Home Appraisal Glossary

Abatement – Abatement is an official reduction or  invalidation of an assessed valuation after the initial assessment for  ad valorem taxation has been completed; the termination of a nuisance; a  reduction in rent levels that a landlord charges a tenant, sometimes  brought about by a rent control program.

Absorption Rate – Absorption Rate is the rate at  which properties for sale or lease have been or are expected to be  successfully marketed sold or leased or given area over duration of  time. See also capture rate.

Access Rights- Access Right is the right of ingress  to and egress from a property that abuts an existing street or highway;  an easement in the street that adjoins abutting property; a private  right, as distinguished from a public right. See landlocked parcel the  right of a riparian owner to pass to and from the waters on which the  premises border.

Administrator – Administrator is a person appointed  by the court to manage and settle the estate of a deceased person; a  representation of limited authority who collects the assets of an  estate, pays its debts, and distributes the residue to those entitled.  An administrator provides security for the due administration of the  estate by entering into a bond with sureties called an administration  bond. See executor.

Adverse Possession – Adverse Possession is the  actual exclusive, open, notorious, hostile and continuous possession and  occupation of the real property under an evident claim of right or  title. The time required to obtain legal title by adverse possession  varies from state to state.

Allocation – Allocation is a method of estimating  land value in which sales of improved properties are analyzed to  establish a typical ration of land value to total to the property being  appraised or the comparable sale being analyzed.

Amortization – Amortization is the process of  retiring a debt or recovering a capital investment, typically through  scheduled, systematic repayment of the principal; a program of periodic  contributions to a shrinking fund or debt retirement fund.

Anticipation – Anticipation is the perception that value is created by the expectation of benefits to be derived in the future.

Appraisal – Appraisal is the act or process of developing an opinion of value; an opinion of value.

Appraisal Consulting – Appraisal Consulting is the act or process of developing an analysis, recommendation, or  opinion to solve a problem, where an opinion of value is a component of  the analysis leading to the assignment results.

Appraisal Management Company (AMC) a private firm  that serves as a conduit between the intended user of an appraisal or  appraisals, and the parties conducting appraisals for a fee.

Appraisal Practice – Appraisal Practice valuation  services performed by an individual acting as an appraiser, including  but not limited to appraisal, appraisal review, or appraisal consulting.

Appraiser – An Appraiser is one who  is expected to perform valuation services competently and in a manner  that is independent, impartial, and objective. See also Professional  Property Valuer in the IVS Glossary in the Addenda.

Appraisal Report – Appraisal Report is the written or oral communication of an appraisal.

Assemblage – Assemblage is the combining of two or  more parcels, usually but not necessarily contiguous, into one ownership  or use; the process that may create plottage; the combining of separate  properties into units, sets or groups, i.e., integration or combination  under unified ownership.

Assignment – Assignment is a written transfer of the  rights of use and occupancy of a property to be held by another legal  entity or to be used for the benefit of creditors, e.g., assignments of  mortgages, sales contracts, and leases.

Capital Recapture- Capital Recapture the return of an investment as distinguished from the return on an  investment. Invested capital may or may be recaptured all or in part  through liquidation of the property at the termination of the  investment. See capital recovery.

Capital Recovery – Capital Recovery is the return to  investors of that portion of their property investment expected to be  lost over the income projection period. Capital recovery may be viewed  in either a physical sense, as reflected in the traditional physical  techniques of capitalization, or in a financial sense as reflected in  mortgage-equity analysis. Capital recovery is not interchangeable with  the term depreciation. See also capital recapture.

Capture Rate – The estimated percentage of the total  potential market for a specific type of property (e.g., office space,  retail space, single-family homes) that is currently absorbed by  existing facilities or is forecast to be absorbed by proposed  facilities. For example, the capture rate of a retail center depends on  the size of its trade area, the anchor tenants in the facility,  competition within the trade area, and the relative position of the  subject facility compared to the competition. Short-term capture is  referred to as absorption; long-term capture is referred to as share of  the market.

Caveat Emptor – Caveat Emptor let the buyer beware; a maxim of the common law stating that the buyer purchases at his or her own risk.

Comparables – Comparables a shortened term for  similar property sales, rentals, or operating expenses used for  comparison in the valuation process. In best usage the thing being  compared should be specified, e.g.

Compulsory Acquisition/Purchase – In accordance with  statutory procedures and practices, the government’s taking of private  property for public use upon the payment of compensation as provided for  by statute. The term compulsory acquisition/purchase is Commonwealth  usage. The terms condemnation and damages are used in North America.

Condemnation – The act or process of enforcing the  right of eminent domain. See also eminent domain. See also Compulsory  Acquisition/Purchase and Condemnation in the IVS Glossary in the  Addenda.

As defined in the IVS Glossary – The act or  process of enforcing the right of eminent domain. In condemnation, the  loss in value to the remainder, resulting from a partial taking, is  known as damages. The terms condemnation and damages are North American  usage.

Condominium –A form of ownership in which each owner  possesses the exclusive right to use and occupy an allotted unit plus  an undivided interest in common areas; A multiunit structure or a unit  within such a structure, with a condominium form of ownership.

Contributory Value – Contributory Value, also referred to deprival value, the change in the value of a property as a whole, whether positive or  negative, resulting from the addition or deletion of a property  component.

Cost Approach – Cost Approach a set of procedures  through which a value indication is derived for the fee simple interest  in a property by estimating the current cost to construct a reproduction  of (or replacement for) the existing structure including an  entrepreneurial incentive, deducting depreciation from the total cost,  and adding the estimated land value. Adjustments may then be made to the  indicated fee simple value of the subject property to reflect the value  of the property interest being appraised.

Cost to Cure – Cost to Cure is the cost to restore an item of deferred maintenance to new or reasonably new condition.

Cul-de-sac – Cul-de-sac is a street with one open end and an enlarged turnaround at the closed end.

Curable Functional Obsolescence – Curable Functional Obsolescence is an element of depreciation; a curable defect caused by a flaw in the  structure, materials, or design, which can be practically and  economically corrected.

Depreciation- In appraising is a loss in property  value from any cause; the difference between the cost of an improvement  on the effective date of the appraisal and the market value of the  improvement on the same date; In accounting, an allowance made against  the loss in value of an asset for a defined purpose and computed using a  specified method.

Deed in Lieu – A deed given by an owner or debtor in lieu of foreclosure by the lender or mortgage. See also foreclosure.

Discount Rate – Discount Rate is a yield rate used  to convert future payments or receipts into present value; usually  considered to be a synonym for yield rate.

Easement–Easement is the right to use another’s land for a stated purpose. See also Easement in the IVS Glossary in the Addenda.

As defined in the IVS Glossary –  Nonpossessory (incorporeal) interest in landed property conveying use,  but not ownership, of a portion of that property.

Economic age-life method – The Economic age-life method is  a method of estimating depreciation in which the ratio between the  effective age of a building and its total economic life is applied to  the current cost of the improvements to obtain a lump-sum deduction;  also known as the age-life method. See also modified economic age-life  method.

Effective Age – Effective Age is the age of the  property that is based on the amount of deterioration and obsolescence  it has sustained, which may be different from its chronological age.

Effective Date – Effective Date is the date on which  the analyses, opinions, and advice in an appraisal, review, or  consulting service apply. In the case of a lease, it’s the date upon  which the lease goes into effect.

Effective Gross Income (EGI) – Effective Gross Income (EGI) is the anticipated income from all operations of the real property  after an allowance is made for vacancy and collection losses and an  addition is made for any other income.

Eminent Domain – Eminent Domain is the right of  government to take private property for public use upon payment of just  compensation. The fifth amendment of the U.S. Constitution (taking  Clause) guarantees payment of just compensation upon appropriation of  private property.

Encroachment – Encroachment is the trespassing on  the domain of another. 2. Encroachment is the partial or gradual  displacement of an existing use by another use, for example, moving a  commercial to a residential district.

Encumbrance – Encumbrance is any claim or liability  that affects or limits the title to property. An encumbrance can affect  the title such as a mortgage or other lien, or it can affect the  physical condition of the property such as an easement. An encumbrance  cannot prevent the transfer of possession, but it does remain after the  transfer.

Entrepreneurial Profit – Entrepreneurial Profit is a market-derived figure that represents the amount an entrepreneur  receives for his or her contribution to a project and risk; the  difference between the total cost of a property (cost of development)  and its market value (property value after completion), which represents  the entrepreneurs compensation for the risk and expertise associated  with development. An entrepreneur is motivated by the prospect of future  value enhancement.

Escheat – Escheat is the right of government that  gives the state titular ownership of property when its owner dies  without a will or any ascertainable heirs.

Escrow – Escrow is the property or  evidence of property (E.g. money, securities, instruments) deposited by  two or more person with a third person to be delivered under a certain  contingency or on the completion of specified terms. An escrow account  is generally held to cover taxes and insurance.

Estate – Estate is a right or  interest in property. Defines an owners degree, quantity, nature and  extent of interest in real property. There are many different types of  estates, including freehold (Fee simple, determinable fee, and life  estate).

Excess land – Excess Land is land that is not needed  to serve or support the existing improvement. The highest and best use  of the excess land may or may not be the same as the highest and best  use pf the improved parcel. Excess land may have the potential to be  sold separately and is valued separately. See also surplus land.

Executor – An executor is an individual or other legal person designated in a will to settle the estate of a deceased person. See also administrator.

Exposure Time – Exposure Time is the time a property  remains on the market. 2. Exposure time is the estimated length of time  the property interest being appraised would have been offered on the  market prior to the hypothetical consummation of a sale at market value  on the effective date of the appraisal; a retrospective estimate based  on an analysis of past events assuming a competitive and open market.

External Obsolescence – External Obsolescence is an  element of depreciation; a diminution in value caused by negative  externalities and generally incurable on the part of the owner,  landlord, or tenant.

Extraction – Extraction is a method  of estimating land value in which the depreciated cost of the  improvements on the property is calculated and deducted from the total  sale price to arrive at an estimated sale price for the land. 2. A  method of deriving capitalization rates from property sale price and net  operating income are known.

Fair Market Value – Fair Market Value is a term that is, in concept, similar to market value in general  usage; used mainly in condemnation, litigation, income tax, and property  tax situations. When an appraisal assignment involves developing an  opinion of fair market value, the appropriate requisite and precise  definition of the term depends on the use of the appraisal and the  applicable jurisdiction.

Fannie Mae – Fannie Mae is a  Federal National Mortgage Association (FMNA). A government sponsored  enterprise (GSE) created by Congress in 1938 that purchases mortgages  from banks, trust companies, mortgages companies, savings and loan  associations, and insurance companies to help distribute funds for home  mortgages.

Federal housing administration (FHA) Mortgage –  Federal housing administration mortgage made in conformity with the  requirements of the national housing act and insured by the federal  housing administration.

Fee Simple Estate – Fee Simple Estate is the absolute ownership unencumbered by any other interest or estate,  subject only to the limitations imposed by the governmental powers of  taxation, eminent domain, police power and escheat.

FEMA Map – a Flood zone map created by the Federal Emergency Management Agency 

(FEMA) sometimes called a FIRM or Flood Insurance Rate Map.

Field Review- Field Review is an appraisal review  for which the scope of appraisal work includes inspection of the  exterior and sometimes interior of the subject property and possibly  inspection of the comparable properties to confirm the data provided in  the report. a field review is generally performed using a customized  checklist that covers the items examined in a desk review and may also  include confirmation of market data, research to gather additional data,  and verification of the software used in preparing the report.

Final Reconciliation – Final Reconciliation is the last phase in the development of a value opinion in which two or  more value indications derived from market data are resolved into a  final value opinion, which may be either a final range of value or a  single point estimate.

Forecasting – in appraising, forecasting is to estimate or to indicate in advance. Forecasts made by appraisers  are based on past trends and the perceptions of market participants  concerning their continuation or alteration.

Foreclosure – The legal process in which a mortgage  forces the sale of a property to recover all or part of a loan on which  the mortgage has defaulted.

Freddie Mac – Freddie Mac is the  Federal Home Loa Mortgage Corporation (FHLMC). A Government-sponsored  enterprise (GSE) created by congressional charter in 1970 that buys  residential mortgages and funds them in the capital markets in one of  two ways: using mortgage backed securities or a variety of debt  instruments.

Functional Obsolescence – Functional Obsolescence is the impairment of functional capacity of a property according to the market tastes and standards.

Functionality Utility – Functional Utility is the  ability of a property or building to be useful and to perform the  function for which it is intended according to current market tastes and  standards; the efficiency of a building uses in terms of architectural  style, design and layout, traffic patterns and size and type of rooms.

Grantee – A Grantee is a person to  whom property is transferred by deed or to whom property rights are  granted by a trust instrument or other document.

Grantor – Grantor is a person who transfers property by deed or grants property rights through a trust instrument or other document.

Gross Rent Multiplier – A Gross Rent Multiplier is the relationship or ratio between the sale price or value of a property and its periodic gross rental income.

Highest and Best Use- Highest and Best Use is the  reasonably probable and legal use of vacant land or an improved property  that is physically possible, appropriately supported, financially  feasible, and that results in the highest value. The four criteria the  highest and best use must be meet are legal permissibility, physical and  possibility, financial feasibility, and maximum productivity.  alternatively, the probable use of land or improved property – specific  with respect to the user and timing of the use – that is adequately  supported and results in the highest present value.

Hypothetical Condition- Hypothetical Condition that  which is contrary to what exists but is supposed for the purpose of  analysis. Hypothetical conditions assume conditions contrary to known  facts about physical, legal, or economic characteristics of the property  subject property.

Income Capitalization Approach – Income Capital Approach is a set of procedures through which an appraiser derives a value  indication for an income-producing property by converting its  anticipated benefits (cash flows and reversion) into property value.  This conversion can be accomplished in one of two ways.

Ingress- Ingress a means of entering; an entrance.

Interim Use- Interim Use the temporary use to which a site or improved property is put until it is ready to be put to its future highest and best use.

Joint Tenancy – Joint Tenancy is the concurrent ownership by two or more persons with the right of survivorship.

Leased Fee Interest – Leased Fee Interest is  a freehold (ownership interest) where the possessory interest has been  granted to another party by creation of a contractual landlord-tenant  relationship.

Leasehold Interest – Leasehold Interest the tenant’s possessory interest created by a lease.

Legally Nonconforming Use – A use that was lawfully  established and maintained, but no longer conforms to the use  regulations of the current zoning in the zone where it is located; also  known as a grandfathered us. See also special use permit; variance.

Lessee – Lessee is the one who has the right to  occupancy and use of the property of another for a period of time  according to a lease agreement.

Lessor- Lessor is the one who conveys the rights of occupancy and use to others under a lease agreement.

Marketing Time – Marketing Time is an opinion of the  amount of time it might take to sell a real or personal property  interest at the concluded market value level during the period  immediately after the effective date of an appraisal. Marketing time  differs from exposure time, which is always presumed to precede the  effective date of an appraisal.

Market Value – Market Value is the  most widely accepted components of market value are incorporated in the  following definition: the most probable price that the specified  property interest should sell for in a competitive market after a  reasonable exposure time, as of a specified date, in cash or in terms of  equivalent to cash, under all conditions requisite to a fair sale, with  the buyer and seller each acting prudently, knowledgeably, for self  interest, and assuming that neither is under duress.

Market Value – Market Value as defined by the  uniform standard of professional Appraisal practice (USPAP)-a type of  value, stated as an opinion that presumes the transfer of a property as  of a certain date, under specific conditions, set forth in the  definition of the term identified by the appraiser as applicable in an  appraisal. (USPAP, 2010-2011 ed.)

Mass Appraisal – Mass Appraisal is the process of  valuing a universe of properties as of a given date using standard  methodology, employing common data, and allowing for statistical  testing. (USPAP, 2010-2011 ed.) Often associated with real estate tax  assessment valuation.

Modified Economic Age-Life Method – A method of  estimating depreciation in which the ratio between the effective age of a  building and its total economic life is applied to the current cost of  the improvements after the costs to cure curable physical and functional  items are deducted. See also economic age-life method.

Neighborhood – Neighborhood a group  of complementary land uses; a congruous grouping of inhabitants,  buildings, or business enterprises. It is also a developed residential  super pad within a master planned community usually having a  distinguishing name and entrance.

Obsolescence– Obsolescence is one  cause of depreciations; an impairment of desirability and usefulness  caused by new inventions, changes in design, improved processes for  production, or external factors that make a property less desirable and  valuable for a continued use; may either functional or external.

Overimprovement – Overimprovement is  an improvement that does not represent the most profitable use for the  site on which it is placed because it is too large or costly and cannot  develop the highest possible land value; may be temporary or permanent.  Can be considered a super-adequacy and measured accordingly in  estimating depreciation.

Oversupply – Oversupply an excess of supply over demand; indicated by high vacancy rates, sluggish absorption rates, and declining rents.

Paired Data Analysis – Paired Data Analysis is a quantitative technique used to identify and measure adjustments to  the sale prices or rents of comparable properties to apply this  technique, sales or rental data on nearly identical properties is  analyzed to isolate and estimate a single characteristic’s effect on  value or rent. Often referred to as paired sales analysis.

Physical Life – Physical Life is the total period a building lasts or is expected to last as opposed to its economic life.

Potential Gross Income (PGI) – Potential gross income (PGI) is the total income attributable to real property at full occupancy before vacancy and operating expenses are deducted.

Professional Property Valuer – A Professional Property Valuer is  a person who possesses necessary qualifications, ability, and  experience to estimate property value for a diversity of purposes  including transactions involving transfers of property ownership,  property considered as collateral to secure loans and mortgages,  property subject to litigation or pending settlement on taxes, and  property treated as fixed assets in financial reporting. A Professional  Property Valuer may also possess the specific expertise to perform  valuations of other categories of property, i.e., personal property,  businesses, and financial interests.

Riparian Rights – Riparian Rights  is the right of the owner of land bordering a non-navigable lake or  stream to the use and enjoyment of the water that flows across their  land or is contiguous to it. Under the riparian rights doctrine, all  owners of land underlying or abutting the water have equal rights to it.  In comparison, the prior appropriation doctrine would not confer equal  rights to all owners of land underlying or abutting the water.

Sales Comparison Approach – Sales Comparison Approach is the process of deriving a value indication for the subject property  by comparing market information for similar properties with the property  being appraised, identifying appropriate units of comparison, and  making qualitative comparisons with or quantitative adjustments to the  sale prices of the comparable properties based on relevant,  market-derived elements of comparison.

Short Sale– Short Sale is a sale of  real property in which the proceeds from the sale fall short of the  balance owed on a loan secured by the property. Lenders may agree to a  short sale to avoid lengthy and costly foreclosure proceedings, and  borrowers who cannot meet their mortgage obligations may agree to a  short sale to satisfy their debt. See also deed in lieu; foreclosure.

Special Use Permit – Permission granted by a local  zoning agency that authorizes a use as a special exception to the  applicable zoning. A special use permit in a residentially zoned area  might allow for construction of a church or hospital. Such uses are  considered conditional uses, only permitted upon the approval of the  zoning authority. Sometimes referred to as a conditional use permit. See  also legally nonconforming use; zoning variance.

Surplus Land – Surplus Land is land  that is not currently needed to support the existing improvement but  cannot be separated from the property and sold off. Surplus land does  not have an independent highest and best use and may or may not  contribute value to the improved parcel.

Swale – Swale is a shallow depression, in a flat area of land, that may be artificial and used in a storm water drainage system.

Tenancy by the Entirety – Tenancy by the Entirety an estate held by a husband and wife in which neither has a disposable  interest in the property during the lifetime of the other, except  through joint action.

Underimprovement – Underimprovement is  an improvement that is inadequate to maximize the return to the site,  usually a structure that is of a lower quality or size than typical of  competitive properties, or one designed for a use of lower intensity.

Valuation Process – Valuation Process is a systematic procedure used in the valuation of real property.

Value in Use- Value in Use is the  value of a property assuming a specific use, which may or may not be the  property’s highest and best use on the effective date of the appraisal.  Value in use may or may not be equal to market value but is different  conceptual.

Zoning – Zoning is a public  regulation of the use of private land through application of police  power; accomplished by establishing districts or areas with uniform  requirements relating to lot coverage, setbacks, type of improvement,  permitted activities, signage, structure height, minimum lot area,  density, landscaping, and other aspects of land use and development.  Zoning regulations are established by enactment of a local (city, town,  or country) zoning ordinance.

Zoning variance- Zoning variance is a legally  authorized modification in the use of property at a particular location  that does not conform to the regulated use set forth in the zoning  ordinance for the surrounding area; not an exception or change in the  legally applicable zoning. See also legally nonconforming use.

All definitions were transferred from The Dictionary of Real Estate Appraisal produced by the Appraisal Institute.