The act or process of developing an opinion of value; an opinion of value. It must be expressed as a specific amount, as a range of numbers, or as a relationship.
A transaction between unrelated parties who are each acting in his or her own best interest.
As is market value
The estimate of the market value of real property in its current physical condition, use, and zoning as of the appraisal date.
The value of a property according to the tax rolls.
Any item, the rights to which may have economic value, including financial assets (cash or bonds), business interests, intangible assets (copyrights and trademarks), and physical assets (real estate and personal property).
- An agreement between an appraiser and a client to provide a valuation service.
- The valuation service that is provided as a consequence of such an agreement.
The conversion of income into value.
Certificate of occupancy
A formal written acknowledgment by an appropriate unit of local government that a new construction or renovation project is at the stage where it meets applicable health and safety codes and is ready for commercial or residential occupancy.
Income-producing property such as office buildings, retail buildings, retail buildings, hotels, banks, restaurants, service outlets, and owner-occupied properties that are capable of becoming income-producing should the owner so decide; usually zoned for business purposes.
The recorded price for which title to a property is transferred.
The cost to build, particularly an improvement; includes the direct costs of labor and materials plus the contractor’s indirect costs.
The actual rent specified in a lease.
Reflects the amount a property or component of a property contributes to the value of another asset or to the property as a whole.
A value indication is derived for the fee simple estate by estimating the current cost to construct a replacement for the existing structure, including an entrepreneurial profit; deducting depreciation from the total cost; and adding the estimated land value.
A method used to convert an estimate of a single year’s income expectancy into an indication of value in one direct step. Direct capitalization employs capitalization rates and multipliers extracted or developed from market data.
Discounted cash flow (DCF) analysis
The procedure in which a discount rate is applied to a set of projected income streams and a reversion.
Rate of return on capital used to convert future payments into present value.
The right to use another’s land for a stated purpose.
The period over which improvements such as buildings and site improvements contribute to property value.
A portion of a larger (parent) parcel, vacant or improved, that can be described and valued as a separate and independent parcel.
The age of property that is based on the amount of observed deterioration and obsolescence it has sustained, which may be different from its chronological age.
- The date on which the appraisal applies.
- In a lease document, the date upon which the lease goes into effect.
The total base rent stipulated in a lease minus rent concessions.
Any claim of liability that affects or limits the title to property. An encumbrance cannot prevent the transfer but it does remain after the transfer.
The amount an entrepreneur receives for his or her contribution to a project and risk. The entrepreneur’s compensation for the risk and expertise associated with development.
A right or interest in property.
Land that is not needed to serve or support the existing use. The highest and best use of the excess land may or may not be the same as the parcel. Excess land has the potential to be sold separately and is valued separately.
The time a property remains on the market.
A type of depreciation or a diminution in value caused by negative external influences and generally incurable on the part of the owner, landlord, or tenant.
A study of the cost-benefit relationship of an economic endeavor.
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.
Furniture, fixtures, and equipment (FF&E)
Business trade fixtures and personal property, exclusive of inventory.
A person to whom property is transferred by deed or to whom property rights are granted.
A person who transfers property by deed or grants property rights.
Gross building area (GBA)
- Total floor area of a building. This includes mezzanines and basements.
- Gross leasable area plus all common areas.
A lease that grants the right to use and occupy land. Improvements made by the ground lessee typically revert to the ground lessor at the end of the lease term.
Highest and best use
The reasonably probable use of property that results in the highest value. The four criteria that the highest and best use must meet are legal permissibility, physical possibility, financial feasibility, and maximum productivity.
Personal observation of the exterior or interior of the real estate that is the subject of an appraisal.
The date on which an inspection is performed; distinct from, but often the same as, the date of the value opinion.
A nonphysical asset such as a franchise, trademark, patent, copyright, goodwill, equity, mineral right, security, and contract that grant rights and privileges, and have value for the owner.
The use or uses of an appraiser’s reported appraisal identified by the appraiser based on communication with the client at the time of the assignment.
The client and any other party as identified, by the name or type, as users of the appraisal report by the appraiser on the basis of communication with the client at the time of the assignment.
The proportion of land area to gross building area.
A contract in which the rights to use and occupy land, space, or structures are transferred by the owner to another for a specified period of time in return for a specified rent.
An arrangement in which the seller of a property is obligated to lease the property from the buyer under terms and conditions that are negotiated by the parties.
Leased fee interest
The ownership interest held by the lessor or landlord, which includes the right to receive the contract rent specified in the lease plus the reversionary right when the lease expires.
The right held by the lessee or tenant to use and occupy real estate for a stated term and under the conditions specified in the lease.
Legally nonconforming use
A use that was lawfully established and maintained, but no longer conforms to the use regulations of its current zoning.
One who conveys the rights of occupancy and use to others under lease agreement.
The relative desirability of a property (for sale or lease) in comparison with similar or competing properties in the area.
A valuation technique that provides an indication of value by comparing the subject with identical or similar assets for which price information is available.
Individuals actively engaged in transactions. Those who invest equity in real property or use real estate, buyers, sellers, owners, lenders, tenants.
The most probable rent that a property should bring in a competitive and open market reflecting the conditions and restrictions of a specified lease agreement.
The most probable price, as of a specified date, in cash, or in terms equivalent to cash, for which the specified property rights should sell after reasonable exposure in a competitive market under all conditions requisite to a fair sale, with the buyer and seller each acting prudently, knowledgeably, and for self-interest, and assuming that neither is under undue duress.
A real estate project with planned integration of some combination of retail, office, residential, hotel, recreation, or other functions.
A written communication of results of a valuation assignment presented to the client in narrative style rather than on a form or orally.
A lease in which the landlord passes on all expenses to the tenant. Also called triple net lease.
Net operating income (NOI)
The actual or anticipated net income that remains after all operating expenses are deducted from effective gross income but before mortgage debt service and book depreciation are deducted.
One cause of depreciation; an impairment of desirability and usefulness caused by new inventions, changes in design, improved processes for production, or external factors that make a property less desirable and valuable for a continued use; may be either functional or external.
A set of terms presented by a bidder or prospective buyer or tenant that are subject to negotiation.
Improvements located off the property itself but necessary to facilitate its development, e.g., streets, sidewalks, curbing, traffic signals, water, and sewer mains, parking, water retention ponds.
Any improvements on a site exclusive of buildings.
Rate of return
The ratio of income or yield to the original investment.
Land that is undeveloped.
Land and all things that are a natural part of the land (e.g., trees, minerals) and things that have been attached to the land (e.g., buildings and site improvements) and all permanent building attachments (e.g., mechanical and electrical plant providing services to a building) that are both below and above the ground.
An interest or interests in real estate.
The wear and tear that begins when a building is completed and placed into service.
An enforceable, legal claim to title of or interest in property.
Remaining economic life
The estimated period over which existing improvements are expected to contribute economically to a property.
Tenant’s rented portion out of a building or space.
The estimated cost to construct, at current prices as of a specific date, a substitute for a building or other improvements, using modern materials and current standards, design, and layout.
Replacement cost for insurance purposes
The estimated cost, at current prices as of the effective date of valuation; using modern materials and current standards, design, and layout for insurance coverage purposes guaranteeing that damaged property is replaced with new property (i.e., depreciation is not deducted).
The final communication, written or oral, of an appraisal transmitted to the client.
Sales comparison approach
The process of deriving a value indication for the subject property by comparing sales of similar properties to the property.
A property with a unique physical design, special construction materials, or a layout that particularly adapts its utility to the use for which it was built.
Land that is not currently needed to support the existing use but cannot be separated from the property and sold off for another use.
Tenant improvements (TIs)
Fixed improvements to the land or structures installed for use by a lessee.
Land area that cannot be used practicably for the development of structures and other improvements because of limitations.
The period of time over which a structure or a component of a property may reasonably be expected to perform the function for which it was designed.
The rights granted to use a portion of a property for utility lines, pipes, poles, guy wires, or other improvements.
The date on which the opinion of value applies.
A systematic set of procedures an appraiser follows to provide answers to a client’s questions about real property value.