Like any profession, the Real Estate Appraiser profession has it’s own terminology that accompanies it. For an Appraiser the terms are second nature and we can sometimes forget that the layman may not know the meaning of some of the things that we say. Here is a brief list of words and definitions that your Appraiser may use. If your Appraiser uses some term that isn’t on this list, go ahead and ask him/her, like we said, we Appraisers use these terms everyday and we sometimes forget that you don’t.
The Subject Property is the property that is being Appraised.
Comparable / Comparable Property / Comp
The most readily used approach to determining the value of a Residential property is the sales comparison approach. During this approach, the Appraiser will locate a minimum of three recent closed sales and a minimum of two active listings that the Appraiser finds to be most similar to the subject property. Of all the homes that are researched, these are the most ‘Comparable’ to the subject property.
After determining the most comparable properties to the subject, the Appraiser will compare each property side by side in a grid. Each relevant amenity or characteristic of the subject and each comparable is laid out side by side. When there is a difference in one of these characteristics between the subject and one or more comparable, an ‘Adjustment’ is made. When the characteristic of the comparable is superior, a negative or minus adjustment is made. Conversely, when the characteristic of the comparable is inferior, a positive or plus adjustment is made.
A Drive-By Appraisal is an Appraisal performed without entering into the subject property. Also known as a curb side inspection, the opinion of value is established based on the quality of exterior features and under the assumption that the interior reflects a similar quality. This type of Appraisal will typically have a smaller fee then a standard Appraisal, but will also hold much less confidence in the opinion of value.
Derived from the word obsolete, it is a term that describes the diminishing desirability of an outdated characteristic (Functional Obsolescence). Also as a means to describe changes in external features, such as changes to the subject’s area which may result in less desirability, but are ultimately beyond the control of the home owner (External Obsolescence).
The term Deferred Maintenance is used to describe a lack of maintenance or updating that would otherwise bring the subject property up to a conforming standard present within the area.
Here are a few terms that you will probably not hear from your Appraiser, but are important to know when reviewing the final Appraisal report.
An acronym meaning ‘Gross Living Area’ which is the total legal living area including closets and stairways (but not stairwells), typically represented in square feet (sq). This is all living area that is above grade and has access to a heat source. The GLA of a single family home includes the thickness of the exterior walls, whereas the GLA of a condo will not.
An acronym for ‘Multiple Listing Services’ which is a listing service of all properties that are currently listed on the market as well as all closed sales within a given area. This is an important service utilized by Real Estate Appraisers in order to determine comparable properties within the area.
Short for ‘Universal Residential Appraisal Report’ which is a Fannie Mae form 1004 and is the most commonly utilized report in completing Appraisals on a single family residence.
The ‘Uniform Standards of Professional Appraisal Practice’ is a uniform set of standards and guidelines established to maintain consistency amongst the Real Estate Appraiser profession.