Glossary of Terms

This appraisal uses definitions from several sources. The sources are specified in the appropriate section of the appraisal and they will be abbreviated within this section.

Assessed Value:  Assessed value applies in ad valorem taxation and refers to the value of a property according to the tax rolls.  Assessed value may not conform to market value, but it is usually calculated in relation to a market value base.

Appraisal Report:  The written or oral communication of an appraisal; the document transmitted to the client upon completion of an appraisal assignment.  Reporting requirements are set forth in the Standards Rules in Standard 2 of the Uniform Standards of Professional Appraisal Practice.

Appreciation:  An increase in property value resulting from an excess of demand over supply, i.e. inflation.

Approaches to Value:  Systematic procedures used to derive value indications in real property appraisal, i.e. Cost Approach, Income Approach; Sales Approach.

Bracketing:  A process in which an appraiser determines a probable range of values for a property by applying qualitative techniques of comparative analysis to a group of comparable sales.  The array of comparables may be divided into two groups-those superior to the subject and those inferior to the subject.  The adjusted sale prices reflected by these two groups limit the probable range of values for the subject and identify a bracket in which the final value opinion will fall.  The most comparable sale will typically fall near the middle of the range.

CAM:  Common area maintenance.

Capitalization Rate:  A rate used to convert income into value.

Cash Equivalent:  The procedure in which the sale prices of comparable properties sold with atypical financing are adjusted to reflect typical market terms.

Clear Height:  The dominant or typical vertical measurement from the floor of the structure to the bottom of the lowest overhead beam.  Also called clear ceiling height or clearance.

Easement:  A nonpossessing interest held by one person in land of another person whereby the first person is accorded partial use of such land for a specific purpose.  An easement restricts but does not abridge the rights of the fee owner to use and enjoyment of the easement holder’s rights.  Easements fall into three broad classifications: surface easements, subsurface easements, and overhead easements.

Exposure Time:  The estimated length of time the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal.

External Obsolescence:  An element of depreciation; a defect, usually incurable, caused by negative influences outside a site and generally incurable on the part of the owner, landlord, or tenant.

Extraordinary Assumption:  An assumption, directly related to a specific assignment, which, if found to be false, could alter the appraiser’s opinion or conclusions.  Extraordinary assumptions presume as fact otherwise uncertain information about physical, legal, or economic characteristics of the subject property; or about conditions external to the property such as market conditions or trends; or about the integrity of data used in an analysis.   (USPAP, 1981 ed.)

Fee Simple Estate:  Absolute ownership unencumbered by any other interest or estate; subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat.

Floor Area Ratio:  The relationship between the above-ground area of a building, as described by the building code, and the area of the plot n which it stands; in planning and zoning, often expressed as a decimal.

Functional Obsolescence:  An element of depreciation resulting from deficiencies or superadequacies in the structure.

Future Prospective Value:  A forecast of the value expected at a specified future date.  A future value opinion is most frequently sought in connection with real estate projects that are proposed, under construction, or under conversion to a new use, or those that have not achieved sellout or a stabilized level of long-term occupancy at the time the appraisal report is written.

Future Prospective Value Upon Reaching Stabilized Occupancy:  The prospective value of a property at a future point in time when all improvements have been physically constructed and the property has been leased to its optimum level of long-term occupancy.  The value estimate at this stage is stated in current dollars unless otherwise indicated.

Going Concern Value:  Tangible and intangible elements of value in a business enterprise resulting from factors such as having a trained workforce, an operational plant and the necessary licenses, systems and procedures in place.

Gross Building Area:  The total floor area of a building, including below-grade space but excluding unenclosed areas, measured from the exterior of the walls.  Gross building area for office buildings is computed by measuring to the outside finished surface of permanent outer building walls without any deductions.

Highest and Best Use:  The reasonable and probable use that supports the highest present value of vacant land or an improved property, as defined, as of the date of the appraisal.  The reasonably probable and legal use of land or sites as though vacant, found to be physically possible, appropriately supported, and financially feasible, and that results in the highest present land value.

Hypothetical Condition:  That which is contrary to what exists but is supposed for the purpose of analysis.  Hypothetical conditions assume conditions contrary to known facts about physical, legal, or economic characteristics of the subject property; or about conditions external to the property, such as market conditions or trends; or about the integrity of data used in an analysis.  (USPAP, 1981 ed.)

Leased Fee Estate:  The ownership interest held by the owner or landlord.  The methodology used to estimate the leased fee interest will be to identify the components of the leased fee interest.  They are 1) The right to receive the base rent under the lease term. 2) The right to receive the property at the end of the lease term.

Leasehold Interest: The interest held by the lessee (the tenant or renter) through a lease transferring the rights of use and occupancy for a stated term under certain conditions.

Market Value “As Is”:  Market value “As Is” on the appraisal, date is an estimate of the market value of a property in the condition observed upon inspection and as it physically and legally exists without hypothetical conditions, assumptions, or qualifications as of the date of the appraisal.

Net Lease:  Lease in which all or some of the operating expenses are paid directly by the tenant.  The landlord never takes possession of the expense payment.  In a Triple Net Lease all operating expenses are the responsibility of the tenant, including property taxes, insurance, interior maintenance, and other miscellaneous expenses.  However, management fees and exterior maintenance are often the responsibility of the lessor in a triple-net lease.

Net Rentable Area:  The area on which rent is computed.  The rentable area of a floor shall be computed by measuring to the inside finished surface of the dominant portion of the permanent outer building walls, excluding any major vertical penetrations of the floor.  No deductions shall be made for columns and projections necessary to the building.  Include space such as a mechanical room, janitorial room, restrooms and lobby of the floor.

Personal Property:  Identifiable tangible objects that are considered by the general public as being “personal”, or example, furnishings, artwork, antiques, gems and jewelry, collectibles, machinery, and equipment; all tangible property that is not classified as real estate.

Stabilized Value:  A value opinion that excludes from consideration any abnormal relationship between supply and demand such as is experienced in boom periods, when cost and sale price may exceed the long-term value, or during periods of depression, when cost and sale price may fall short of long-term value.

Value In Use:  The value a specific property has to a specific person or specific firm as opposed to the value to a person or the market in general.  Special-purpose properties such as churches, schools, and public buildings, which are seldom bought and sold in the open market, can be valued on the basis of value in use.  The value in use to a specific person may include a sentimental value component.  The value in use to a specific firm may be the value of the plant as part of an integrated multi-plant operation.


The Dictionary of Real Estate Appraisal, 7th Edition