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Stopping or reducing of amount or value, as when assessments for
ad valorem taxation are abated after the initial assessment has
An owner of an interest in income-producing property who does not
reside on the premises and who may rely on a property manager to
oversee the investment.
simple title. A title that is unqualified. Fee simple is the
best title that can be obtained. (See also fee simple.)
A study of the number of units of residential or nonresidential
property that can be sold or leased over a given period of time
in a defined location. (See also feasibility study.)
Method of finding land value in which all improvement costs (less
depreciation) are deducted from sales price. Also called extraction.
A way to enter and leave a tract of land, sometimes by easement
over land owned by an- other. (See also egress and ingress.)
The relative ease of entrance to a property by various means, a
factor that contributes to the probable most profitable use of a
Structures on a property, such as sheds and garages, that are secondary
to the main building.
Land buildup resulting from the de- posit by natural action of sand
or soil washed up from a river, lake or sea.
In accounting, a system of allocating revenue and expense items
on the basis of when the revenue is earned or the expense incurred,
not on the basis of when the cash is received or paid out.
(1) For accounting purposes, total depreciation taken on an asset
from the time of its acquisition. (2) For appraisal purposes, the
difference between reproduction or replacement cost and the appraised
value as of the date of appraisal.
Expenses incurred that are not yet payable. In a closing statement,
the accrued expenses of the seller typically are credited to the
purchaser (taxes, wages, interest, etc.).
appraisal. A market value appraisal of property condemned or
otherwise acquired for public use, to establish the compensation
to be paid to the owner.
measure of land, 208.71 by 208.71 feet in area, being 43,560 square
feet, or 160 square rods or 4,840 square yards.
The number of years elapsed since the original structure was built.
Sometimes re- feared to as historical or chronological age.
mortgage (ARRI). A financing technique in which the lender can
raise or lower the interest rate according to a set index, such
as the rate on six-month Treasury bills or the average cost of funds
of FDIC-insured institutions. (See also amortized mortgage. )
Decrease or increase in the sales price of a comparable property
to account for a feature that the property has or does not have
in comparison with the subject property.
According to value (Latin); generally used to refer to real estate
taxes that are based on assessed property value.
use. A land use that has a detrimental effect on the market
value of nearby properties.
Relating to beauty, rather than to functional considerations.
In statistics, the sum of all individuals, called variates.
The right to use the open space above the physical surface of the
land, generally allowing the surface to be used for some other purpose.
The allocation of the ap praised total value of the property between
land and building. The allocation may be accomplished either on
a ratio basis or by subtracting a figure representing building value
from the total appraised value of the property.
vacancy and collection losses. The percentage of potential gross
income that will be lost due to vacant units, collection losses
The qualities and state of being pleasant and agreeable; in appraising,
those qualities that are attached to a property and from which the
owner derives benefits other than monetary; satisfaction of possession
and use arising from architectural excellence, scenic beauty and
A mortgage loan in which the principal and interest are payable
in periodic installments during the term of the loan so that at
the completion of all payments there is a zero balance.
A fixed, regular return on an investment.
A method of capitalization that treats income from real property
as a fixed, regular return on an investment. For the annuity method
to be applied, the lessee must be reliable and the lease must be
principle of. The principle that the purchase price of property
is affected by the expectation of its future appeal and value.
An estimate of quantity, quality or value; the process through which
conclusions of property value are obtained; also refers to the report
setting forth the process of estimating value. (See also appraisal
Nonprofit corporation established in 1987 and headquartered in Washington,
D.C., sponsored by major appraisal and appraisal-related professional
and trade groups.
The approaches used in the appraisal of real property. (See
cost approach, income capitalization, approach, sales comparison
A systematic analysis of the factors that bear on the value of real
estate; an orderly program by which the problem is defined; the
work necessary to solve the problem is planned; the data involved
are acquired, classified, analyzed and interpreted into an estimate
of value; and the value estimate is presented in the form requested
by the client.
An appraiser's written opinion to a client of the value sought for
the subject property as of the date of appraisal, giving all details
of the appraisal process.
Board. Created by the Appraisal Foundation and responsible for
establishing minimum standards of appraisal competence.
An estimate by an appraiser of the amount of a particular value,
such as assessed value, insurable value or market value, based on
the particular assignment.
One who estimates value.
Board. Created by the Appraisal Foundation and responsible for
establishing minimum requirements for licensed and certified appraisers
and licensing and certifying examinations.
Permanent or temporary increase in monetary value over time due
to economic or related causes.
value. Any of the following three methods used to estimate the
value of real estate: cost approach, income capitalization approach
and sales comparison approach.
Anything used with land for its benefit, either affixed to land
or used with it, that will pass with the conveyance of the land.
transaction. A transaction in which both buyer and seller act
willingly and under no pressure, with knowledge of the present conditions
and future potential of the property, and in which the property
has been offered on the open market for a reasonable length of time
and there are no unusual circumstances. array. An arrangement of
statistical data according to numerical size.
The combining of two or more ad- joining lots into one larger tract
to increase their total value.
The value placed on land and buildings by a government unit (assessor)
for use in levying annual real estate taxes.
The imposition of a tax, charge or levy, usually according to
established rates. (See also special assessment.)
One who determines property values for the purpose of ad valorem
that is owned and has value, such as cash or real or personal property.
In statistics, the measure of how far the average individual, or
variate, differs from the mean of all variates.
Balance. The appraisal principle that states that the greatest
value of a property will occur when the type and size of the improvements
are proportional to each other as well as to the land.
Band of investment.
A method of developing a discount rate based on (1) the rate of
mortgage interest available, (2) the rate of return required on
equity and (3) the debt and equity share in the property. A variation
of this method is used to compute an overall capitalization rate.
sale deed. A deed that contains no warranties against liens
or other encumbrances but implies that the grantor has the right
to convey title.
Base line. A
reference survey line of the government or rectangular survey, being
an imaginary line extending east and west and crossing a principal
meridian at a definite point.
The minimum rent payable under a percentage lease.
A permanent reference mark (PRM) used by surveyors in measuring
differences in elevation. Benchmark. The standard or base from which
specific estimates are made.
The person who is to receive the benefits from a trust fund.
The value of a property as an asset on the books of account; usually,
reproduction or replacement cost, plus additions to capital and
less reserves for depreciation.
(See observed condition depreciation. )
That point at which total in- come equals total expenses.
The ratio of operating expenses plus the property's annual debt
service to potential gross income.
rate. The sum of the discount and capital recapture rates for
Rules of local, municipal or state governments specifying minimum
building and construction standards for the protection of public
safety and health.
technique. A method of capitalization using net income remaining
to building after interest on land value has been deducted.
Bundle of rights.
A term often applied to the rights of ownership of real estate,
including the rights of using, renting, selling or giving away the
real estate or not taking any of these actions.
Money and/or property comprising the wealth owned or used by a person
or business enterprise to acquire other money or goods.
The process employed in estimating the value of a property by the
use of an appropriate capitalization rate and the annual net operating
income expected to be produced by the property. The formula is expressed
as Income/Rate = Value
rate. The percentage rate ap- plied to the income a property
is expected to produce to derive an estimate of the property's value;
includes both an acceptable rate of return on the amount invested
(yield) and return of the actual amount invested (recapture).
The return of an investment; the right of the investor to get back
the amount invested at the end of the term of ownership or over
the productive life of the improvements.
value method of depreciation. A method of computing depreciation
by determining loss in rental value attributable to a depreciated
item and applying a gross rent multiplier to that figure.
A system of recognizing revenue and expense items only at the time
cash is received or paid out.
technique. Method of adjusting a sales price downward to reflect
the increase in value due to assumption or procurement by buyer
of a loan at an interest rate lower than the prevailing market rate.
The net spendable income from an investment, determined by deducting
all operating and fixed expenses from gross income. If expenses
exceed income, a negative cash flow is the result.
Cash flow rate.
(See equity capitalization rate.)
Cash on cash
rate. (See equity capitalization rate. )
surveyor's unit of measurement equal to four rods or 66 feet, consisting
of 100 links of 7.92 inches each; ten square chains of land are
equal to one acre.
principle of. The principle that no physical or economic condition
ever remains constant.
Tangible personal property items.
One who hires another person as a representative or agent for a
The computation of financial adjustments required to close a
real estate trans- action, computed as of the day of closing the
sale; used to determine the net amount of money the buyer must pay
to the seller to complete the transaction, as well as amounts to
be paid to other parties, such as the broker or escrow holder. (See
also settlement. )
Code of ethics.
Rules of ethical conduct, such as those that govern the actions
of members of a professional group.
A form of property ownership in which husband and wife have an equal
interest in property acquired by either spouse during the time of
their marriage. Community property does not include property that
each spouse owned prior to marriage or property received by gift
or inheritance or as the proceeds of separate property.
Properties that are substantially equivalent to the subject property.
unit method. (See square-foot method. )
(See sales comparison approach.) Competition, principle of. The
principle that a successful business attracts other such businesses,
which may dilute profits.
Interest paid on both the original investment and accrued interest.
Taking private property for public use through court action, under
the right of eminent domain, with compensation to the owner.
use permit. Approval of a property use inconsistent with present
zoning because it is in the public interest. For example, a church
or hospital may be allowed in a residential district.
covenants and restrictions (CC&R's). Private limitations
on property use placed in the deed received by a property owner,
typically by reference to a Declaration of Restrictions.
The absolute ownership of an apartment or a commercial unit, generally
in a multi-unit building, by a legal description of the airspace
that the unit actually occupies, plus an undivided interest in the
ownership of the com- mon elements, which are owned jointly with
the other condominium unit owners. Common elements. All portions
of the land, property and space that make up a condominium property
that include land, all improvements and structures, and all easements,
rights and appurtenances and exclude all space composing individual
units. Each unit owner owns a definite percentage of undivided interest
in the com- mon elements. Parcel. The entire tract of real estate
included in a condominium development; also referred to as a development
parcel. Unit. One ownership space in a condominium building or a
part of a property intended for independent use and having lawful
access to a public way. Ownership of one unit also includes a definite
undivided interest in the common elements.
principle of. The principle that buildings should be similar
in design, construction and age to other buildings in the neighbor-
hood to enhance appeal and value. contiguous. Adjacent; in actual
An agreement entered into by two or more legally competent parties
who, for a consideration, undertake to do or to refrain from doing
some legal act or acts.
(See scheduled rent.)
principle of. The principle that any improvement to a property,
whether to vacant land or a building, is worth only what it adds
to the property's market value, regardless of the improvement's
loan. A mortgage loan, made with real estate as security, that
is neither insured by the FHA nor guaranteed by the VA. Conveyance.
A written instrument, such as a deed or lease, by which title or
an interest in real estate is transferred.
A multi-unit residential building with title in a trust or corporation
that is owned by and operated for the benefit of persons living
within it, who are the beneficial owners of the trust or the stockholders
of the corporation, each possessing a proprietary lease granting
occupancy of a specific unit in the building.
An association of shareholders, created under law, having a legal
identity separate from the individuals who own it.
A system of compensating for inaccuracies in the rectangular survey
system due to the curvature of the earth. Every fourth township
line (24-mile intervals) is used as a correction line on which the
intervals between the north and south range lines are remeasured
and corrected to a full six miles. correlation. (See reconciliation.)
amount paid for a good or service.
The process of estimating the value of a property by adding the
appraiser's estimate of the reproduction or replacement cost of
property improvements, less depreciation, to the estimated land
Figure representing construction cost at a particular time in relation
to construction cost at an earlier time, prepared by a cost reporting
or indexing service.
index method. (See index method. )
An agreement written into deeds and other instruments promising
performance or nonperformance of certain acts or stipulating certain
uses or non-uses of property.
A method of estimating re- production cost by multiplying the number
of cubic feet of space a building encloses by the construction cost
per cubic foot.
A depreciated item that can be restored or replaced economically.
(See also functional obsolescence-curable and physical deterioration-curable.
pertinent to a specific appraisal assignment. Data may be general
(relating to the economic background, the region, the city and the
neighborhood) or specific (relating to the subject property and
comparable proper- ties in the market).
horizontal plane from which heights and depths are measured.
Investors who take a relatively conservative approach, typically
taking a passive role in investment management while demanding a
security interest in property financed.
of restrictions. Document filed by a subdivision developer and
referenced in individual deeds to subdivision lots that lists all
restrictions that apply to subdivision properties. (See also deed
laws of. The situation in which property improvements no longer
bring a corresponding increase in property income or value.
written instrument that conveys title to or an interest in real
estate when properly executed and delivered.
Deed of trust
(See trust deed.)
Provisions in a deed limiting the future uses of the property. Deed
restrictions may take many forms: they may limit the density of
buildings, dictate the types of structures that can be erected and
prevent buildings from being used for specific purposes or used
at all. Deed restrictions may impose a myriad of limitations and
conditions affecting the property rights appraised.
Failure to perform a duty or meet a contractual obligation.
Property conveyed for a certain number of years, most often by a
The statistical study of human populations, especially in reference
to size, density and distribution. Demographic information is of
particular importance to people involved in market analyses and
highest and best use analyses in determining potential land uses
cost. For appraisal purposes the reproduction or replacement
cost of a building, less accrued depreciation to the time of appraisal.
For appraisal purposes, loss in value due to any cause, including
physical deterioration, functional obsolescence and external obsolescence.
(See also obsolescence.)
An adjustment factor applied to the value per front foot of lots
that vary from the standard depth.
(See neighborhood life cycle. )
Selection of a capitalization rate from a range of overall rates
computed by analyzing sales of comparable properties and applying
the formula I/V = R to each.
Costs of erecting a new building involved with either site preparation
or building construction, including fixtures.
comparison approach. (See sales comparison approach.)
(See interest rate. )
(See neighborhood life cycle.)
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