Appraisal Terminology

Appraisal Terminology

Understanding appraisal terminology can help homeowners communicate effectively with appraisers and real estate professionals. Here is a list of common terms:

• General Appraisal Terms
  • Market Value – The most probable price a property should bring in an open and competitive market.
  • Appraised Value – The value opinion developed by the appraiser.
  • ARV (After Repair Value) – The estimated value of a property after proposed renovations are completed.
  • Effective Date – The date the value opinion applies (inspection date, retrospective date, or prospective date).
  • Scope of Work – The level of research and analysis performed to develop the appraisal.
  • Exposure Time – Estimated time a property would be on the market before selling at market value.
  • Marketing Time – Estimated time after the effective date that a property will take to sell.
  • Highest and Best Use – The reasonably probable use that results in the highest value.
  • Extraordinary Assumption – An assumption related to uncertain information that is believed to be true.
  • Hypothetical Condition – A condition that is contrary to known facts but assumed for valuation purposes.
  • Assignment Conditions – All requirements, limitations, and assumptions for the appraisal

• Property Characteristics
  
  • GLA (Gross Living Area) – Above-grade, fully finished, heated living area.
  • Gross Building Area – Total finished area including all levels (commercial or multi-unit).
  • Site Size / Lot Area – Measured in square feet or acres.
  • Zoning – Legal classification dictating permitted land use.
  • Legal Non-Conforming Use – A use that was legal when established but no longer conforms to current zoning.
  • Functional Utility – How well the property’s design, layout, and features meet market expectations.
  • Functional Obsolescence – Loss in value due to poor layout or outdated features.
  • External Obsolescence – Loss in value due to outside influences (traffic, commercial influence, noise).

• Market Analysis Terms
  
  • Comparable Sales (Comps) – Recently sold properties similar to the subject used for valuation.
  • Adjusted Sale Price – Price of a comp after market-based adjustments.
  • Paired Sales Analysis – Method to determine adjustment amounts by comparing similar sales.
  • Price Per Sq Ft – A standard metric used to analyze market trends and support adjustments.
  • Bracketing – Selecting comps that bracket (exceed and fall below) key features such as GLA, lot size, or value.
  • Time Adjustment – Market-based adjustment for appreciation or depreciation.
  • Market Trend – Overall direction of prices (stable, increasing, declining).
  • 1004MC – Market conditions addendum used for trend analysis.

• Reporting Terms
  
  • Subject to – Value conclusion dependent on proposed repairs or conditions.
  • As-Is – Value opinion of the property in its current condition.
  • As-Repaired – Value assuming completion of repairs (similar to ARV).
  • Reconciliation – The process of weighing approaches to reach the final value.
  • Intended User – The party authorized to rely on the appraisal.
  • Intended Use – The purpose of the appraisal.

Familiarity with these terms can enhance your understanding of the appraisal process.

Conclusion

Being knowledgeable about appraisal terminology can empower homeowners during real estate transactions.