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KES Appraisals

TermDefinition
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