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Real Estate Course
Chapter 8 - Valuation Process and Pricing Properties
| Term | Definition |
|---|---|
| Appraisal | An estimate of a property’s value by an appraiser who is usually presumed to be expert in his work. |
| Valuation | The process of estimating market value, investment value, insurable value, or other properly defined value of an identified interest or interests in a specific parcel or parcels of real property as of a given date. |
| Assessed Value | A valuation placed upon property by a public officer or a board, as a basis for taxation. |
| Insured Value | The value of an asset or asset group that is covered by an insurance policy; can be estimated by deducting cost of non-insurable items (e.g. land value) from market value. |
| Value-in-Use | The net present value (NPV) of a cash flow or other benefits that an asset (real property) generates for a specific owner under a specific use. |
| Investment Value | The specific value of an investment to a particular investor or class of investors based on individual investment requirements; distinguished from market value, which is impersonal and detached. |
| Evaluation | A study of the nature, quality, or utility of certain property interests in which a value estimate is not necessarily required, e.g. highest and best use, feasibility, market supply and demand, etc. |
| Market Value | The most probable price that a property should bring if exposed for sale in the open market for a reasonable period of time, with both the buyer and seller aware of current market conditions, neither being under duress. |
| Price | The amount a purchaser agrees to pay and a seller agrees to accept in an arms length transaction. |
| Cost | The total dollar expenditure for labor, materials, legal services, architectural design, financing, taxes during construction, interest, contractor's overhead and profit, and entrepreneurial overhead and profit (may or may not equal value). |
| Comparative Market Analysis | A property evaluation that determines property value by comparing similar properties sold within the last year. |
| Sales Comparison Approach | Valuation method which compares a subject property’s characteristics with those of comparable properties which have recently sold in similar transactions. |
| Cost Approach | A method of estimating the value of real property by calculating a current construction cost, subtracting accrued depreciation and adding a land value obtained from the market. This method works best when the improvements are relatively new and estimates |
| Depreciation | A loss of utility and thus value caused by physical deterioration, functional obsolescence or economic obsolescence or any combination thereof. |
| Direct Cost | The cost of labor and materials. |
| Income Approach | An appraisal technique whereby the value of an income producing property is estimating by capitalizing its net operating income using an appropriate capitalization rate. Value = Income / Rate. (tax.ny.gov - glossary) |
| Indirect Cost | Costs that support a construction project, such as legal or architectural fees. |
| Market Price | The actual selling price of a property |
| Mortgage Value | The estimate worth of a particular asset which is established for the purposes of obtaining financing secured against that asset. |
| Obsolescence | One of the causes of depreciation. It is the loss of desirability and usefulness caused by new inventions, changes in design, and improved processes for production, or from the influence of external factors. Obsolescence may be either economic or function |
| Functional Obsolescence | Impairment of useful capacity or efficiency; loss of value caused by super adequacy, inadequacy or changes in the art inherent in the property itself. not to be confused with external effects of economic obsolescence. Curable if the cost to cure is justif |
| Economic Obsolescence | A loss in value caused by influences external to the property such as increasing industrial activity near a residential neighborhood. |
| Plottage | Increment in unity value of a plot of land created by assembling smaller ownerships into one ownership. |
Created by:
drister05
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