Vocab Flashcards
Appraisal
An unbiased estimate of the nature, quality, value, or utility of an interest in or aspect of identified real estate and related personalty as of a certain date
Scope of Work
is the appraiser’s determination of the amount and type of information to be researched and the types of analysis that will be applied.
Cost approach to value
Part of appraisal where the appraiser estimates a property’s value by adding the land value to the depreciated value of any improvements to the property.
Income (capitalization) approach
Appraisal approach used by appraisers who need to value commercial and investment properties using a single year’s income or discounts a projected income stream to derive an indication of the property’s value.
Sales comparison approach
Appraisal approach based on principle of substitution where an appraiser examines the price (or price per unit area) of similar properties recently sold or currently being sold in the marketplace to come up with comparable value assessments.
Valuation
The process of estimating the value of an identified interest in specific property as of a given date.
Investment value
The amount of the return on an investment that an income-producing property will produce.
Insured value
The face amount a casualty or hazard insurance policy will pay in case a property is deemed unusable.
Mortgage value
The value the lender places on a property as collateral for the loan, especially in the event of a foreclosure when the lender must recover the debt through the sale of the property.
Use value
The value the property holds for the owner. Also called value-in-use.
Exchange value
The value that results from comparing the property
to other similar properties on the open market. This is the type of value that real estate agents are concerned with.
Reproduction cost
The value based on the cost of constructing a precise duplicate of the subject property’s improvements, assuming current construction costs.
Replacement cost
The value based on the cost of constructing a functional equivalent of the subject property’s improvements, assuming current construction costs.
Salvage value
The nominal value of a property that has reached the end of its economic life.
Assessed value
The value of a property as estimated by a taxing authority (for example, the IRS, local school or fire district) as the basis for ad valorem taxation.
Condemned value
The value set by a county or municipal authority for a property that may be taken by eminent domain.
Depreciated value
A value established by subtracting accumulated depreciation from the purchase price of a property. Equal to the purchase price of a property minus the accumulated depreciation.
Rental value
An estimate of the rental rate a property can command for a specific period of time.
Evaluation
The study of the nature, quality, or utility of certain property interests in which a value estimate is not necessarily required. Evaluation of a property does not result in an estimate of value.
Anticipation
The benefits a buyer expects to receive over the period of time he or she has the property influences the decision to purchase it. The value of the property can increase or decrease depending on whether the anticipated change is a benefit or a disadvantage.
Assemblage
When two adjacent pieces of property are joined together, the value of the one larger parcel may be greater than the value of the two separately.
Change
Both market conditions and a property’s physical condition change constantly over time. These changes affect the benefits of the property.
Conformity
This principle says that a property is at its highest value when it conforms with and fits into its surroundings.
Competition
This principle holds that when several businesses of a similar type are close to one another, they may make more money together than they would have individually.
Contribution
This is what the market recognizes as the change in value of an improvement made to a property—not what that improvement cost.
Diminishing return
This condition is a result of continuing to add improvements to a property when those improvements will have no effect on increasing the value of the property.
Highest and Best Use
Principle stating every property has a single-use which produces the greatest income and return. Therefore, the property will have its highest value when it is used for that purpose. The property’s use must be legally permissible, physically possible, financially feasible, maximally productive.
Progression and Regression
This principle holds that a property is affected by the surrounding properties. Progression is when lesser properties increase in value due to higher properties in the vicinity. Regression is when higher properties decrease in value due to lesser properties in the vicinity.
Substitution
According to this principle, a buyer will not pay more for a home than what he or she would pay for another home that is equally attractive and available.
Supply and Demand
Principle stating the value of a property depends on how many properties are available in an area; property prices; number of prospective buyers; and the price buyers are willing to pay.
Market Value
The most probable price, as of a specific date, in cash for which the specified property rights should be sold after reasonable exposure in a competitive market.
Market Price
The amount a particular purchaser agrees to pay and a particular seller agrees to accept under the circumstances surrounding the transactions—in other words, the actual sales price.
Direct Costs
Costs include the cost of labor and materials. Also called hard costs.
Indirect Costs
These are the costs that support a given project.
Physical Deterioration
Decay or disintegration, cracks, settling, structural defects, termite damage.
Functional Obsolescence
Within the property lines, outdated plumbing, electrical or heating, outmoded lighting fixtures, or architecture.
External Obsolescence
Outside the property lines, population changes, neighborhood changes that decrease value, legislative changes.
Breakdown Method
When appraisers break depreciation down into the three classes and give estimates for the curable and incurable factors of each class.
Straight-line Method
Assumption that depreciation occurs at a steady rate over the economic life of the property useful when estimating depreciation from physical deterioration. It is also called the economic age-life method.
Economic Life
The time period that a building is expected to remain useful for its originally-intended purpose.
Capitalization Rate
The rate of return an investor will require on his or her investment of capital in this kind of property.
Potential Gross Income
The rent scheduled to be collected on the property plus income from such other sources as vending machines, parking fees, and laundry facilities.
Gross Rent Multiplier
Estimate of the value of properties such as single-family homes and duplexes that could produce income but are not primarily income-producing properties. Calculated by dividing sales price by gross rent. Also called the Gross Income Multiplier.
Appraisal Management Company (AMC)
An entity authorized by TALCB to provide appraisal management services.
