Glossary of Terms
(excerpts from The Dictionary of Real Estate Appraisal,
3rd Edition, Appraisal Institute, 1993)
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Abatement: An official reduction
or invalidation of an assessed valuation after the initial assessment for ad
valorem taxation has been completed.
Acre: A land measure equal to 43,560 square feet.
Ad valorem tax: A real estate tax based on the assessed value of
the property, which is not necessarily equivalent to its market value.
Amenity: A tangible or intangible benefit of real property that
enhances its attractiveness or increases the satisfaction of the user, but is
not essential to its use. Natural amenities may include a pleasant location
near water or a scenic view of the surrounding area; man-made amenities
include swimming pools, tennis courts, community buildings, and other
Appraisal: 1. An analysis, opinion, or conclusion relating to the
nature, quality, value, or utility of specified interests in, or aspects of,
identified real estate; 2. The act or process of estimating value; an estimate
Approaches to Value: Systematic procedures used to derive value
indications in real property appraisal. (See also: cost approach, income
capitalization approach, sales comparison approach.)
Arbitration: A process in which one or more individuals are selected
by opposing parties to settle a dispute outside of court. The decision of an
arbitrator is generally binding.
Arm's-length Transaction: A transaction between unrelated parties
under no duress.
Assess: 1. To estimate property value as a basis for taxation; 2. To
fix or determine, e.g., by a court or commission, the compensation due a
property owner for the taking of real property.
Assessed Value: The value of a property according to the tax rolls
in ad valorem taxation. May be higher or lower than market value, or based on
an assessment ratio that is a percentage of market value.
Assessment: 1. The official valuation of property for ad valorem
taxation; 2. A single charge levied against a parcel of real estate to defray
the cost of a public improvement that presumably will benefit only the
properties it serves, e.g., assessment for the installation of sidewalks,
curbs, or sewer and water lines; 3. An official determination of the amount to
be paid by or to the owners of real estate to defray the cost of a public
improvement that is presumed to benefit the properties it serves in an amount
at least equal to the cost of the improvement, e.g., assessment of benefits
and damages for public sewer or water lines.
Assessment Period: The period during which all property in the
assessment district must be reassessed; also called "assessment cycle" or
Assessment Ratio: The relationship between assessed value and market
Assessment Roll: A public record that shows how the property tax
levy is allocated among the property owners in a jurisdiction with taxing
powers; usually identifies each taxable parcel in the jurisdiction, the name
of the owner of record, the address of the parcel or the owner, the assessed
value of the land, the assessed value of the improvement(s), applicable
exemption codes if any, and the total assessed value.
Assessment/Sales Ratio: The number derived by dividing the assessed
value by the selling price; used as a measure of the relationship between a
property assessment and market value.
Assessor: 1. The head of an assessment jurisdiction. Assessors may
be either elected or appointed. The term is sometimes used collectively to
refer to all administrators of the assessment function. (IAAO); 2. One who
discovers, lists, and values real property for ad valorem taxation.
Assumptions and Limiting Conditions: For appraisal or analysis
purposes, a list of assumptions and limitations on which an appraisal or
analysis is based.
Bargain and Sale Deed: A deed
that conveys real property from a seller to a buyer but does not guarantee
clear title; used by court officials and fiduciaries to convey property they
hold by force of law, but to which they do not hold title. (See also: Deed,
Grant Deed, Quitclaim Deed, Warranty Deed.)
Board of Equalization: A nonjudicial board that reviews assessments
to see that all districts are assessed at a uniform level of value; authorized
to raise or lower the assessments to achieve a uniform basis of taxation.
Breakdown Method: A method of estimating accrued depreciation in
which the total loss in the value of a property is estimated by analyzing and
measuring each cause of depreciation (physical, functional, and external)
Bundle of Rights Theory: The concept that compares property
ownership to a bundle of sticks with each stick representing a distinct and
separate right of the property owner, e.g., the right to use real estate, to
sell it, to lease it, to give it away, or to choose to exercise all or none of
Certificate of Title: A document,
usually given to a home buyer with the deed, which states that the title to
the property is believed to be clear; usually prepared by an attorney or
another qualified person who has examined the abstract of title for the
Class of Construction: The classification of buildings according to
the fire-resistance of the materials from which they are constructed, e.g.,
structural steel framing (Class A), reinforced concrete framing (Class B),
masonry walls (Class C), wood or light steel framing (Class D).
rental, but is available for common use by all owners, tenants, or their
invitees, e.g., parking and its appurtenances, malls, sidewalks, landscaped
areas, recreation areas, public toilets, truck and service facilities.
Comparables: A shortened term for similar property sales, rentals,
or operating expenses used for comparison in the valuation process; also
Complex: In real estate, a group of buildings, site improvements,
and support facilities designed to carry out related activities in a single
location; e.g., apartment complex, office complex.
Condominium: 1. A form of fee ownership of separate units or
portions of multi-unit buildings that provides for formal filing and recording
of a divided interest in real property; 2. A multi-unit structure or property
in which persons hold fee simple title to individual units and an undivided
interest in common areas.
Cost Approach: A set of procedures
through which a value indication is derived for the fee simple interest in a
property by estimating the current cost to construct a reproduction of, or
replacement for, the existing structure; deducting accrued depreciation from
the reproduction or replacement cost; and adding the estimated land value plus
an entrepreneurial profit. Adjustments may then be made to the indicated fee
simple value of the subject property to reflect the value of the property
interest being appraised.
County: The largest division of local government in all states
except Louisiana and Alaska, where the comparable units are parish and
Curable Depreciation: Items of physical deterioration or functional
obsolescence that are economically feasible to cure. Economic feasibility is
indicated if the cost to cure is equal to or less than the anticipated
increase in the value of the property.
Deed: A written, legal instrument
that conveys an estate or interest in real property when it is executed and
delivered. (See also Bargain & Sale Deed, Quitclaim Deed, Warranty Deed.)
Depreciation: 1. In appraising, a loss in property value from any
cause; the difference between the reproduction or replacement cost of an
improvement on the effective date of the appraisal and the market value of the
improvement on the same date; 2. In regard to improvements, depreciation
encompasses both deterioration and obsolescence.
Deterioration: Impairment of condition; a cause of depreciation that
reflects the loss in value due to wear and tear, disintegration, use in
service, and the action of the elements.
Discounting: A procedure used to convert periodic incomes, cash
flows, and reversions into present value; based on the assumption that
benefits received in the future are worth less than the same benefits received
District: 1. A type of neighborhood characterized by homogeneous
land use (e.g., apartment, commercial, industrial, agricultural); 2. A unit of
local government with the authority to levy taxes and issue bonds to finance
schools, parks, sewers, etc.
Easement: An interest in real
property that conveys use, but not ownership, of a portion of an owner's
property. Access or right-of-way easements may be acquired by private parties
or public utilities. Governments dedicate conservation, open space, and
Egress: A way out; an exit or outlet.
Eminent Domain: The right of government to take private property for
public use upon the payment of just compensation. The Fifth Amendment of the
U.S. Constitution, also known as "the takings clause," guarantees payment of
just compensation upon appropriation of private property.
Equalization: The process by which an appropriate governmental body
attempts to ensure that all property under its jurisdiction is assessed
equitably at market value or at a ratio or ratios as required by law.
Escheat: The right of government that gives the state titular
ownership of a property when its owner dies without a will or any
Fee appraiser: An appraiser who
is paid a fee for the appraisal assignments he or she performs.
Final Value Estimate: The range of values or single dollar figure
derived from the reconciliation of value indications and stated in the
Floodplain: The flat surfaces along the courses of rivers, streams,
and other bodies of water that are subject to overflow and flooding.
Forced Sale: 1. Offering and transferring property for a valuable
consideration under conditions of compulsion; 2. A sale at public auction made
under a court order.
Foreclosure: The legal process in which a mortgagee forces the sale
of a property to recover all or part of a loan on which the mortgagor has
Grantee: A person to whom
property is transferred by deed or to whom property rights are granted by a
trust instrument or other document.
Grantor: A person who transfers property by deed or grants property
rights through a trust instrument or other document.
Guaranteed Title: A title whose validity is insured by an abstract,
title, or indemnity company.
Highest and Best Use: The
reasonable, probable, and legal use of vacant land or an improved property,
which is physically possible, appropriately supported, financially feasible,
and that results in the highest value. The four criteria the highest and best
use must meet are: legal permissibility, physical possibility, financial
feasibility, and maximum profitability.
IAAO: International Association
of Assessing Officers.
Improved Land: 1. Land that has been developed for some use by the
construction of improvements; also, land that has been prepared for
development by grading, draining, installing utilities, etc., as distinguished
from raw land.
Improvements: Buildings or other relatively permanent structures or
developments located on, or attached to, land.
Income Approach: A set of procedures through which an appraiser
derives a value indication for an income-producing property by converting its
anticipated benefits into property value. This conversion can be accomplished
in two ways. One year's income expectancy can be capitalized at a
market-derived capitalization rate or at a capitalization rate that reflects a
specified income pattern, return on investment, and change in the value of the
investment. Alternatively, the annual cash flows for the holding period and
the reversion can be discounted at a specified yield rate.
Incurable Depreciation: An element of accrued depreciation; a defect
caused by a deficiency or superadequacy in the structure, materials, or
design, which cannot be practically or economically corrected.
Industrial Property: Land and/or improvements that can be adapted
for industrial use; a combination of land, improvements, and machinery
integrated into a functioning unit to assemble, process, and manufacture
products from raw materials or fabricated parts; factories that render
service, e.g., laundries, dry cleaners, storage warehouses, or those that
produce natural resources, e.g., oil wells.
Ingress: A means of entering; an entrance.
Instrument: In real estate, a formal, legal document, e.g., a
contract, a deed, a lease, a will.
Intangible Property: 1. Nonphysical items of Personal Property,
e.g., franchises, trademarks, patents, copyrights, goodwill; 2. Deferred items
such as a development or organization expense.
Intestate: The condition of dying without leaving a valid will.
Investment Property: Property that constitutes a business enterprise
consisting of all tangible and intangible assets assembled and developed as a
single unit of utility for lease or rental, in whole or in part, to others for
profit; normally purchased in expectation of annual net income and/or capital
Joint Tenancy: Joint ownership by
two or more persons with the right of survivorship.
Land or Site Analysis: A careful
study of factual data relating to the neighborhood characteristics that
create, enhance, or detract from the utility and marketability of the land or
site as compared with competing, comparable land or sites.
Land-To-Building Ratio: The proportion of land area to gross
building area; typical land-to-building ratios for properties combine land and
building components into a functional economic unit.
Land Use Analysis: A systematic study of an area or region that
documents existing conditions and patterns of use, identifies problem areas,
and discusses future options and choices. As part of the general planning
process, such an analysis might cover topics such as traffic flow, residential
and commercial zoning, sewer services, water supply, solid-waste management,
air and water pollution, or conservation areas. In short, any factors that
could affect how particular areas of land should, or should not, be used.
Legal Description: A description of land that identifies the real
estate according to a system established or approved by law; an exact
description that enables the real estate to be located and identified.
Legal Owner: The owner of title, as distinguished from the holders
of other interests, e.g., beneficial or possessory interests.
Limited Partnership: An ownership arrangement consisting of general
and limited partners. General partners manage the business and assume full
liability for partnership debt, while limited partners are passive and liable
only to the extent of their own capital contributions.
Living Trust: A trust that becomes effective during the lifetime of
its creator, as distinguished from a trust under a will.
Lot: 1. A distinct piece of land; a piece of land that forms a part
of a district, community, city block, etc.; 2. A smaller portion into which a
city block or subdivision is divided; described by reference to a recorded
plat or by definite boundaries; a piece of land in one ownership, whether
platted or unplatted.
Market Value: The most probable
price, as of a specified date, in cash, or in terms equivalent to cash, or in
other precisely revealed terms 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
Mass Appraisal: The process of valuing a universe of properties as
of a given date utilizing standard methodology, employing common data, and
allowing for statistical testing.
Metes and Bounds System: A system for the legal description of land
that refers to the parcel's boundaries, which are formed by the point of
beginning (POB) and all intermediate points (bounds) and the courses or
angular direction of each point (metes).
Mill: One-tenth of one cent; often used to express real estate
Mill Levy: A tax rate expressed in tenths of a cent; e.g., a tax
rate of one mill per thousand means $1 of taxes per $1,000 of assessed value.
Multiple Use: 1. A combination of compatible land uses in an area;
2. A combination of compatible uses in a single building.
Neighborhood: A group of
complementary land uses; a congruous grouping of inhabitants, buildings, or
Obsolescence: One cause of
depreciation; an impairment of desirability and usefulness caused by new
inventions, changes in design, improved processes for production, or other
external factors that make a property less desirable and valuable for a
continued use; may be either functional or external.
Overimprovement: An improvement that does not represent the most
profitable use for the site on which it is placed because it is too large or
costly and cannot develop the highest possible land value; may be temporary or
Owner of Record: The owner of title to a property as indicated by
Parcel: A piece of land of any
size in one ownership.
Parcel Number: A code number that serves as an abbreviation of, or
replacement for, a parcel's legal description; used to facilitate the storage
and use of land data in an information system; may be based on geocodes,
government surveys, or tax maps.
Partial Interest: Divided or undivided rights in real estate that
represent less than the whole.
Partnership: A business arrangement in which two or more persons
jointly own a business and share in its profits and losses.
Personal Property: Identifiable portable and tangible objects that
are considered by the general public to be "personal", e.g., furnishings,
artwork, antiques, gems and jewelry, collectibles, machinery and equipment;
all property that is not classified as real estate. Personal property includes
movable items that are not permanently affixed to, and part of, the real
Plat: 1. A plan, map, or chart of a city, town, section, or
subdivision indicating the location and boundaries of individual properties;
2. A map or sketch of an individual property that shows property lines and may
include features such as soils, building locations, vegetation, and
Plat Book: A record showing the location, size, and owner of each
plot of land in a stated area.
Plot Plan: A plan showing the layout of improvements on a property
site or plot; usually includes location, dimensions, parking areas,
landscaping, and other features.
Point of Beginning (POB): A survey reference point that is tied into
adjoining surveys. In a metes and bounds description, courses that connect
monuments or points are generally described from this point.
Power of Attorney: A legal instrument in which a person authorizes
another to act as his or her attorney or agent.
Quitclaim Deed: A form of
conveyance in which any interest the grantor possesses in the property
described in the deed is conveyed to the grantee without warranty of title.
Real Estate: Physical land and
appurtenances attached to the land, e.g., structures. An identified parcel or
tract of land, including improvements, if any.
Real Property: All interests, benefits, and rights inherent in the
ownership of physical real estate; the bundle of rights with which the
ownership of the real estate is endowed. In some states, real property is
defined by statute and is synonymous with "real estate".
Reassessment: The process in which all property within a taxing
jurisdiction is revalued to assign new assessed values.
Reconciliation: 1. The last phase of any valuation assignment in
which two or more value indications derived from market data are resolved into
a final value estimate, which may be either a final range of value or a single
point estimate; 2. In the Sales Comparison Approach, reconciliation may
involve two levels of analysis: derivation of a value indication from the
adjusted prices of two or more comparable sales expressed in the same unit of
comparison, and derivation of a value indication from the adjusted prices of
two or more comparables expressed in different units of comparison.
Recorded Map: A map of a parcel of land that has been filed in the
office of the County Clerk and Recorder; e.g. "as per map recorded in book 56
at page 20".
Recording: The filing of a copy of a legal instrument or document,
e.g., a deed, in a government office provided for this purpose; creates a
public record of the document for the protection of all concerned and gives
constructive notice to the public at large.
Rectangular Survey System: A system for the legal description of
land that refers to the parcel's location in a township, an area approximately
six miles square that is formed by the intersection of principal meridians and
base lines. Each township contains 36, one-square-mile sections of 640 acres.
Residence: Any property used as a dwelling; in law, the legal
domicile; used for owner occupancy, not investment income.
Right of Survivorship: Right of the surviving joint tenant to
acquire the interest of the deceased joint tenant in joint tenancies and
tenancies by the entirety without any probate proceedings.
Sales Comparison Approach:
A set of procedures in which a value
indication is derived by comparing the property being appraised to similar
properties that have been sold recently, applying appropriate units of
comparison, and making adjustments to the sale prices of the comparables based
on the elements of comparison. The sales comparison approach may be used to
value improved properties, vacant land, or land being considered as though
vacant; it is the most common and preferred method of land valuation when
comparable sales data are available.
Sales-Ratio Analysis: A study of the relationship between assessed
values and sale prices and the deviations that result from differences between
the two; used to determine the efficiency and fairness of the assessment
process in a particular jurisdiction.
Section: In the government survey system of land description, one of
the 36 sections, each one mile square, into which each township is divided.
Situs: In real estate, the physical location of a property; in
personal property, the taxable location because personal property may be moved
from one place to another.
Special Assessment: An assessment against real estate levied by a
public authority to pay for public improvements, e.g., sidewalks, street
improvements, sewers; an amount levied against individual owners in a
condominium or cooperative to cover their proportionate shares of a common
Special Districts: Special service governments created to provide a
particular service, e.g., economic development districts, water resource
Square Foot Cost: The cost of one square foot of an improvement;
obtained by dividing the actual, or estimated, cost of a building by its gross
floor area or by dividing the actual, or estimated, cost of a land improvement
by its square foot area; can be multiplied by the number of square feet in a
building or land improvement to produce the actual or estimated cost.
Tax: A compulsory contribution
legally exacted from persons, corporations, and other organizations by a
government, for the support of government and the maintenance of public
Taxation: The right of government to raise revenue through
assessments on valuable goods, products, and rights.
Tax Base: The unit of value to which the tax rate is applied to
determine the tax due; for property taxes, the assessed valuation; for income
taxes, the net taxable income.
Tax District: A political subdivision of one or more assessment
districts where a governmental unit has the authority to levy taxes.
Tax Exemption: Total exemption or freedom from tax; granted to
educational, charitable, religious, and other nonprofit organizations. Partial
exemptions from ad valorem tax are granted to homesteads in some states.
Tax Levy: In property taxation, the total revenue that will be
realized by a tax.
Tax Lien: A lien that is automatically attached to property in the
amount of its unpaid property taxes.
Taxpayer: One who pays or is liable for a tax.
Tax Rate: The ratio between the tax and the tax base; applied to the
assessed value to determine the amount of tax; obtained by dividing the amount
of the tax levy by the total assessed value of all properties in the tax
district; usually expressed in dollars per $100 or $1,000 (mills) of assessed
Tax Roll: The official list of all taxpayers subject to property
tax, the amounts of their assessments, and the taxes due.
Tenancy: 1. The holding of property by any form of title; 2. The
right to use and occupy property as conveyed in a lease.
Tenancy in Common: An estate held by two or more persons, each of
whom has an undivided interest.
Title: The combination of all elements that constitute proof of
Township: In the government survey system of land description, the
area between two township lines and two range lines; normally contains 36
sections of approximately 640 acres each.
Township Lines: In the government survey system of land description,
survey lines that run east and west at six-mile intervals north and south of a
baseline and form the north and south boundaries of townships.
Tract: A parcel of land; an area of real estate that is frequently
subdivided into smaller parcels.
Trust Deed: A deed that establishes a trust, an instrument that
conveys legal title to a property to a trustee, stating the trustee's
authority and the conditions that bind the trustee in dealing with the
Trustee: A person who controls legal title to a property under a
Underimprovement: An improvement
that is inadequate to develop the highest and best use of its site; usually a
structure that is of lesser cost, quality, and size than typical neighborhood
Undivided Interest: Fractional ownership without physical division
Uniform Standards of Professional Appraisal Practice (USPAP):
Current standards of the appraisal profession, developed for appraisers and
the users of appraisal services by the Appraisal Standards Board of The
Appraisal Foundation. The Uniform Standards set forth the procedures to be
followed in developing an appraisal, analysis, or opinion and the manner in
which an appraisal, analysis, or opinion is communicated. They are endorsed by
the Appraisal Institute and by other professional appraisal organizations.
Unimproved Land: Vacant land or land that lacks the essential,
appurtenant improvements required to make it useful.
Units of Comparison: The components into which a property may be
divided for purposes of comparison, e.g., price per square foot, front foot,
cubic foot, room, bed, seat, apartment unit.
Useable Area: The actual occupiable area of a floor or an office;
computed by measuring the finished surface of the office side of corridor and
other permanent walls, to the center of partitions that separate the office
from adjoining usable areas, and to the inside finished surface of the
dominant portion of the permanent out building walls. The usable area of a
floor is equal to the sum of all usable areas of that floor. No deductions are
made for columns and projections necessary to the building.
Use Classification: Categories into which real estate can be divided
according to its use: residential, commercial, industrial, agricultural, and
Valuation: The process of
estimating the market value, insurable value, investment value, or some other
properly defined value of an identified interest or interests in a specific
parcel or parcels of real estate as of a given date. Valuation is a term used
interchangeably with appraisal.
Value: 1. The monetary worth of a property, good, or service to
buyers and sellers at a given time; 2. The present worth of the future
benefits that accrue to real property ownership.
Warranty Deed: A deed that
conveys to the grantee title to the property free and clear of all
encumbrances, except those specifically set forth in the document.
Weighted Average: An average in which each component is adjusted by
a factor that reflects its relative importance to the whole; obtained by
multiplying each component by its assigned weight, adding the products, and
dividing the sum of the products by the sum of the weights.
Zoning: The public regulation of
the character and extent of real estate use through police power; accomplished
by establishing districts or areas with uniform restricts relating to
improvements; structural height, area, and bulk; density of population; and
other aspects of the use and development of private property