ARC RA key terms

A USPAP provision allowing an appraiser to disregard a specific Standard Rule when it conflicts with local law or regulation. The appraiser must cite the law and limit the departure to that conflict only.

The amount and type of research and analysis an appraiser performs to produce credible assignment results. It is driven by the intended use, the client, and the property's complexity, and must be disclosed in the report.

The purpose for which an appraisal is prepared, such as mortgage lending, litigation, or estate settlement. It shapes the required scope of work, reporting format, and level of analysis.

The party or parties identified by the appraiser as the expected recipients of the report. Naming them clarifies who may rely on the analysis and limits exposure to unintended third parties.

A statement about a fact that is uncertain at the time of the assignment but treated as true. If the assumption proves false, the appraiser's opinions and conclusions could change materially.

A condition that is contrary to what exists as of the effective date but is assumed for analysis, such as valuing a completed building on a vacant lot. It must be clearly disclosed.

The signed statement in a report affirming that the appraiser's analyses, opinions, and conclusions comply with USPAP, that compensation is not contingent on a predetermined value, and that no undisclosed interest exists.

One of the enforceable requirements in the Uniform Standards of Professional Appraisal Practice. Standards 1 and 2 govern development and reporting of real property appraisals, with specific rules for each.

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 estimated length of time a property would have been offered on the open market prior to the effective date to achieve the appraised value, given the assumed market conditions.

A forecast of how long a property will take to sell after the effective date at the appraised value. It looks forward, while exposure time looks back from the effective date.

The most probable rent a property would command in a competitive open market, with typical lease terms and knowledgeable parties. It is often used to estimate the income a property could generate.

The actual rent stated in an existing lease between the parties. It may differ from market rent because of concessions, escalation clauses, or leases signed under different conditions.

An opinion of value as of a future date, such as after construction completion or lease-up. It depends on hypothetical conditions or extraordinary assumptions that must be disclosed.

The date to which the appraiser's opinion of value applies. It may be the date of inspection or a retrospective or prospective date, and it anchors all market analysis.

The reasonably probable use that is legally permissible, physically possible, financially feasible, and maximally productive, resulting in the highest value. It is tested as vacant and as improved.

A temporary use of a property that is not its highest and best use but produces some return while the property awaits a more productive use, such as a parking lot on redevelopment land.

The pace at which available properties in a market are sold or leased over a given period, often expressed as units per month. It helps estimate demand, lease-up time, and feasibility.

The study of supply and demand, demographics, employment, and competitive properties in a defined area to understand price trends and support value conclusions and highest and best use.

A property that has sold, is under contract, or is listed and is similar enough to the subject to provide a basis for comparison. Adjustments are made for differences in features and terms.

A dollar or percentage change applied to a comparable's price to reflect a difference from the subject, such as size, condition, or location. It is applied to the comparable, not the subject.

The sum of the absolute values of all adjustments made to a comparable, without regard to direction. Reviewers use it as a rough indicator of comparability and reliability.

The sum of adjustments to a comparable after positive and negative amounts are offset. A large net adjustment suggests a systematic difference between the comparable and the subject.

A technique that compares two otherwise similar properties differing in one feature to isolate the market reaction to that feature. It supports quantified adjustments in the sales comparison approach.

The current cost to construct a building of equivalent utility using modern materials and methods, without including the value of the land. It is a common basis for the cost approach.

The current cost to build an exact replica of the subject using the same materials, design, and workmanship. It is appropriate when the property has unusual features worth replicating.

The total loss in value from replacement or reproduction cost new to the property's current value, caused by physical deterioration, functional obsolescence, and external obsolescence.

A loss in value caused by features within the property that are outdated or inadequate, such as a poor floor plan or insufficient bathrooms, measured against market expectations.

A loss in value caused by factors outside the property, such as neighborhood decline, zoning changes, or market conditions. It is generally incurable because the owner cannot control the cause.

A method that converts a single year's net operating income into value by dividing by a capitalization rate. It assumes stable income and is common for simpler income properties.

A ratio expressing the relationship between net operating income and value, derived from market sales. It reflects risk, growth expectations, and financing conditions in the market.

Effective gross income less all operating expenses, excluding debt service and income taxes. It represents the property's income before financing and is the basis for capitalization.

A ratio of sale price to gross rent, used to estimate value by multiplying a subject's gross rent by a market-derived multiplier. It is simple but ignores expense differences.

The increase in value that results when two or more contiguous parcels are combined into one larger site with greater utility than the sum of the individual parcels.

Land that exceeds what is needed to support the existing or highest and best use of the site. It may have separate value if it can be sold or developed independently.

Land that is not needed to support the current use but cannot be sold separately because of zoning, access, or parcel configuration. It contributes little or no additional value.

The final step in which the appraiser weighs the indications of value from each approach, considering relevance and reliability, to arrive at a single value conclusion.

A valuation method that estimates value by analyzing prices of similar properties and adjusting for differences. It is the most reliable approach for typical residential properties.

A method that estimates value by adding land value to the depreciated cost of improvements. It is most useful for new construction, special-purpose properties, and insurance purposes.