Anticipation (principle of)
expectation that property will offer future benefits, which tends to increase present value
Appraisal
an estimate of a property's monetary value on the open market; an estimate of a property's type and condition, its utility for a given purpose, or its highest and best use
Arm's-length transaction
a transaction in which neither party acts under duress and both have full knowledge of the property's assets and defects, the property involved has been on the market a reasonable length of time, there are not unusual circumstances, and the price represen
Balance (principle of)
the combination of land uses that results in the highest property values overall
Broker's price opinion (BPO)
an estimate of property value that is not an appraisal but is developed by a real estate broker based on comparable sales in the area
Bureau of Real Estate Appraisers (BREA)
CA office that licenses and regulates real estate appraisers
Capitalization ("cap") rate
the rate of interest that is considered a reasonable return on an investment, used in the process of determining value based on net operating income; the yield necessary to attract investment
Change (principle of)
effect on property value of constantly varying physical, economic, social, and political forces
Competition (principle of)
business profits encourage competition, which ultimately may reduce profits for any one business
Competitive market analysis (CMA)
informal estimate of market value performed by a real estate agent for either seller or buyer, utilizing the sales history of nearby properties; usually expressed as a range of values that includes the probable market value for the subject property
Comps
comparable properties that are used in an appraisal to determine the value of the property that is the subject of the appraisal
Conformity (principle of)
holds that property values are maximized when buildings are similar in design, construction, and age, particularly in residential neighborhoods
Contribution (principle of)
a component part of a property is valued in portion to its contribution to the value of the entire property, regardless of its separate actual cost
Cost approach
appraisal method in which site value is added to the present reproduction or replacement cost of all property improvements, less depreciation, to determine market value
Decline
period in which property loses value due to lack of maintenance
Demand
...
Depreciation
decrease in value of an asset that is allowed in computing property value for tax purposes; in appraising, a loss in value of property improvement from any cause; depreciation is curable when it can be remedied by a repair or an addition to the property,
Effective gross income
property income from all sources, less allowance for vacancy and collection losses
Equilibrium
period of stability in the life cycle of a building or neighborhood in which little change is evident
External obsolescence
economic or environmental obsolescence; loss in value due to outside causes, such as changes in nearby land use
Federally related transaction
transaction that involves a federally chartered or insured lender Functional obsolescence: loss in value due to adverse factors within a structure that affect its marketability, such as its design, layout, or utility
Gentrification
renovation of run-down properties in neighborhoods that are in decline
Gross income multiplier (GIM)
gross rent multiplier; a number derived by dividing the sales price of a comparable property by the income it produces, which then is multiplied by the gross income produced by the subject property to derive an estimate value
Growth
period of life cycle of a neighborhood in which property development is ongoing
Highest and best use
in appraising real estate, the most preferable, physically possible, and legally permissible use for the property under consideration
Home Valuation Code of Conduct (Code)
...
Income capitalization approach
appraisal method in which the actual or likely net operating income of property is divided by its expected rate of return (capitalization rate) to arrive at an estimate of market value
Index method
way of estimating building reproduction cost by multiplying the original cost of the subject building by a factor that represents the percentage change in construction costs generally from the time of construction to the time of valuation
Market rent
the rent that could be charged for property at the present time, based on demand and the number of available properties
Market value
the most probable price property would bring in an arm's-length transaction under normal conditions on the open market
Net operating income
profit; the money remaining after expenses are deducted from income
Observed condition method
breakdown method; depreciation computed by estimating the loss in value caused by every item of depreciation, whether curable or incurable
Physical deterioration
loss in value brought about by wear and tear, disintegration, use, and action of the elements
Potential gross income
the maximum income that property is capable of producing
Progression (principle of)
the worth of a less valuable building tends to be enhanced by proximity to buildings of greater value Quantity survey method: way of estimating building reproduction cost by making a thorough itemization of all construction costs, both direct (material a
Reconciliation
in appraising, the final step, in which the estimates of value reached by each of the three appraisal approaches (sales comparison, cost, and income capitalization) are weighed in light of the type of property being appraised, the purpose of the appraisal
Regression (principle of)
a building's value will decline if the buildings around it have a lower value
Replacement cost
the cost of a new building using modern construction techniques, design, and materials but having the same utility as the subject property
Reproduction cost
the cost of a new building of exactly the same design and materials as the subject property
Restricted use report
property appraisal that will be limited in either the method of valuation used or the property interests valued
Revitalization
period of property renovation and rebuilding in which neighborhood begins a new life cycle
Sales comparison approach
market comparison approach; market data approach; appraisal method in which the sales price of properties that are comparable in construction and location to the subject property are analyzed and adjusted to reflect the difference between the comparable a
Scarcity
relative lack of supply of product; one of the four basic elements of value that also include demand, utility, and transferability
Self-contained report
narrative report; most comprehensive type of appraisal report, including a thorough statement of the background data supporting the opinion in value
Site value
determination of land value exclusive of improvements
Square-foot method
way of finding reproduction cost by multiplying the current cot per square foot of comparable building by the number of square feet in the subject building
Straight-line method
depreciation computed at a constant rate over the estimated useful life of the improvement
Substitution
the division of real property into separate parcels or lots for the purpose of sale, lease, or financing
Summary report
appraisal report using a standardized form, such as the Uniform Residential Appraisal Report (URAR) developed by Fannie Mae and Freddie Mac
Supply and demand (principle of)
takes into account the effect the market value of the relationship between the number of properties on the market at a given time and the number of potential buyers
Transferability
one of the four elements that must be present for a market to be created; demand, utility, scarcity, and transferability
Uniform Residential Appraisal Report (URAR)
summary form of appraisal report developed and required by Fannie Mae and Freddie Mac
Unit-in-place method
way of estimating building reproductive cost per unit of measure of each of the component parts of the subject property; each unit cost includes material, labor, overhead, and builder's profit
Utility
one of the four elements necessary to create a market; demand, utility, scarcity, and transferability
Value in exchange
the value of property expressed as the kind and amount of other property that would be acceptable in a transfer of ownership
Value in use
the subjective value of property to its present owner, as opposed to market value, which should be objective
Anticipation (principle of)
expectation that property will offer future benefits, which tends to increase present value
Appraisal
an estimate of a property's monetary value on the open market; an estimate of a property's type and condition, its utility for a given purpose, or its highest and best use
Arm's-length transaction
a transaction in which neither party acts under duress and both have full knowledge of the property's assets and defects, the property involved has been on the market a reasonable length of time, there are not unusual circumstances, and the price represen
Balance (principle of)
the combination of land uses that results in the highest property values overall
Broker's price opinion (BPO)
an estimate of property value that is not an appraisal but is developed by a real estate broker based on comparable sales in the area
Bureau of Real Estate Appraisers (BREA)
CA office that licenses and regulates real estate appraisers
Capitalization ("cap") rate
the rate of interest that is considered a reasonable return on an investment, used in the process of determining value based on net operating income; the yield necessary to attract investment
Change (principle of)
effect on property value of constantly varying physical, economic, social, and political forces
Competition (principle of)
business profits encourage competition, which ultimately may reduce profits for any one business
Competitive market analysis (CMA)
informal estimate of market value performed by a real estate agent for either seller or buyer, utilizing the sales history of nearby properties; usually expressed as a range of values that includes the probable market value for the subject property
Comps
comparable properties that are used in an appraisal to determine the value of the property that is the subject of the appraisal
Conformity (principle of)
holds that property values are maximized when buildings are similar in design, construction, and age, particularly in residential neighborhoods
Contribution (principle of)
a component part of a property is valued in portion to its contribution to the value of the entire property, regardless of its separate actual cost
Cost approach
appraisal method in which site value is added to the present reproduction or replacement cost of all property improvements, less depreciation, to determine market value
Decline
period in which property loses value due to lack of maintenance
Demand
...
Depreciation
decrease in value of an asset that is allowed in computing property value for tax purposes; in appraising, a loss in value of property improvement from any cause; depreciation is curable when it can be remedied by a repair or an addition to the property,
Effective gross income
property income from all sources, less allowance for vacancy and collection losses
Equilibrium
period of stability in the life cycle of a building or neighborhood in which little change is evident
External obsolescence
economic or environmental obsolescence; loss in value due to outside causes, such as changes in nearby land use
Federally related transaction
transaction that involves a federally chartered or insured lender Functional obsolescence: loss in value due to adverse factors within a structure that affect its marketability, such as its design, layout, or utility
Gentrification
renovation of run-down properties in neighborhoods that are in decline
Gross income multiplier (GIM)
gross rent multiplier; a number derived by dividing the sales price of a comparable property by the income it produces, which then is multiplied by the gross income produced by the subject property to derive an estimate value
Growth
period of life cycle of a neighborhood in which property development is ongoing
Highest and best use
in appraising real estate, the most preferable, physically possible, and legally permissible use for the property under consideration
Home Valuation Code of Conduct (Code)
...
Income capitalization approach
appraisal method in which the actual or likely net operating income of property is divided by its expected rate of return (capitalization rate) to arrive at an estimate of market value
Index method
way of estimating building reproduction cost by multiplying the original cost of the subject building by a factor that represents the percentage change in construction costs generally from the time of construction to the time of valuation
Market rent
the rent that could be charged for property at the present time, based on demand and the number of available properties
Market value
the most probable price property would bring in an arm's-length transaction under normal conditions on the open market
Net operating income
profit; the money remaining after expenses are deducted from income
Observed condition method
breakdown method; depreciation computed by estimating the loss in value caused by every item of depreciation, whether curable or incurable
Physical deterioration
loss in value brought about by wear and tear, disintegration, use, and action of the elements
Potential gross income
the maximum income that property is capable of producing
Progression (principle of)
the worth of a less valuable building tends to be enhanced by proximity to buildings of greater value Quantity survey method: way of estimating building reproduction cost by making a thorough itemization of all construction costs, both direct (material a
Reconciliation
in appraising, the final step, in which the estimates of value reached by each of the three appraisal approaches (sales comparison, cost, and income capitalization) are weighed in light of the type of property being appraised, the purpose of the appraisal
Regression (principle of)
a building's value will decline if the buildings around it have a lower value
Replacement cost
the cost of a new building using modern construction techniques, design, and materials but having the same utility as the subject property
Reproduction cost
the cost of a new building of exactly the same design and materials as the subject property
Restricted use report
property appraisal that will be limited in either the method of valuation used or the property interests valued
Revitalization
period of property renovation and rebuilding in which neighborhood begins a new life cycle
Sales comparison approach
market comparison approach; market data approach; appraisal method in which the sales price of properties that are comparable in construction and location to the subject property are analyzed and adjusted to reflect the difference between the comparable a
Scarcity
relative lack of supply of product; one of the four basic elements of value that also include demand, utility, and transferability
Self-contained report
narrative report; most comprehensive type of appraisal report, including a thorough statement of the background data supporting the opinion in value
Site value
determination of land value exclusive of improvements
Square-foot method
way of finding reproduction cost by multiplying the current cot per square foot of comparable building by the number of square feet in the subject building
Straight-line method
depreciation computed at a constant rate over the estimated useful life of the improvement
Substitution
the division of real property into separate parcels or lots for the purpose of sale, lease, or financing
Summary report
appraisal report using a standardized form, such as the Uniform Residential Appraisal Report (URAR) developed by Fannie Mae and Freddie Mac
Supply and demand (principle of)
takes into account the effect the market value of the relationship between the number of properties on the market at a given time and the number of potential buyers
Transferability
one of the four elements that must be present for a market to be created; demand, utility, scarcity, and transferability
Uniform Residential Appraisal Report (URAR)
summary form of appraisal report developed and required by Fannie Mae and Freddie Mac
Unit-in-place method
way of estimating building reproductive cost per unit of measure of each of the component parts of the subject property; each unit cost includes material, labor, overhead, and builder's profit
Utility
one of the four elements necessary to create a market; demand, utility, scarcity, and transferability
Value in exchange
the value of property expressed as the kind and amount of other property that would be acceptable in a transfer of ownership
Value in use
the subjective value of property to its present owner, as opposed to market value, which should be objective