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Tips on preparing for your appraisal... |
Appraisal Terms |
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ABSORPTION RATE
The ratio of the number of properties in an area that have been sold
against the number available. Used to show the volatility of a
market.
ABSTRACTION METHOD
This method of estimating the value of property uses similar
properties available in the same market to extract the value of a
parcel of land.
ACCESSORY BUILDING
A building separate from the main structure on a property. Often
used for a specific purpose, such as a workshop, storage shed or
garage.
ACCRETION
The natural growth of a piece of land resulting from forces of
nature
ACRE
43,560 square feet. A measurement of area.
ACTUAL AGE
The amount of time that has passed since a building or other
structure was built. See also: EFFECTIVE AGE
AD VALOREM TAX
Taxes assessed based on the value of the land and improvements
ADDENDUM
A supplement to any document that contains additional information
pertinent to the subject. Appraisers use an addendum to further
explain items for which there was inadequate space on the standard
appraisal form.
ADJUSTED BASIS
The value of an asset (property or otherwise) that includes the
original price plus the value of any improvement, and less any
applicable depreciation.
AESTHETIC VALUE
The additional value a property enjoys based on subjective criteria
such as look or appeal.
AFFIRMATION
A declaration that a certain set of facts are truthful.
AMENITY
Any feature of a property that increases its value or desirability.
These might include natural amenities such as location or proximity
to mountains, or man-made amenities like swimming pools, parks or
other recreation.
AMERICAN SOCIETY OF APPRAISERS
An organization of appraisal professionals and others interested in
the appraisal profession.
APPRAISAL
A ''defensible'' and carefully documented opinion of value. Most
commonly derived using recent sales of comparable properties by a
licensed, professional appraiser.
APPRAISAL FOUNDATION
A not-for-profit educational organization established by the
appraisal profession in the United States in 1987. It is dedicated
to the advancement of professional valuation and responsible for
establishing, improving, and promoting the Uniform Standards of
Professional Appraisal Practice (USPAP).
APPRAISAL INSTITUTE
A world-wide organization dedicated to real estate appraisal
education, publication and advocacy.
APPRAISAL PRINCIPLES
The basic building blocks of the property valuation process,
including property inspection, market analysis and basic economics.
APPRAISAL REPORT
The end result of the appraisal process, usually consists of one
major, standardized form such as the Uniform Residential Appraisal
Report form 1004, as well as all supporting documentation and
additional detail information. The purpose of the report is to
convey the estimated value of the subject property and support that
estimate with corroborating information.
APPRAISAL STANDARDS BOARD (ASB)
An independent board of the APPRAISAL FOUNDATION, which writes,
amends, and interprets USPAP. The ASB is composed of up to seven
appraisers appointed by the Foundation's Board of Trustees. The ASB
holds public meetings throughout the year to interpret and amend
USPAP.
APPRAISED VALUE
The estimated fair market value of a property as developed by a
licensed, certified appraiser following accepted appraisal
principals.
APPRAISER
An educated, certified professional with extensive knowledge of real
estate markets, values and practices. The appraiser is often the
only independent voice in any real estate transaction with no vested
interest in the ultimate value or sales price of the property.
APPRECIATION
The natural rise in property value due to market forces.
ASSESSED VALUE
The value of a property according to jurisdictional tax assessment.
ASSESSMENT
The function of assigning a value to a property for the purpose of
levying taxes.
ASSESSMENT RATIO
The comparative relationship of a property's assessed value to its
market value.
ASSESSOR
The jurisdictional official who performs the assessment and assigns
the value of a property.
ASSET
Any item of value which a person owns.
ATTACHED HOUSING
Any number of houses or other dwellings which are physically
attached to one another, but are occupied by a number of different
people. The individual houses may or may not be owned by separate
people as well.
BLIGHTED AREA
Any region of a city or town that has fallen into disrepair or
otherwise has become undesirable.
BONA FIDE
Made or carried out in good faith; sincere.
BUFFER ZONE
A segment of land between two disparate municipal zones which acts
as a shield to keep one zone from encroaching upon the other. Often
used to separate residential districts from commercial areas.
BUILDING CODE
Regulations that ensure the safety and material compliance of new
construction within a municipality. Building codes are localized to
ensure they are adequate to meet the risk of common hazards.
BUILDING LINE OR SETBACK
The statutory distance between buildings and the property line,
imposed by municipalities, home associations, or other agreements.
BUILT-INS
Specific items of personal property which are installed in a real
estate improvement such that they become part of the building.
Built-in microwave ovens and dishwashers are common examples.
BUNGALOW
A one-story, home-style dating from the early twentieth century.
Often characterized by a low-pitched roof.
CAPE COD COLONIAL
A single-story house style made popular in New England. Often
characterized by a steep roof with gables.
CERTIFICATE OF REASONABLE VALUE (CRV)
Usually based on an independent appraisal, a CRV for a particular
property establishes the maximum amount which can be secured by a VA
mortgage.
CERTIFICATE OF TITLE
A document designating the legal owner of a parcel of real estate.
Usually provided by a title or abstract company.
CERTIFIED GENERAL APPRAISER
Generally, any professional who has met the local or state
requirements, and passed the appropriate certification exam, and is
capable of appraising any type of property.
CERTIFIED RESIDENTIAL APPRAISER
A sub-classification of appraiser who is only licensed to appraise
residential property, usually up to four units.
CHAIN OF TITLE
The complete history of ownership of a piece of property.
CHATTEL
Any personal property which is not attached to or an integral part
of a property. Chattel is not commonly taken into consideration when
appraising the value of real property.
CLEAR TITLE
Ownership of property that is not encumbered by any counter-claim or
lien.
COMMON AREA ASSESSMENTS
Fees which are charged to the tenets or owners of properties to
cover the costs of maintaining areas shared with other tenets or
owners. Commonly found in condominium, PUD or office spaces.
COMMON AREAS
Any areas, such as entryways, foyers, pools, recreational facilities
or the like, which are shared by the tenets or owners of property
near by. Commonly found in condominium, PUD or office spaces.
COMMUNITY PROPERTY
In many jurisdictions, any property which has been acquired by a
married couple. The ownership of the property is considered equal
unless stipulated otherwise by both parties.
COMPARABLES
An abbreviated term used by appraisers to describe properties which
are similar in size, condition, location and amenities to a subject
property who's value is being determined. The Uniform Standards of
Professional Appraisal Practice (USPAP) establish clear guidelines
for determining a comparable property.
CONCESSIONS
Additional value granted by a buyer or seller to entice another
party to complete a deal.
CONDEMNATION
The official process by which a property is deemed to be
uninhabitable or unusable due to internal damage or other external
conditions.
CONDOMINIUM
A development where individual units are owned, but common areas and
amenities are shared equally by all owners.
CONDOMINIUM CONVERSION
Commonly, the conversion of a rental property such as an apartment
complex into a CONDOMINIUM-style complex where each unit is owned
rather than leased.
CONTIGUOUS
Connected to or touching along an unbroken boundary
CONTINGENCY
Something that must occur before something else happens. Often used
in real estate sales when a buyer must sell a current home before
purchasing a new one. Or, when a buyer makes an offer the requires a
complete home inspection before it becomes official.
CORPORATE RELOCATION
A situation where a person's employer pays all or some of the
expenses associated with moving from one location to another,
usually over a substantial distance. Relocation expenses often
include the amounts, such as brokerage fees, incurred in the selling
and buying of the employee's primary residence.
CUL-DE-SAC
A dead-end street. One with only one entrance/exit.
DATE OF APPRAISAL
The specific point in time as of which an appraiser designates the
value of a home. Often stipulated as the date of inspection.
DEED
A document indicating the ownership of a property.
DEED OF TRUST
A document which transfers title in a property to a trustee, who's
obligations and powers are stipulated. Often used in mortgage
transactions.
DEED OF RECONVEYANCE
A document which transfers ownership of a property from a Trustee
back to a borrower who has fulfilled the obligations of a mortgage.
DEED OF RELEASE
A document which dismisses a lien or other claim on a property.
DEED OF SURRENDER
A document used to surrender any claim a person has to a property.
DEPRECIATION
The natural decline in property value due to market forces or
depletion of resources.
DETACHED SINGLE-FAMILY HOME
A single building improvement intended to serve as a home for one
family.
DISTRESSED PROPERTY
A mortgaged property which has been foreclosed on.
DUPLEX
A single-building improvement which is divided and provides two
units which serve as homes to two families.
DWELLING
A house or other building which serves as a home.
DOWN PAYMENT
An amount paid in cash for a property, with the intent to mortgage
the remaining amount due.
EASEMENT
The right of a non-owner of property to exert control over a portion
or all of the property. For example, power companies often own an
easement over residential properties for access to their power
lines.
ECONOMIC DEPRECIATION
The decline in property value caused by external forces, such as
neighborhood blight or adverse development.
ECONOMIC LIFE
The amount of time which any income-producing property is able to
provide benefits to its owner.
EFFECTIVE AGE
The subjective, estimated age of a property based on its condition,
rather than the actual time since it was built. Excessive wear and
tear can cause a property's effective age to be greater than its
actual age.
ENCROACHMENT
A building or other improvement on one property which invades
another property or restricts its usage.
ENCUMBRANCE
A claim against a property. Examples are mortgages, liens and
easements
EQUITY
The difference between the fair market value of a property and that
amount an owner owes on any mortgages or loans secured by the
property.
EQUITY BUILDUP
The natural increase in the amount of equity an owner has in a
property, accumulated through market appreciation and debt
repayment.
ERRORS AND OMISSIONS INSURANCE
An insurance policy taken out by appraisers to cover their liability
for any mistakes made during the appraisal process.
ESTATE
The total of all property and assets owned by an individual.
FACADE
The front exposure of any building. Often used to describe an
artificial or false front which is not consistent with the
construction of the rest of the building.
FAIR MARKET VALUE
The price at which two unrelated parties, under no duress, are
willing to transact business.
FEDERAL HOUSING ADMINISTRATION (FHA)
A sub-agency of the U.S. Department of Housing and Urban Development
created in the 1930's to facilitate the purchase of homes by
low-income, first-time home buyers. It currently provides
federally-subsidized mortgage insurance for private lenders.
FEE APPRAISER
A certified, professional appraiser who estimates the fair market
value of property and receives a set fee in exchange.
FINAL VALUE ESTIMATE
The estimated value of a piece of property resulting from an
appraisal following the USPAP guidelines.
FIXTURE
Any piece of personal property which becomes permanently affixed to
a piece of real property.
FLOOR PLAN
The representation of a building which shows the basic outline of
the structure, as well as detailed information about the positioning
of rooms, hallways, doors, stairs and other features. Often includes
detailed information about other fixtures and amenities.
FRONTAGE
The segment of a property that runs along a point of access, such as
a street or water front.
FUNCTIONAL OBSOLESCENCE
A decrease in the value of property due to a feature or lack thereof
which renders the property undesirable. Functional obsolescence can
also occur when the surrounding area changes, rendering the property
unusable for its originally intended purpose.
GABLE ROOF
A steeply angled, triangular roof.
GAMBREL ROOF
A ''barn-like'' roof, where the upper portion of the roof is
less-steeply angled than the lower part.
GEORGIAN
A classic, English-style hose characterized by simple rectangular
shape and multiple stories.
GOVERNMENT MORTGAGE
Any mortgage insured by a government agency, such as the FHA or VA.
GRADE
The slope of land around a building.
GRANTEE
Any person who is given ownership of a piece of property.
GRANTOR
Any person who gives away ownership of a piece of property.
GROSS AREA
The sum total of all floor space, including areas such as stairways
and closet space. Often measured based on external wall lengths.
HALF-SECTION
320 acres
HEIGHT ZONING
A municipal restriction on the maximum height of any building or
other structure.
HIDDEN AMENITIES
Assets of a property which contribute to its value, but are not
readily apparent. Examples might include upgraded or premium
building materials.
HOME INSPECTION
A complete examination of a building to determine its structural
integrity and uncover any defects in materials or workmanship which
may adversely affect the property or decrease its value.
HOMEOWNER'S ASSOCIATION
An organization of home owners in a particular neighborhood or
development formed to facilitate the maintenance of common areas and
to enforce any building restrictions or covenants.
HOMEOWNER'S INSURANCE
A policy which covers a home owner for any loss of property due to
accident, intrusion or hazard.
IMPROVED LAND
Any parcel of land which has been changed from its natural state
through the creation of roads, buildings or other structures.
IMPROVEMENTS
Any item added to vacant land with the intent of increasing its
value or usability.
IMPROVEMENT RATIO
The comparative value of a improved piece of land to its natural,
unaltered state.
INCOME APPROACH
The process of estimating the value of property by considering the
present value of a stream of income generated by the property.
INCOME PROPERTY
A piece of property whose highest and best use is the generation of
income through rents or other sources.
INDEPENDENT APPRAISAL
An estimation of value created by a professional, certified
appraiser with no vested interest in the value of the property.
INSPECTION
The examination of a piece of property, its buildings or other
amenities.
INVESTMENT PROPERTY
Any piece of property that is expected to generate a financial
return. This may come as the result of periodic rents or through
appreciation of the property value over time.
JOINT TENANCY
A situation where two or more parties own a piece of property
together. Each of the owners has an equal share, and may not dispose
of or alter that share without the consent of the other owners.
LATENT DEFECTS
Any defect in a piece of property which is not readily apparent, but
which has an impact of the value. Structural damage or termite
infestation would be examples of latent defects.
LEASEHOLD ESTATE
A type of property ''ownership'' where the buyer actually has a
long-term lease on the property.
LEGAL DESCRIPTION
The description of a piece of property, identifying its specific
location in terms established by the municipality or other
jurisdiction in which the property resides. Often related in
specific distances from a known landmark or intersection.
LENDER
The
person or entity who loans funds to a buyer. In return, the lender
will receive periodic payments, including principal and interest
amounts.
LIEN
Any claim against a piece of property resulting from a debt or other
obligation.
LIKE-KIND PROPERTY
Any property which is substantially similar to another property.
LIQUID ASSET
Any asset which can be quickly converted into cash at little or no
cost, or cash itself
LOAN-TO-VALUE RATIO (LTV)
The comparison of the amount owed on a mortgaged property to its
fair market value.
MANUFACTURED HOUSING
Once known as ''mobile homes,'' manufactured housing is any building
which has been constructed off site, then moved onto a piece of real
property.
MARGINAL LAND
Land whose value has been diminished due to some internal defect or
external condition. In most cases, the cost to correct the flaw or
condition is as much or more than the expected return from the
property.
MASTER ASSOCIATION
An umbrella organization that is made up of multiple, smaller home
owner's associations. Often found in very large developments or
condominium projects.
METES
AND BOUNDS
A traditional way of describing property, generally expressed in
terms of distance from a known landmark or intersection, and then
following the boundaries of the property back to its origin.
METROPOLITAN AREA
The accumulated land in and around a city or other municipality
which falls under the political and economic influence of that
entity.
MINERAL RIGHTS
The legal right to exploit and enjoy the benefits of any minerals
located below the surface of a parcel of land.
MISREPRESENTATION
A statement by one party in a transaction that is incorrect or
misleading. Most misrepresentations are deemed to be intentional and
thus may constitute fraud. Others, however, some are rendered
through simple mistakes, oversights or negligence.
MORTGAGE
A financial arrangement wherein an individual borrows money to
purchase real property and secures the loan with the property as
collateral.
MORTGAGEE
The entity that lends money in a real estate transaction.
MULTI-FAMILY PROPERTIES
Any collection of buildings that are designed and built to support
the habitation of more than four families.
NATIONAL SOCIETY OF REAL ESTATE APPRAISERS
An organization founded in 1956 which promotes standards of
professionalism in its members.
NATURAL VACANCY RATE
The percentage of vacant properties in a given area that is the
result of natural turnover and market forces.
NEIGHBORHOOD LIFE-CYCLE
The evolution of neighborhood use and demographics over time.
Economic fluctuations, municipal zoning changes and population
shifts can effect the life cycle.
NEIGHBORHOOD
A subsection of a municipality that has been designated by a
developer, economic forces or physical formations.
NET LEASABLE AREA
The space in a development, outside of the common areas, that can be
rented to tenants.
NEW ENGLAND COLONIAL
An architectural style dating from early American history typified
by a two-story building with clapboard siding.
NON-CONFORMING USE
The use of land for purposes contrary to the applicable municipal
zoning specifications. Often occurs when zoning changes after a
property is in use.
NONLIQUID ASSET
Any asset which can not be quickly converted into cash at little or
no cost.
OBSOLESCENCE
The process of an assets value diminishing due to the development of
more desirable alternatives or because of the degradation of its
capabilities.
OCCUPANCY
A physical presence within and control of a property.
OCCUPANCY RATE
The percentage of properties in a given area that are occupied.
OFF-SITE IMPROVEMENTS
Buildings, structures or other amenities which are not located on a
piece of property, but are necessary to maximize the use of the
property or in some way contribute to the value of the property.
OFF-STREET PARKING
Designated parking spaces associated with a particular building or
other structure which are not located on public streets.
ON-SITE IMPROVEMENTS
Buildings, structures or other amenities that are erected on a piece
of property and contribute to its value.
OPEN SPACE
Any land which has not had any significant buildings or structures
erected on it. Most often used to describe desirable neighborhood
features like parks.
ORIGINAL EQUITY
The amount of cash a home buyer initially invests in the home.
OWNER OCCUPIED
The state of property wherein the owner occupies at least some
portion of the property.
PARTIAL INTEREST
A shared ownership in a piece of property. May be divided among two
or more parties.
PERSONAL PROPERTY
Owned items which are not permanently affixed to the land.
PERSONAL RESIDENCE
The primary domicile of a person or family.
PLANNED UNIT DEVELOPMENT (PUD)
A coordinated, real estate development where common areas are shared
and maintained by an owner's association or other entity.
PLAT
A plan or chart of a piece of land which lays out existing or
planned streets, lots or other improvements.
PREFABRICATED
Any building or portion thereof which is manufactured and assembled
off site, then erected on a property.
PRIVATE MORTGAGE INSURANCE (PMI)
A form of mortgage insurance provided by private, non-government
entities. Normally required when the LOAN TO VALUE RATIO is less
that 20%.
PROPERTY
Any item which is owned or possessed.
QUADRAPLEX
Any building designed to accommodate four families.
QUITCLAIM DEED
A legal document which transfers any ownership an individual has in
a piece of property. Often used when the amount of ownership is not
known or is unclear.
RANCH HOUSE
An architectural style typified by a single-story, low-roof
construction. Popular in the western U.S.
RAW LAND
Any land which has not been developed.
REAL ESTATE
A piece of land and any improvements or fixtures located on that
land.
RECORDER
A local government employee whose role it is to keep records of all
real estate transactions within the jurisdiction.
RECORDING
The filing of a real estate transaction with the appropriate
government agent (normally the RECORDER). A real estate transaction
is considered final when it is recorded.
RELOCATION SERVICE
Any company or agency that assists corporate employees in relocating
from one place to another. Services may include hiring and
coordinating real estate agents, moving companies, utilizes and the
like.
REMODEL
An activity designed to improve the value or desirability of a
property through rebuilding, refurbishing, redecorating or adding on
to it.
RESIDENTIAL PROPERTY
A piece of property whose highest and best use is the maintenance of
a residence.
RURAL
An area outside of an established urban area or metropolitan
district.
SALE PRICE
The actual price a property sells for, exclusive of any special
financing concessions.
SALES COMPARISON APPROACH
An appraisal practice which estimates the value of a property by
comparing it to comparable properties which have sold recently.
SCARCITY
An economic principal that dictates the price of a good or service
through the interaction of supply and demand. When an item is
scarce, its price tends to rise, given a constant demand. Real
Estate is a classic example of scarcity.
SEMIDETACHED HOUSING
Two residences which share a common wall.
SERVICER
A financial institution which collects mortgage payments from
borrowers and applies the appropriate portions to principal,
interest and any escrow accounts.
SINGLE-FAMILY PROPERTY
A property designed and built to support the habitation of one
family.
SUBDIVISION
A residential development that is created from a piece of land which
has been subdivided into individual lots.
SUBJECT PROPERTY
A term which indicates a property which is being appraised.
SURVEY
A specific map of a piece of property which includes the legal
boundaries and any improvements or features of the land. Surveys
also depict any rights-of-way, encroachments or easements.
TENANCY
The right to occupy a building or unit.
TITLE
A specific document which serves as proof of ownership.
TITLE SEARCH
The process whereby the TITLE COMPANY researches a properties title
history and ensures that no outstanding claims exist.
TUDOR
A style of architecture typified by exposed stone, wood and brick
construction. Similar in style to English manor homes.
UNDERIMPROVED LAND
A piece of land which has been improved, but not to the full extent
of its potential.
UNENCUMBERED PROPERTY
Any property which has no outstanding claims or liens against it.
UNIFORM STANDARDS OF PROFESSIONAL APPRAISAL PRACTICE (USPAP)
Developed in 1986 by the Ad Hoc Committee on Uniform Standards and
copyrighted in 1987 by The Appraisal Foundation, USPAP forms the
guidelines followed by every licensed and certified real estate
appraiser in the United States. The purpose of these Standards is to
establish requirements for professional appraisal practice, which
includes appraisal, appraisal review, and appraisal consulting. The
intent of these Standards is to promote and maintain a high level of
public trust in professional appraisal practice.
USEFUL LIFE
The span of time over which a property can be used or can provide
benefits to its owner.
VACANCY RATE
The current percentage of vacant properties in a given area,
regardless of why they are vacant.
VARIANCE
An exception to municipal zoning regulations granted for a specific
time period to allow for non-conforming use of the land.
VETERANS AFFAIRS, DEPARTMENT OF (VA)
The successor to the Veteran's Administration, this government
agency is responsible for ensuring the rights and welfare of our
nation's veterans and their dependents. Among other duties, the VA
insures home loans made to veterans.
WALK-THROUGH INSPECTION
A process whereby an appraiser examines a property in preparation
for estimating its value. Also, the process of inspecting a property
for any damage prior to that property being bought or sold.
WARRANTY
An affidavit given to stipulate the condition of a property. The
person giving the warranty assumes liability if the condition turns
out to be untrue.
WEAR AND TEAR
A term used to indicate the normal damage inflicted on a property
through every-day use.
ZERO
LOT
LINE
A municipal zoning category wherein a building or other fixture may
abut the property line.
ZONE
A specific area within a municipality or other jurisdiction which
conforms to certain guidelines regarding the use of property in the
zone. Typical zones include single-family, multi-family, industrial,
commercial and mixed-use.