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KES Appraisals
| Term | Definition |
|---|---|
| Accrued depreciation | Loss in a property's value due to physical depreciation, environmental depreciation, functional obsolescence. |
| Anticipation | The principal of anticipation is that Value is created by the expectation that certain events will occur. |
| Appraisal | An opinion of value based on supportive evidence and approved methods |
| Appraiser Independence Requirements (AIR) | Fannie Mae initiated to prevent fraud |
| Assemblage | Merging separately owned lots under one owner |
| Broker's price Opinion (BPO) | Less expensive option for lenders working on home equity lines |
| Capitalization rate | Rate of return vs investment capital NOI/sale price. (As rate goes down value goes up) |
| Change | Principle that no physical or economic conditions remain constant |
| Competition | The interaction of supply and demand (successful store may inspire others to open similar stores) |
| Conformity | Principle of conformity means that maximum value is created when a property is in harmony with its surroundings. |
| Contribution | Principle of contribution, the value of any part of a property is measured by its effect on the value of the whole parcel. |
| Cost approach | Based on principle of substitution: estimate value of land, estimate cost of improvements, estimate accrued depreciation |
| Depreciation | Loss in value for any reason. Is the result of negative condition that effects property |
| Economic life | The number of years during which an improvement will add value to land |
| External obsolescence | Not curable: environmental, social, economic factors (pollution) |
| Functional obsolescence | Depreciation, a loss in value from market response to item |
| Gross income multiplier (GIM) | For valuation of 5+ Sale price/ gross annual income |
| Gross rent multiplier (GRM) | For valuation of 1-4 units. sales price/ monthy gross rent |
| Highest and best use | The most profitable single use of a property: physically possible, legally permitted,economically feasible, most profitable/productive. |
| Income approach | Value based on the present value of the right to future income. |
| Law of diminishing returns | Applies at the point when improvements do not increase income or value. |
| Law of increasing returns | Applies when money spent on improvements produces increase in income or value. |
| Market data approach | (Market data approach) looks at sales of comparable properties |
| Market value | Most probable price a property should bring in a competitive open market under fair sale conditions. |
| Net operating income ((NOI) | The income projected for an income producing property after deducting anticipated vacancy, collection losses and operating expenses |
| Physical deterioration | A curable item is painting an incurable is wear and tear not feasibility corrected economically |
| Plottage | The individual value of two properties is greater than they would be separately. Plottage is the value the combined properties increased by assemblage. |
| Progression | Value of modest quality homes increased If located among higher quality homes |
| Reconciliation | Analyzing and weighting the results from the three value approaches |
| Regression | The worth of a better quality property adversely affected by lesser quality property. |
| Sales comparison approach | Comparing similar properties. |
| Sales price | The amount of money paid to seller for the product sold. |
| Substitution | Maximum value of a property tends to be set by price of equality desirable property. This is the foundation of the sales comparison approach to appraising. |
| Supply and demand | When supply increases demand decreases. |
| Uniform Standards of Professional appraisal practice (USPAP) | A set of standards established and maintained by the ASB. Appraisal Standards Board. Is required by Fannie Mae and Freddie Mac |
| Value | DUST: Demand, Utility, scarcity, transferability |
| Appraisal Practices Board (APB) | Offers voluntary guidance to appraisers, regulators, on recognized valuation methods |
| CMA | Comparative market analysis. Focuses on similar properties. Based on reciently closed, currently on the market, no sells |
| Market price | Unlike market value is the property's asking price |
| 3 approaches to value | Sales comparison approach, cost approach,income approach |
| Adjustments made for sales comparison aprasial approach | Property rights,financing concessions, market conditions,conditions of sale, conditions since date of sale, location or area of preference, physical features and amenities |
| Comparative Market Analysis CMA | Report by RE professional on market stats not an appraisal |
Created by:
KimSchroeder
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