rightAppraiser jargon

Have you heard an appraiser use any of these terms? Did you just hear one of our appraisers use it and you came here to figure out what it meant? We don't mean to speak a foreign language, but any profession has its jargon. What res ipsa loquitur is to a lawyer and triple witching is to day traders, external obsolescence is to appraisers. Here are some examples of common appraiser jargon 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 or road frontage, amenities (remodeling or renovations, bedroom and bath counts, fireplaces, in-ground pools, etc) and the like.  This is where the professional expertise of an appraiser is most valuable.

 

Amenities.  Those features that make a property more desirable.  Amenities are permanent fixtures of the property (example, Central AC is an amenity, Window AC units are not; an in-ground pool is an amenity, an above ground pool is not). If a comparable property has a positive amenity (something the subject does not have) the appraiser will adjust, by deduction, what he or she believes what a typical buyer would be willing to pay for that amenity, not what the amenity actually cost. If the comp has a negative amenity (lacks the feature the subject has) the appraiser will make a positive adjustment on the "comp grid" section of the appraisal report. The rationale behind adjustments is to equate or equalize the subject and comps to help determine the fair market value of the subject property. The fewer the adjustments means the more accurate of an indicator (of fair market value) the comp is.  

 

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 (within 1 mile radius) which have sold recently (within the past 6 months), 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.

 

Drive-by.  An appraisal or inspection that is limited to examination of the subject property and comparable sales to determine 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 its 2055, so you may hear a drive-by referred to as a "2055." Not to be confused with the other "Drive By" of urban notoriety.

 

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; that is, what a willing buyer would pay a willing seller in an arm's-length transaction that co-incides with neighborhood trends

 

GLA.  "Gross Living Area" is also known as the subjects' square footage (not lot size) which is the sum of all above grade floor space (not basement), 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 impact the fair market value.  Structural damage or termite infestation might be examples.

 

MLS.  A Multiple Listing Service is a proprietary listing of all properties on the market in a given area and their listing prices, as well as a record of all recent closed sales and their sales prices.  Created by and used primarily by real estate agents, many appraisers pay for access to these databases to aid in comparable property selection and adjustment research.

 

Obsolescence.  The value of assets diminishes 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.  Short for Uniform Residential Appraisal Report, Fannie Mae form 1004, it is the form most lenders require if they need a full appraisal (with walk-through inspection).

 

USPAP.  Short for Uniform Standards of Professional Appraisal Practice, USPAP 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 house used in estimating value.