Risk Assessment & Mitigation Flashcards
7 cards from real ARA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Risk Assessment & Mitigation flashcards as text
A rural property sits in a 100-year floodplain with no flood insurance. Which adjustment best reflects this risk in a market value appraisal?
Answer: Deduct for required flood insurance cost capitalized over the holding period
The appraiser should capitalize the ongoing flood insurance cost as a market-supported deduction reflecting the financial burden on buyers.
When appraising farmland near a confined animal feeding operation (CAFO), which risk factor most directly affects market value?
Answer: Odor and nuisance externalities that reduce buyer pool and price
CAFOs create odor, air quality, and nuisance risks that reduce the pool of willing buyers and typically cause measurable price discounts.
Which technique is most appropriate to measure market risk associated with isolated rural parcels that have limited comparable sales?
Answer: Exposure time analysis combined with interviews of active market participants
Exposure time analysis and market participant interviews capture liquidity risk and buyer depth in thin rural markets where paired sales are scarce.
A rural appraisal assignment involves property with a pipeline easement crossing the primary tillable acreage. The most significant risk this creates is:
Answer: Permanent encumbrance restricting land use and reducing productivity
Pipeline easements permanently restrict certain uses, may limit crop selection, and typically depress per-acre value in the encumbered strip.
Which environmental risk is most commonly associated with rural properties that previously operated as dry-cleaning businesses or fuel distribution sites?
Answer: Soil and groundwater contamination from chlorinated solvents or petroleum hydrocarbons
Dry cleaners and fuel sites commonly leave chlorinated solvent or petroleum contamination in soil and groundwater, creating significant remediation liability.
When a rural property's highest and best use is uncertain due to pending zoning changes, the appraiser should:
Answer: Analyze the probability-weighted impact of alternative uses and disclose the uncertainty
USPAP and sound practice require the appraiser to analyze probable highest and best use scenarios, weighting them by likelihood and disclosing the speculative nature.
In rural appraisal, 'commodity price risk' primarily affects which property type's income capitalization analysis?
Answer: Row crop farmland where rent is tied to grain prices
Row crop farmland rents often float with corn and soybean prices, so commodity price volatility directly affects the income stream used in capitalization.