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Unit 16
| Term | Definition |
|---|---|
| Amenity | Some extra that contributes to the owner satisfaction; clean air, views etc... |
| Appraisal | An estimate of property's value by someone who has specific training as an appraiser |
| Appraiser | Independent person trained to estimate value |
| Capitalization Rate | The rate of return a property produces on the owner's investment |
| Comparables | Properties listed in an appraisal report or a CMA that are substantially equivalent to the subject property.. Also called COMPS |
| Cost Approach | The process of estimating the value of property by adding the estimated land value the appraisers estimate of the reproduction or replacement cost of the building, less depreciation |
| Depreciation | In appraisal, a loss of value in property due to any cause including, physical deterioration, functional obsolescence, and locational obsolescences. For income tax purposes, yearly write off a percentage of a cost of a building as an expense |
| External Obsolescence | Reduction in a properties value caused by factors outside the subject property such as social or environmental forces or objectionable neighboring property, also called locational obsolescence |
| Functional Obsolescence | A loss of value to an improvement to real estate due to becoming outdated, often caused by age or poor design |
| Gross Rent Multiplier (GRM) | A figure used as a multiplier with a gross rental income of a property to produce an estimate of the properties value |
| Highest and Best Use | That possible use of land that would produce the greatest net income and thereby develop the highest land value |
| Income Approach | The process of estimating the value of an incoming producing property by capitalization of the net income expected to be produced by the property during its remaining useful life |
| Market Value | The probable price a willing, ready, able, and informed buyer would pay and a ready, willing, and informed seller would accept, neither being under any pressure to act, and after allowing for reasonable exposure on the market |
| Physical Deterioration | Loss of value due to wear and tear or action of the elements |
| Reconciliation | The final step in the appraisal process, in which the appraiser reconcials the estimates of value received from the direct sales comparison data, cost, and income approaches to arrive at a final estimate of value for the subject property |
| Replacement Cost | The construction cost at current prices of a property that is not necessarily an exact duplicate of the subject property but serves the same purpose or function as the original |
| Reproduction Cost | The construction cost at current prices of an exact duplicate of the subject property |
| Sales Comparison Approach | The process of estimating the value of a property by examining and comparing actual sales of comparable properties |
| Substitution | An appraisal principle stating that the maximum value of a property tends to be set by the cost of purchasing an equally desirable and valuable substitute property |
| Value | The power of a good or service to command other goods in exchange for the present worth of future rights to its income or amenities |
Created by:
MAK89
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