DEFINITIONS FOR APPRAISAL PURPOSES

Adjustments: are the monetary or percentage adjustments applied to the sale price of a comparable property to reflect differences in value as it compares to the subject property. Adjustments are always made to the comparable sale and not to the subject property.

Amenities: are items and/or conditions that are attached to a property that enhances its desireability and utility. The owner may derive benefits that are monetary, comfort related, or that result in satisfaction of possession and use resulting from architectural excellence, scenic beauty, and social environment.

Approach: is the valuation methodology used by the appraiser to form an opinion of the estimated value of the property. The 3 common approaches to value include the Cost Approach, the Direct Sales Comparison Approach, and the Income Approach. There are a number of other methods employed in the valuation of the property, but at least one of these are usually reflected in the appraisal report.

Comparables: are properties that are substantially equivalent to the subject property, that are used to estimate the value of the property by direct comparison. Comparables are not always related to recent sales, they may be used to reflect market value, aquisition rates, capitalization rates, rental rates, expense rates, vacancy rates, and many other elements of the appraisal process.

Contract: An agreement between two or more persons that represents their promise to do or not to do a particular thing. For real property a contract is described as a dated, written, signed statement between two or more competent parties who agree to perform or not to perform a legal act, for legal consideration, within a specified period of time. See also installment contract; land contract.
 
Cost: is an agreement entered into by two or more legally competent parties who, for a consideration, undertake to do or to refrain from doing some legal act or acts. This may include a monetary entitlement, or it can be a less quantifiable consideration such as love and devotion.

Deed: is a written, legal instrument that conveys an estate or interest in real property when it is executed and delivered.

Depreciation: is the loss in value due to any cause, including physical deterioration, functional obsolescence, and external obsolescence.

Easement: is a right to use the land of another for a specific purpose, such as a right-of-way for utilities; a non-possessory interest in land. An easement appurtenant passes with the land when conveyed.

Effective Age: is the estimated age of a building based on the actual wear, tear and maintenance, or lack of it, that the building has received. Over the life of the building this estimate may change due advanced deterioration due to the lack of maintenance or decreased as improvement and upgrades are made.

External Obsolescence: is the loss of value from forces outside the building or property, such as changes in optimum land use, legislative enactments that restrict or impair property rights, and changes in supply-demand relationships.

Externalities:  is the principle that outside influences may have a positive or negative effect on property value.

Fee Simple: is the greatest possible estate or right of ownership of real property, continuing without time limitation. It includes the entire bundle of rights that may be transfered.

Final Opinion of Value: is the appraiser’s opinion of the defined value of the subject property, arrived at by reconciling (correlating) the estimates of values derived from the sales comparison, cost and income approaches.

Functional Obsolescence:  are defects in a building or structure that detract from its value or marketability, usually the result of layout, design, or other features that are less desirable than features designed for the same functions in newer property.

Gross Building Area: all of the floor area under roof, as measured along a building’s outside perimeter.

High and Best Use: is the legally and physically possible use of land that is likely to produce the highest land (or property} value. It considers the balance between site and improvements as well as the intensity and length of uses.

Improved Land: is real property made suitable for building by the addition of utilities and publicly owned structures, such as a curb, sidewalk, street-lighting system, and /or sewer.

Improvements: are structures of whatever nature, usually privately rather than publicly owned, erected on a site to enable its utilization, e.g., buildings, fences, driveways and retaining walls.

Income Capitalization Approach: is the process of estimating the value of an income-producing property by capitalization of the annul net operating income expected to be produced by the property during its remaining economic life.

Incurable Depreciation: is a depreciated item that would be impossible or too expensive to restore or replace.

Legal Description:  is a description of land that identifies the real estate according to a system established or approved by law; an exact description that enables the real estate to be located and identified.

Neighborhood: is a residential or commercial area with similar types of properties, buildings of similar value or age, predominant land-use activities, and natural or fabricated geographic boundaries, such as highways or rivers.

Obsolescence: is a type of depreciation that is from issues other than physical deterioration or from influences external to the property. Obsolescence can sometimes be corrected with alteration, but is often an incurable factor.

Physical Deterioration-Curable: is the loss of value due to neglected repairs or maintenance that is economically feasible and, if performed, would result in an increase in appraised value equal to or exceeding their cost.

Physical Deterioration-Incurable: is the loss of value due to neglected repairs or maintenance of short-lived or long-lived building components that would not contribute comparable value to a building if performed.

Physical Life: is the length of time a structure can be considered habitable, without regard to its economic use. This can change as property is remodeled or renovated overtime.

Range: is a measure of the difference between the highest and lowest items in a data set.

Reconciliation: is the step in the appraisal process in which the appraiser reconciles the estimates of value received from the sales comparison, cost and income capitalization approaches to arrive are a final opinion of market value for the subject property.

Remaining Economic Life: is the number of years of useful life to a building from the date of appraisal.

Replacement Cost: is the current construction cost of a building having simlar utility as the subject property.

Reproduction Cost: is the current construction cost of an exact duplicate of the subject building.

Sale Comparison Approach: is the process of estimating the value of property through direct comparison of actual sales of similar properties.

Sale Price: is the actual price that a buyer pays for a property.

Site: is defined area of land, such as a lot, parcel, tract, etc.

Zoning or Land Use Code: is the municipal or county regulation of land use within designated districts or zones. Zoning is an application of a state’s police power to regulate private activity by enacting laws that benefit the public health, safety, and general welfare. Zoning may affect use of the land, lot sizes, type of structure permitted, building heights, setbacks and density i.e. the legal use of the property.