Al addresses lack of appraisal requirement in EPA's 'All Appropriate Inquiry'

Valuation Insights & Perspectives, Fall, 2004

"Linkage of the appraisal being prepared for other purposes to All Appropriate Inquiry is simple, reasonable and cost efficient," wrote the Appraisal Institute in addressing the Environmental Protection Agency's recent proposed All Appropriate Inquiry rule, which does not currently require an appraisal be performed to ascertain fair market value.

All appropriate inquiries are the inquiries into the previous ownership, uses and environmental condition of a property that must be conducted prior to acquisition by parties seeking Superfund liability protections for contiguous property owners, bona fide prospective purchasers and innocent landowners. Section 312.29 of the proposed rule requires that the prospective purchaser of the property consider whether or not the purchase price to be paid for the property reflects its fair market value, assuming that the property is not contaminated.

In a November 11 letter to the EPA, the Appraisal Institute, American Society of Appraisers and American Society of Farm Managers and Rural Appraisers expressed their concerns over a clause in the proposed rule that states a real estate appraisal is not required to achieve compliance with determining fair market value. It notes that there may be many reasons that the price paid for a particular property is not an accurate reflection of the fair market value.

The appraisal organizations claim that "the Congressional mandate for comparison of the fair market value of the property to the purchase price was not sufficiently addressed" by the proposed rule, and could leave "prospective purchasers (and the EPA) in a precarious position, and that vagaries in the proposed rule will continue to dissuade the purchase of contaminated or potentially contaminated properties."

The EPA developed its proposed rule in response to provisions requiring the agency to develop regulations governing how to conduct "all appropriate inquiries," inquiries into the previous ownership uses and environmental condition of a property that must be conducted prior to acquisition by parties seeking Superfund liability protections.

The full letter is available on the Appraisal Institute Web site under Government Affairs "official comments."