rightAppraiser jargon

Have you heard an appraiser use any of these terms? Did you just hear one of our appraisers use it and you came here to figure out what it meant? We don't mean to speak a foreign language, but any profession has its jargon. What res ipsa loquitur is to a lawyer and triple witching is to day traders, external obsolescence is to appraisers. Here are some examples of common appraiser jargon and their meanings:

 

Adjustment.  When comparable properties have been identified, the appraiser adjusts the value of the subject property according to differences in living area, acreage, frontage, amenities and the like.  This is where the professional expertise of an appraiser is most valuable.

 

Chattel.  Personal property that may be on the subject property but which does not figure into the opinion of value in the appraisal report.

 

Comparable or "comp”.  Properties like the subject property nearby which have sold recently, used as a basis to determine the fair market value of the subject property.  The Uniform Standards of Professional Appraisal Practice (USPAP) establish clear guidelines for comparable selection.

 

Drive-by.  An appraisal that is limited to examination of comparable sales and a determination that the property is actually there and has no obvious defects or damage visible from the outside.  Fannie Mae's form for this type of appraisal is its 2055, so you may hear a drive-by referred to as a "2055."

 

Fair market value.  The appraiser's opinion of value as written in his or her appraisal report should reflect the fair market value of the property -- what a willing seller would pay a willing buyer in an arm's-length transaction.

 

GLA.  "Gross Living Area," the sum of all above grade floor space, including stairways and closet space.  GLA is often determined using exterior wall measurements.

 

Latent defects.  A defect on the property that is not readily apparent but which impact the fair market value.  Structural damage or termite infestation might be examples.

 

Market Value  is a very specific term in the appraisal of real property. It is generally considered to be "The highest price in terms of money which a property will bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus.

Implicit in this definition is the consummation of a sale as a specified date and the passing of title from seller to buyer under conditions whereby:
1. Buyer and seller are typically motivated.
2. Both parties are well informed or well advised, and each acting in what he considers his own best interest.
3. A reasonable time is allowed for exposure in the open market.
4. Payment is made in cash or its equivalent.
5. Financing, if any, is on terms generally available in the community at the specified date and typical for the property type in its locale.
6. The price represents a normal consideration for the property sold unaffected by special financing amounts and/or terms, services, fees, costs, or credits incurred in the transaction."

Numerous definitions of Market Value have been devised over the years by professional organizations, government bodies, courts, etc.

The Supreme Courts of most states have handed down definitions of Market Value for use in the state courts.  These definitions are subject to frequent change.

Persons performing appraisal services which may be subject to litigation are cautioned to seek the exact definition of Market Value in the jurisdiction in which the services are being performed. 

MASS APPRAISING A method used in revaluation of a community for tax purposes.  As the term implies, it is a method of appraising a large number of properties at one time by adopting standard techniques, and giving due consideration to the appraisal process so that uniformity or equality of values may be achieved between all properties.

MLS.  A Multiple Listing Service is a proprietary listing of all properties on the market in a given area and their listing prices, as well as a record of all recent closed sales and their sales prices.  Created by and used primary by real estate agents, many appraisers pay for access to these databases to aid in comparable selection and adjustment research.

 

Obsolescence.  The value of assets diminishes as their capabilities degrade or more desirable alternatives are developed.  Functional obsolescence is the presence or absence of a feature which renders the property undesirable.  Obsolescence can also occur because the surrounding area changes, making a feature of the property less desirable.

 

Subject.  Short for the property being appraised -- the "subject property."

 

Useful life.  The time during which a property can provide benefits to its owner.

 

URAR.  Short for Uniform Residential Appraisal Report, Fannie Mae form 1004, it is the form most lenders require if they need a full appraisal (that is, with walk-through inspection).

 

USPAP.  Short for Uniform Standards of Professional Appraisal Practice, USPAP promotes standards and professionalism in appraisal practice, and is often enacted into law in a state.  It is promulgated by the Appraisal Foundation, a non-governmental entity chartered by Congress to, among other things, maintain appraisal standards.

 

Walk-through.  An inspection that includes a visit to each part of the interior of the house used in estimating value.