortgage impractical. These considerations for rejection apply on a case-by-case basis, taking into account the needs and desires of the purchaser. For example, a site should not be considered unacceptable simply because it abuts a commercial use; some commercial uses may not appeal to a specific market segment while other commercial uses may. If the-condition is clearly a health and safety violation, reject the appraisal and return it to the lender. If there is any doubt as to the severity, report the condition and submit the completed report. The lender must clear the condition and may require an inspection or reject the property. For those conditions that cannot be repaired, such as site factors, the appraised value is based upon the existing conditions.


There are special hazards caused by unique topography. For example, denuded slopes, soil erosion and landslides often adversely affect the marketability of hillside areas. When evaluating the site, consider earth and mud slides from adjoining properties, falling rocks and avalanches. These occurrences are associated with steep grades and must be considered in the site analysis.


Danger of subsidence is a special hazard that may be encountered under a variety of circumstances:

  • Where buildings are constructed on uncontrolled fill or unsuitable soil containing foreign matter such as organic material
  • Where the subsoil is unstable and subject to slippage or expansion

In mining areas, consider the depth or extent of mining operations and the site of operating or abandoned shafts or tunnels to determine if the danger is imminent, probable or negligible.

The appraiser must note any readily observable conditions, which indicate potential problems. Signs include fissure or cracks in the terrain, damaged foundations, sinkholes or settlement problems.

If there is a danger of subsidence, the specific site will be deemed ineligible unless complete and satisfactory evidence can be secured to establish that the probability of any threat is negligible.

  • If there is evidence of subsidence, the property is ineligible. Mark the "YES" column in VC-1 under subsidence.



Operating and abandoned oil and gas wells pose potential hazards to housing, including potential fire, explosion, spray and other pollution.

1. Existing Construction

No existing dwelling may be located closer than 300 feet from an active or planned drilling site. Note that this applies to the site boundary, not to the actual well site.

2. New or Proposed Construction

If an operating well is located in a single-family subdivision, no new or proposed construction may be built within 75 feet of the operating well unless mitigation measures are taken. This measure is designed to:

  • Avoid nuisance during maintenance
  • Diminish noise levels caused by pumping
  • Reduce the likelihood of contamination by potential spills

The appraiser must examine the site for the existence of or any readily observable evidence of a well.

3. Abandoned Well

A letter may be obtained from the responsible authority in the state government stating that the subject well was safely and permanently abandoned.

  • When such a letter is provided, a dwelling may be located no closer than 10 feet from the abandoned well.
  • When a letter is not provided, the dwelling must be located at least 300 feet from the abandoned well.

The lender is responsible for obtaining the letter; the appraiser must note the location of the well and verify the existence of the letter.

4. Special Case - Proposed, Existing or Abandoned Wells

Hydrogen sulfide gas emitted from petroleum product wells is toxic and extremely hazardous. Minimum clearance from sour gas wells may be established only after a petroleum engineer has assessed the risk and state authorities have concurred on clearance recommendations for petroleum industry regulation and for public health and safety.

  • If there is readily observable evidence that the conditions exist, mark the "YES" column in VC-1 under operating and abandoned wells.
  • If an inspection by a qualified person verifies that the condition exists and is acceptable based on the standards defined above, account for the presence of wells in the valuation of the property.
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