ASFMRA RPRA key terms

The reasonably probable, legally permissible, physically possible, financially feasible, and maximally productive use of a property that produces the greatest value. Rural appraisers test this before choosing a valuation approach.

The most probable price a property should bring in a competitive and open market under all conditions requisite to a fair sale, with buyer and seller acting prudently and knowledgeably, price unaffected by undue stimulus.

The value a property has for a specific use, such as farming or ranching, rather than its value in an open market exchange. Common in agricultural appraisals for financing and tax purposes.

Value derived from the income a property can generate through its agricultural or natural-resource production, such as crop yields or livestock carrying capacity, rather than from comparable sales.

A valuation method that converts anticipated future income from a property into a present value estimate, typically by dividing net operating income by a capitalization rate.

A rate expressing the relationship between a property's net operating income and its value, derived from market sales or band-of-investment analysis. Dividing income by the rate yields an indicated value.

Effective gross income from a property minus all operating expenses, excluding debt service and income taxes. It is the income figure appraisers capitalize in the income approach.

A valuation method that estimates value by analyzing recent sales of similar properties and adjusting their prices for differences from the subject, such as size, location, improvements, and productivity.

A recently closed transaction of a property similar to the subject, used as a basis for comparison. Rural comparables require close attention to soil, water rights, and productivity differences.

A dollar or percentage modification applied to a comparable sale's price to reflect how it differs from the subject property, so the adjusted price better indicates the subject's value.

A valuation method that estimates value as the current cost to replace or reproduce improvements, minus depreciation, plus the value of the land. Useful for special-purpose agricultural structures with few sales.

The current cost to build a structure of equivalent utility using modern materials and methods, as opposed to reproducing the original exactly. Used in the cost approach for agricultural improvements.

In appraisal, the loss in improvement value from any cause, including physical deterioration, functional obsolescence, and external obsolescence. It is subtracted from cost in the cost approach.

A loss in value caused by outdated design or features in an improvement, such as an inefficient barn layout or inadequate grain handling capacity, relative to what the market expects.

A loss in value caused by factors outside the property itself, such as a nearby feedlot, new zoning, or shifting commodity markets. It is generally not curable by the owner.

A classification of farmland based on its capacity to produce crops, often expressed as a productivity index or land class. It supports adjustments and highest-and-best-use analysis in agricultural appraisals.

Legal rights to use water from a stream, well, or other source, which may be appurtenant to land or transferable. Their presence or absence materially affects agricultural property value.

A right held by one party to use another's land for a specific purpose, such as a utility line or access road. Easements can burden rural parcels and must be identified and analyzed.

Any right, interest, lien, or restriction that burdens a property and may diminish its value or limit its use, including easements, mortgages, and deed restrictions.

The amount and type of research and analysis an appraiser determines is necessary to produce credible assignment results. It must be stated and supported in the report.

Results that are worthy of belief, based on support and analysis appropriate to the intended use. Credibility is a core performance standard in appraisal review and practice.

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

The act of critically examining an appraisal report and its supporting analysis to form an opinion about whether the work is competent and the value conclusion is reasonable and well supported.

The Uniform Standards of Professional Appraisal Practice section governing appraisal review, setting requirements for developing and reporting a review opinion about another appraiser's work.

An appraiser who performs an appraisal review, evaluating the quality of another appraiser's work and the soundness of its conclusions without necessarily inspecting the property or forming an independent value opinion.

An appraisal review performed without a physical inspection of the property, relying on the report, public records, and available data. It is limited to evaluating the work as presented.

An appraisal review that includes an exterior inspection of the subject property and comparables to verify report data and observations. It supports stronger conclusions than a desk review alone.

The ethical and performance standards, including the Standards Rules and Statements, that govern appraisal and review practice in the United States and are incorporated into state licensing law.

A USPAP requirement that an appraiser accept an assignment only after confirming the knowledge and experience needed to complete it competently, or else disclose the limitation and take steps to gain competence.

The state of being free from bias, coercion, and influence that could compromise an appraiser's judgment. Independence is fundamental to ethical appraisal and review practice.

The quality of evaluating a property or another appraiser's work impartially, without favoring any party's interest. It requires setting aside personal or client preferences in forming conclusions.

A situation in which an appraiser's personal, financial, or other interest could improperly influence judgment. It must be disclosed and, where required, avoided.

A fee arrangement in which payment depends on a predetermined value result or on the outcome of the assignment. Such arrangements are prohibited because they compromise impartiality.

The ethical duty not to disclose confidential client information or assignment results to third parties without proper authorization, except as required by law or regulation.

The USPAP rule establishing requirements for integrity, objectivity, independence, confidentiality, and competence in appraisal practice, including prohibitions on misleading conduct.

The nonprofit organization that publishes the Uniform Standards of Professional Appraisal Practice and oversees the Appraiser Qualifications Board and Appraisal Standards Board.

The body within the Appraisal Foundation that establishes minimum education, experience, and examination criteria for appraiser licensing and certification, which states adopt.

A professional designation awarded by the American Society of Farm Managers and Rural Appraisers after meeting education, experience, and examination requirements for rural property appraisal.

A specific rule within USPAP that sets mandatory requirements for developing or reporting an appraisal or review, such as Standards Rules 1-1 or 3-1.

An assumption, directly stated in the report, that something is true when its truth is uncertain, and whose use could affect the value opinion. It must be clearly disclosed.

A condition, contrary to known facts, that is assumed for analysis or reporting purposes, such as valuing a property as if a proposed building existed. It must be disclosed in the report.