Real Estate Appraiser key terms

The most probable price a property should bring in a competitive, open market under all conditions requisite to a fair sale, with buyer and seller acting prudently, knowledgeably, and without undue stimulus.

The reasonably probable and legal use of vacant land or an improved property that is physically possible, appropriately supported, financially feasible, and results in the highest value.

The estimated length of time the property interest being appraised would have been offered on the market before the hypothetical consummation of a sale at market value on the effective date.

The appraisal principle holding that a buyer would pay no more for a property than the cost of acquiring an equally desirable substitute with similar utility, supporting the sales comparison and cost approaches.

The principle that a property component's value is measured by how much it adds to or subtracts from the total property value, regardless of the component's actual cost.

The principle that value is maximized when properties in a neighborhood are reasonably similar in use, size, design, and age, while extreme dissimilarity or excessive uniformity tends to reduce value.

The principle that value is created by the expectation of future benefits, so buyers and sellers set prices today based on what they expect a property will produce or be worth later.

The principle that property values are never static because social, economic, governmental, and environmental forces continually alter neighborhoods, markets, and the desirability of a location over time.

The principle that value is greatest when land, labor, capital, and entrepreneurship are combined in the proper proportion; too much or too little of any production agent reduces value.

The increment of value created when two or more adjacent parcels are combined into a single site whose total value exceeds the sum of the individual parcel values.

The process of combining two or more adjoining parcels into one ownership or site, usually undertaken to create a larger, more efficient, and more valuable development tract.

The relative position of a property within its market area, reflecting the advantages or disadvantages of that location for the property's use, such as access, visibility, and surrounding development.

The difference between the cost to build a new improvement and the present market value of the improvement as of the effective date, including physical deterioration and functional and external obsolescence.

The age indicated by the condition and utility of a structure, which may be less or greater than its actual age and is used to estimate remaining economic life and depreciation.

The cost, at current prices, to construct an exact duplicate or replica of the subject improvement using the same materials, standards, design, and workmanship as the original.

The cost, at current prices, to construct an improvement with equivalent utility to the subject, using modern materials, design, and current standards rather than duplicating the original.

Recently sold properties that are similar to the subject in location, size, condition, and use, and whose prices are adjusted to estimate the subject's value in the sales comparison approach.

A technique that compares two otherwise similar properties that differ in one characteristic, so the price difference is attributed to that single feature and used as an adjustment.

The income remaining after subtracting vacancy, collection losses, and all operating expenses from potential gross income; it is the income figure capitalized to estimate value.

The rate that expresses the relationship between a property's net operating income and its value or sale price, calculated as net operating income divided by value.

A method that converts a single year's expected net operating income into an indication of value by dividing the income by an appropriate capitalization rate.

The ratio of a property's sale price to its gross rental income, used to estimate value by multiplying a subject property's gross rent by a market-derived multiplier.

A technique for building a capitalization or discount rate by weighting the cost of debt and the required return on equity by their respective proportions in the capital structure.

The final step of the appraisal process in which the appraiser weighs the indications of value from each approach and resolves them into a single, supportable opinion of value.

The Uniform Standards of Professional Appraisal Practice, the generally accepted standards for appraisal, review, and consulting work in the United States, published by the Appraisal Standards Board.

The amount and type of research and analysis an appraiser performs to produce credible assignment results, determined by the intended use, intended users, and the appraisal problem.

The purpose for which an appraisal or appraisal review is being performed, such as mortgage lending, litigation, estate settlement, or tax appeal, which shapes the scope of work.

The client and any other party specifically identified by the appraiser as users of the appraisal report, to whom the appraiser owes duties and for whom the report is written.

A condition that is contrary to what exists but is assumed for purposes of analysis or reporting, such as appraising a property as if a proposed building were complete.

An assumption directly related to a specific assignment about conditions that exist but are unknown to the appraiser, which, if found to be false, could affect the assignment results.

The USPAP requirement that an appraiser accept an assignment only after determining that he or she has, or can gain, the knowledge and experience needed to complete it competently.

A fee that is paid only when a predetermined result is achieved, such as a loan closing or a specified value conclusion; accepting such an arrangement is prohibited for most appraisal work.

An appraisal report option under USPAP that states the appraiser's opinions and conclusions without the supporting data and analysis, intended only for the named client.

A USPAP provision that allows an appraiser to comply with a conflicting law or regulation of a jurisdiction, setting aside only the affected requirement for that assignment.

The set of legal interests associated with owning real property, including the rights to use, sell, lease, mortgage, exclude others, and give the property away.

The government's power to take private property for public use, with the owner entitled to just compensation under the Fifth Amendment; the taking itself is called condemnation.

The government's authority to regulate private property to protect public health, safety, and welfare, exercised through zoning, building codes, and similar land use controls without compensation.