Common Appraiser Terms
Have you heard an appraiser use any of these terms? Here are some examples of common appraiser terminology 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.
Contributory Value - The value of an improvement that contributes to the value of the property. This is different from the cost of the improvement. How much does this improvement add to the property value rather than how much does the improvement cost.
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 the 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) - Refers to 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 impacts the fair market value. Structural damage or termite infestation might be examples.
MLS (Multiple Listing Service) - A proprietary listing of all properties on the market in a given area with their listing prices, as well as a record of all recent closed sales and their sale prices. Created by and used primarily 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 diminish 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 (Uniform Residential Appraisal Report) - Refers to Fannie Mae form 1004. It is the form most lenders require if they need a full appraisal (with walk-through inspection).
USPAP (Uniform Standards of Professional Appraisal Practice) - 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 property used in estimating value.