ASA AM key terms

The reasonably probable, legally permissible, physically possible, financially feasible, and maximally productive use of a property that supports the value conclusion. It frames the premise on which market value is estimated.

The most probable price a property would bring in a competitive and open market under all conditions requisite to a fair sale, with buyer and seller acting prudently and knowledgeably, price not affected by undue stimulus.

A valuation method that estimates value by analyzing recent sales of similar properties and adjusting their prices for differences such as location, size, condition, and date of sale relative to the subject property.

A tabular worksheet that lines up the subject property against comparable sales and records quantitative or qualitative adjustments for each element of comparison, producing an indicated value for the subject.

The characteristics used to compare a subject property with comparable sales, typically including property rights conveyed, financing terms, conditions of sale, market conditions over time, location, and physical features.

A valuation method that converts expected future income from a property into a present value indication, either by direct capitalization of a single-year income figure or by discounting a multi-year cash flow projection.

A rate expressing the relationship between a single year's net operating income and property value, calculated as net operating income divided by sale price. It reflects risk, growth, and financing expectations in the market.

The income remaining after deducting all operating expenses from effective gross income, before debt service and income taxes. It is the income stream capitalized in the income approach.

A valuation method that estimates value as the current cost to replace or reproduce improvements, less accrued depreciation, plus the value of the land as if vacant.

The total loss in value of an improvement from all causes at the date of appraisal, measured as the difference between replacement or reproduction cost new and the improvement's contributory value.

The current cost to construct a building or improvement with equivalent utility using modern materials, standards, and design, rather than replicating the original construction exactly.

The type and extent of research and analysis an appraiser performs to produce credible assignment results, determined by the problem to be solved, client expectations, and the intended use of the report.

The purpose for which the appraisal or review is being performed and how the client will employ the reported opinions and conclusions, which shapes the appropriate scope of work and reporting format.

The client and any other party specifically identified by the appraiser as the users of the report. The appraiser must identify them because their needs drive scope and reporting decisions.

The appraiser's documentation of the data, analysis, and reasoning supporting the report, retained for a period after delivery. It must be sufficient for another appraiser to understand the work performed.

The act of critically examining another appraiser's report and supporting data to form an opinion about the quality of the work and the adequacy of the analysis, conclusions, and reported value.

An entity that contracts with lenders to order, track, and deliver appraisals performed by a panel of independent appraisers, while maintaining appraiser independence and regulatory compliance.

A valuation technique that projects periodic cash flows over a holding period, discounts each to present value at a rate reflecting risk and time value, and adds the present value of a reversion or terminal value.

The rate used to convert expected future cash flows into a present value, reflecting the time value of money and the risk associated with realizing those cash flows.

The estimated value of a business or asset at the end of the explicit forecast period, often computed by applying a growth-adjusted multiple or capitalizing a normalized final-year cash flow.

A market approach technique that derives pricing multiples from publicly traded companies comparable to the subject and applies those multiples to the subject's operating metrics to indicate value.

A family of valuation methods that estimates value by reference to prices paid for similar businesses or assets, using multiples or transaction data adjusted for differences between the subject and the comparables.

The additional amount a buyer pays for a controlling interest to gain the ability to direct management and operations, often measured by comparing acquisition prices to pre-announcement trading prices.

A reduction in value applied to an ownership interest that cannot be readily converted to cash because it is not publicly traded, reflecting the cost and time of finding a buyer.

The price at which property would change hands between a willing buyer and a willing seller, neither being under compulsion and both having reasonable knowledge of relevant facts, as commonly defined for tax purposes.

The estimated gross amount that could be realized from a sale of assets, given a reasonable period to find buyers and with the seller under no forced time constraint.

The estimated gross amount that could be realized from a properly advertised and conducted public sale where the seller is compelled to sell within a limited, often short, timeframe.

In personal property valuation, the loss in value from physical deterioration, functional obsolescence, or economic obsolescence relative to a new or replacement item of equivalent utility.

The current cost to acquire or reproduce a new item of personal property of equivalent utility, used as the starting point from which depreciation is subtracted to estimate value.

The value of an asset installed and operating in its present location, assuming continued use and including installation and related costs, as opposed to a value premised on removal and sale.

The period over which an asset is expected to remain economically useful to its owner, ending when continued operation no longer justifies the costs of ownership and maintenance.

The estimated period an asset will continue to provide economic benefit from the appraisal date, considering its age, condition, use, and maintenance history.

A loss in value from causes other than physical deterioration, such as changes in technology, design, or market demand that make an asset less desirable or more costly to operate.

An assignment to estimate the value of tangible industrial assets such as production machinery, process equipment, and support systems, often for lending, insurance, or financial reporting purposes.

A unit of mass used to weigh gemstones and pearls, equal to 200 milligrams. It is distinct from karat, which expresses the purity of gold in parts out of twenty-four.

A measure of gold purity stated in parts of twenty-four, so that 18-karat gold is eighteen parts gold and six parts alloy. It is not a weight measure like the carat.

A document issued by a gem-testing laboratory that records the identification, measurements, and grading characteristics of a stone, such as color, clarity, and treatments, supporting the appraiser's analysis.

The four grading factors commonly used to describe and compare diamonds and colored stones: color, clarity, cut, and carat weight, which together drive relative market value.