URE-APPRAISAL
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| Amenity | A "nice, but not necessary" feature which provides personal pleasure to the owner of real property. It can be tangible or intangible.
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| Anticipation | The appraisal principle that weighs the value of the future benefits a product or property will bring.
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| Appraisal | A professional process for estimating the value of real property.
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| Assemblage | Combining two or more parcels of land into one.
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| Capitalization Rate or Cap Rate | The ratio created when the net operating income is divided by the value of the property. It is also called the rate of return.
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| Change (Cycle of Change) | This appraisal principle involves a cycle of activity which goes from growth or integration to equilibrium to disintegration and perhaps to growth again.
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| Competition | An appraisal principle: When a particular use of property is bringing a high return, others enter into the same business or purchase property for the same purpose.
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| Conformity | An appraisal principle which states that because all homes in a particular area are harmonious in design and value, their value is sustained and tends to increases over time.
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| Contribution | The appraisal principle which states that an improvement to a property must add its cost to the value.
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| Cost | What you paid for the product or property when you bought it.
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| Cost Approach | An approach to appraisal which considers the price of resources necessary to build the same or a similar property. It is the only approach which places a separate value on the land.
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| Cubic Foot Method | Under the Cost Replacement Approach, this method determines the cost per cubic foot and then multiplies it by the number of cubic feet. It is most often used with warehouses.
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| Deferred Maintenance | When physical deterioration is repairable, but hasn't yet been repaired.
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| Depreciation | When property loses value, regardless of the reason for the loss. When this loss of value is an accounting process used for investment properties, it is referred to by the IRS as cost recovery.
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| Economic Life | The period of time during which improvements give a return on investment. It is generally considered to be shorter than physical life.
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| Economic Obsolescence | A form of depreciation caused by forces outside the property boundaries. It includes such things as a run-down neighborhood, increases in property taxes, etc. It is considered to be incurable.
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| Effective Age | An age placed on property for appraisal purposes, based on the condition of the property. It may be more or less that the actual chronological age.
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| Fair Market Value | What a willing buyer is willing to pay, and a willing seller is willing to accept, with neither of them under duress and the property has been on the market for sufficient time to verify its value.
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| Functional Obsolescence | The item in question is working fine, but is not what people want in their homes any more. Examples are a poor floor plan, four bedrooms and one bath, inadequate insulation, insufficient electrical outlets, etc.
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| Gross Operating Income (GOI) | The total income received from an investment property after subtracting vacancies and lost rents.
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| Gross Rent Multiplier (GRM) | A "quick and dirty" estimate of value based only on a relationship between the value of the property and the gross rents. The formula is to divide the selling price by the gross rents. It is referred to as the GRM.
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| Gross Scheduled Income (GSI) | What an investor would receive if there were no vacancies or lost rents.
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| Highest and Best Use | The appraisal principle which states that value should be based on the utilization of the property which will bring the greatest return to the owner. That use must be legal and feasible.
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| Income (Capitalization) Approach | An appraisal approach based on the cash flow the property produces. It addresses the question, "How much will a potential investor pay for the cash flow?"
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| Incurable Depreciation | Physical deterioration that cannot be repaired in a cost-effective manner.
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| Investment Property | Property which is generating a cash flow, such as a strip mall or a single or multi-family rental property.
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| Letter Form Report | An appraisal report that provides a short, written statement giving the bare essentials of the appraisal.
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| Market Data (Comparison) Approach | An appraisal approach that compares the subject property to other properties that have recently sold. Adjustments are made to account for variations between the comparables and the subject property.
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| Narrative Report | The longest form of appraisal report which uses a variety of supporting documentation.
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| Net Operating Income (NOI) | The profit that remains after the operating expenses have been subtracted from the gross effective income.
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| Non-Investment Property | A property that has no cash flow
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| Physical Deterioration | A type of depreciation that occurs when something wears out and will no longer perform the function or give the service that was originally intended.
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| Physical Life | The time span during which an improvement is in condition to be utilized and occupied.
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| Plottage | Combining two or more parcels of land with a resulting increase in total value.
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| Price | The amount of money being asked for a product or property.
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| Quantity Survey Method | The appraiser determines the cost of the materials
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| Rate of Return | Same as Capitalization Rate or Cap Rate.
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| Reconciliation or Correlation | An appraiser should use as many of the approaches to appraising as possible. This technique synthesizes the results into a single estimate of value. It is sometimes called correlation.
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| Service Property | Property such as government buildings or churches which are used for public purposes and are non-profit.
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| Short Form (Checklist) Report | An appraisal report that uses a standardized form wherein the appraiser checks boxes and fills in blanks. It is often required by a lending institutions.
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| Square Foot Method | In this method for estimating the value of improvements, the appraiser multiplies the value per square foot times the number of square feet.
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| Substitution | The appraisal principle which states that no prudent buyer will pay more that he has to to get what he wants. This is the basic principle of the Market Data or Comparison approach to appraisal.
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| Supply and Demand | The principle of economics, as well as appraisal, which states that when there is an overabundance of a particular product, the price will go down
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| Unit-in-Place Method | An appraisal method for determining the cost of improvements which takes a general approach. It is sometimes referred to as a sub-contractor approach and considers the cost of components, such as the concrete work, the framing, etc. or such items as ext
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| Value | The power of a product, service, or property to command other goods or money in exchange. It is the present worth of future benefits arising out of ownership.
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Created by:
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