Below are some common terms used in the appraisal business.
Adjustment: Comparables are adjusted to reflect differences between them and the subject property. Typically adjustments would be made for such things as – view amenity, quality of construction, age, condition, room count, gross living area, car parking facilities and pool, etc.
Comparable or Comp: Properties that have been selected which recently sold, are similar to the subject and located nearby. Information regarding the comparables is entered into a grid in the appraisal report and then adjustments are made as necessary. USPAP establish clear guidelines for comparable selection.
Cost Approach: For residential property this approach is utilized to indicate a cost breakdown for the subject site, site improvements and structure and is generally for informational purposes and not heavily relied upon to estimate the market value of a property. The Cost Approach is instrumental in determining an Insurable Value for a property.
Drive By: An appraisal which is made with a limited exterior only inspection of the subject property to determine that the property has no obvious defects or damage visible from the outside.
GLA: Gross Living Area, generally in Florida is the air conditioned living area which is usually determined by measuring the exterior of a single family home and the interior dimensions of a condominium unit.
Income Approach: Utilized for income producing properties.
Inspection: The visual inspection of the subject property by the appraiser in order to ascertain the type and quality of the features, fixtures and fittings included in the property.
Insurable Value:
1. The portion of the value of an asset or asset group that is acknowledged or recognized under the provisions of an applicable loss insurance policy.
2. Value used by insurance companies as the basis for insurance. Often considered to be replacement or reproduction cost less deterioration and non-insurable items. Sometimes cash value or market value but often entirely a cost concept.
(This definition is taken from The Dictionary of Real Estate Appraisal, Third Edition, published in 1993 by the Appraisal Institute.)
Market or Sales Comparison Approach: The approach to value most commonly utilized for single family homes, 2-4 family homes and individual condominium units. This approach is based on comparing recent sales of similar properties, adjusting the comparables for contributory differences and reconciling the results to attain a market value.
Market Value:
The most probable price, which property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:
(a) Buyer and seller are typically motivated.
(b) Both parties are well informed or well advised, and acting in what they consider their own best interests.
(c) A reasonable time is allowed for exposure in the open market.
(d) Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto, and
(e) The price represents the normal consideration for the property sold unaffected by spectial or creative financing or sales concessions granted by anyone associated with the sale.
MLS: The Multiple Listing Service is created by and used primarily by real estate agents, it is a compilation of properties listed for sale, pending sale and sold. Appraisers generally pay to access these databases to assist with the selection of comparable sales and listings.
Obsolescence: Functional obsolescence is the presence or absence of a feature which renders a property less desirable. Obsolescence can also be external and occur because of influences in the neighborhood or unfavorable financial conditions which can affect property values.
Subject: The property being appraised.
USPAP: Short for Uniform Standards of Professional Appraisal Practice, USPAP promotes standards of professionalism in appraisal practice, and is often enacted into law in a state. It is promulgated by the Appraisal Foundation.