Real Estate Chapter 7 Terms

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Appraisal

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unbiased written estimate of property's market value at a particular time

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subject property

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property that is being appraised

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appraisal report

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document appraiser submits to client containing appraiser's final report of value, data the estimate is based on, reasoning and calculations used

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market value

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property's probable selling price based on "normal" conditions

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investment value

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value a particular investor places on a property

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transaction prices

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prices we observe on sold properties, only occur when buyer's investment value exceeds seller's

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Uniform Standards of Professional Appraisal Practice

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ethical obligations and minimum appraisal standards all appraisers must follow

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highest and best use of property

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use found to be legally permissible, physically possible, financially feasible, maximally productive

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reconciliation

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weighing by appraiser of relative reliability of value indicators for property being valued (step in assigning final estimate of property value)

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self-contained appraisal report

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includes all details, information that were relevant to determining market value or other conclusions within report

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summary appraisal report

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summarizes conclusions of appraisal, majority of data and techniques kept in appraiser's work file

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restricted appraisal report

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provides minimal discussion of appraisal with large numbers of references to internal file documentation

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comparable properties

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similar properties to subject property that have sold recently, used in sales comparison approach

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indicated value

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achieved by evaluating, reconciling final adjusted sales prices of comparable properties

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arm's length transaction

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fairly negotiated transaction that occurred under typical market conditions

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adjustments

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special factors considered under sales comparison approach

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transactional adjustments

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concern nature and terms of deal: property rights conveyed, financing terms, conditions of sale, expenditures made immediately after purchase, market conditions

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property adjustments

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recognize locational, physical, economic differences between properties: location, physical characteristics, economic characteristics, use, nonrealty items

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market conditions

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change due to inflation/deflation in economy or changes in local supply/demand conditions

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repeat-sale analysis

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analysis of changing market conditions by tracking prices of individual properties as they sell repeatedly over time

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nonrealty items

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personal property whose involvement in conveyance leads to downward adjustment of comparable property price

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elements of comparison

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relevant characteristics used to compare, adjust property prices

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cost approach

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indicated market value of depreciated cost of building improvements plus estimated land value

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reproduction cost of existing building

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expenditure required to construct building today (replicated in exact detail)

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replacement cost

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expenditure needed to construct building of equal utility to existing building

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accrued depreciation

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difference between current market value of building and cost to construct it new

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physical deterioration

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loss in value of building over time associated with aging, decay of its physical condition

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functional obsolescence

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loss in value within a structure due to changes in tastes, preferences, technical innovations, market standards

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external obsolescence

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loss in value due to influences external to site that affect value