The Impact of Environmental Factors on Property Appraisals 

Property values aren’t only determined by curb appeal and neighborhood safety. Environmental factors, for example, can play a sizable role in determining the value of a property. Of course, climate and natural disasters play a part in informing these values, but there are other factors that can impact an appraisal report just as much, for better and for worse! 

Summary 

Positive Environmental Effects on Property Appraisals 
 

Wish you lived on a tropical island getaway? Us, too. But the positive environmental factors we’re about to cover go beyond beautiful scenery — even though that is a major plus for a property appraisal! While some of these features are cornerstones to land valuation, each factor also has a hand in contributing to the value of any kind of property.  

Note: As always, the opinion of value assigned to any property is just that: an opinion! Each property will vary in the factors that weigh in on an appraiser’s report of the property value.  

Climate Conditions 

Weather is one of the first things homebuyers consider in their search for the perfect home. Naturally, places with favorable climates have homes with higher values. When an appraiser considers the value of a property, climate is one of the overarching factors that will contribute to a market with high-value properties. For example, climates like those with unrelenting droughts or below-zero temperatures are generally going to appraise lower. 

Good Soil For Property Use 

The quality and type of soil living on a given property can impact that property’s value in a variety of ways, depending on the use of the property. For our purposes, we’ll consider the best types of soils as they relate to a residential property. For appraisals of industrial and commercial properties, like farms, these values will change.  

Generally, there are six types of soil, each with their own composition of minerals, water, and level of compactness that make for either perfect property-building conditions, or very poor ones. Every part of the country has at least one, if not a mixture of more than one, type of soil. With residential properties, for example, areas with strong, moisture-draining soil will help maintain a home’s value long into its age. 

Helpful Resource: AgriData is a great resource for appraisers that might need a deeper look at soil data, property boundaries, crop history, topography, and more. This data is not always easily accessible or easy to find on the property or in the county files. It’s also important to note that soil composition can change over time. 

Sustainability & Energy-Efficiency 

Market trends have a significant impact on how appraisers determine their opinions of property value. Recently, the most significant trend surrounds energy-efficient features. Lately, homes that offset carbon emissions, are self-sustaining, or can effectively reduce their energy needs are more popular than those without energy-efficient features. These features include solar panels, highly effective insulation, and smart thermostats, to name a few.  

Negative Environmental Influences on Appraisals 

No one wants to live in a dystopia. Places that experience frequent natural disasters, homes with high exposure to industrial toxins and poor waste management, and areas without access to water are only a few environmental factors that will negatively impact property values.  

Natural Disasters 

In 2022, the United States faced 18 major natural disasters that caused over $175 billion in damages. Hurricanes, tornados, wildfires, earthquakes, and landslides are just a few of many natural disasters that, if regularly occurring, can severely deplete a property’s value. Insurance premiums are also higher in these areas.  

Water Access Issues 

As it stands today, the United States is facing a water crisis that leaves many heavily populated areas of the country without access to safe, clean water. This water crisis lowers values for properties in those areas. Property values are higher in towns, cities, and regions with access to higher quality water. In fact, one research article published by Proceedings of the National Academy of Sciences (PNAS) in 2023 showed that if water quality improves by 10%, property values will appreciate by up to $9 billion. 

Pollution 

Pollution can encompass many types of environmental contamination and proximity to toxins. If a property is located across the street from an industrial plant, there might be issues with air quality and waste management that can cause the environment to become highly toxic and unhealthy for people to live near. 

Environmental Site Assessments (ESAs) 

Sometimes, appraisers will use Environmental Site Assessments (ESAs) — also called environmental reports — to help them form a more educated opinion of value, and identify environmental contamination liabilities, both existing and potential. This is especially the case for appraising commercial properties.  

ESAs are conducted by environmental professionals using the property’s environmental history, current and past conditions, and potential risks. They also cover the property’s compliance with environmental regulations, and, if there are any issues, they might include recommendations to mitigate them. 

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