Appraisal Definitions
The following definitions are sourced from:
- The Dictionary of Real Estate Appraisal, 6th ed., Appraisal Institute
- 2024 USPAP by The Appraisal Foundation
- Building Owners and Managers Association (BOMA)
- StartDeck.com
As Is Value #
The value of a property in its current condition, occupancy and operating expenses. This may or may not be synonymous with the As Stabilized value of the property.
Source: StartDeck.com
As Stabilized Value #
The value of a property after it reaches a normal occupancy rate and operating expenses.
Source: StartDeck.com
Building Classes #
Class A: New well located high quality buildings with high energy efficiency, high quality tenancy, top tier rents and low vacancy. These buildings are professionally managed and exhibit little or no deferred maintenance. Because of the lower risk profile, Class A buildings generally exhibit low cap rates.
Class B: These properties exhibit good quality improvements, tenancy, design, adequate on-going maintenance, and good to average energy efficiency. Many of these properties were Class A when new, but now are somewhat dated with attendant depreciation. This is reflected in generally higher cap rates when compared to Class A buildings.
Class C: These are older buildings often in secondary locations. Original construction is markedly below Class B buildings often with deferred maintenance and/or renovations required. Tenancy is lower quality, vacancy higher, and higher on-going expenses. Accordingly, these buildings exhibit higher cap rates for the market area.
Source: StartDeck.com
Capitalization Rate #
The rate of return generated by real estate. It is calculated as NOI/Price or NOI/value.
Source: StartDeck.com
Effective Gross Income (EGI) #
The anticipated income from all operations of the real estate after an allowance is made for vacancy and collection losses and an addition is made for any other income.
Source: Dictionary
Expense Ratio #
Total operating expenses measured as a percent of Effective Gross Income (EGI).
Source: StartDeck.com
Excess Land #
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 highest and best use of the improved parcel. Excess land has the potential to be sold separately and is valued separately.
Source: Dictionary
Exposure Time #
An opinion, based on supporting market data, of the length of time that the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal.
Comment: Exposure time is a retrospective opinion based on an analysis of past events assuming a competitive and open market.
Source: USPAP
See Marketing Time
Extraordinary Assumption #
An assignment-specific assumption as of the effective date regarding uncertain information used in an analysis which, if found to be false, could alter the appraiser’s opinions or conclusions.
Comment: Uncertain information might include physical, legal, or economic characteristics of the subject property; or conditions external to the property, such as market conditions or trends; or the integrity of data used in an analysis.
Source: USPAP
Fee Simple Property Rights #
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.
Source: Dictionary
Floor Area Ratio (FAR) #
This is the ratio of building to land area, calculated as building area ÷ lot area.
Source: StartDeck.com
Gross Building Area (GBA) #
- Total floor area of a building, excluding unenclosed areas, measured from the exterior of the walls of the above-grade area. This includes mezzanines and basements if and when typically included in the market area of the type of property involved.
- Gross leasable area plus all common areas.
- For residential space, the total area of all floor levels measured from the exterior of the walls and including the superstructure and substructure basement; typically does not include garage space.
Source: Dictionary
Hypothetical Condition #
A condition, directly related to a specific assignment, which is contrary to what is known by the appraiser to exist on the effective date of the assignment results, but is used for the purpose of analysis.
Comment: Hypothetical conditions are contrary to known facts about physical, legal, or economic characteristics of the subject property; or about conditions external to the property, such as market conditions or trends; or about the integrity of data used in an analysis.
Source: USPAP
Leased Fee Property Rights #
An ownership interest held by a landlord with the rights of use and occupancy conveyed by a lease to others. The rights of the lessor (the fee simple owner) and the fee simple are specified by contract terms contained within the lease.
Source: Dictionary
Market Value # is defined as the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:
- buyer and seller are typically motivated;
- both parties are well informed or well advised and acting in what they consider their own best interests;
- a reasonable time is allowed for exposure in the open market;
- payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and
- the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.
Source: Dictionary
Marketing Time #
An opinion of the amount of time it might take to sell a real or personal property interest at the concluded market value level during the period immediately after the effective date of an appraisal.
Source: USPAP Advisory Opinion 7 Marketing Time
See Exposure Time
Net Operating Income (NOI) #
Effective Gross Income - Expenses = Net Operating Income
Source: StartDeck.com
Net Rentable Area / Rentable Area #
NRA is defined as "the area of a building that can be rented to tenants, calculated by measuring the floor area from the inside faces of exterior walls and from the centerline of partition walls separating tenant spaces and excluding any vertical penetrations, such as elevator shafts or stairwells."
Source: BOMA
Potential Gross Income (PGI) #
Potential Gross Income (PGI) is the total income attributable to property at full occupancy before vacancy and operating expenses are deducted.
Source: Dictionary
Prospective Opinion of Value #
A value opinion effective as of a specified future date. The term does not define a type of value. Instead, it identifies a value opinion as being effective at some specific future date. An opinion of value as of a prospective date is frequently sought in connection with projects that are proposed, under construction, or under conversion to a new use, or those that have not yet achieved sellout or a stabilized level of long-term occupancy.
Source: Dictionary
Retrospective Value Opinion #
A value opinion effective as of a specified historical date. The term retrospective does not define a type of value. Instead, it identifies a value opinion as being effective at some specific prior date. Value as of a historical date is frequently sought in connection with property tax appeals, damage models, lease renegotiation, deficiency judgments, estate tax, and condemnation. Inclusion of the type of value with this term is appropriate, e.g., “retrospective market value opinion.”
Source: Dictionary
Surplus Land #
Land that is not currently needed to support the existing use but cannot be separated from the property and sold off for another use. Surplus land does not have an independent highest and best use and may or may not contribute value to the improved parcel.
Source: Dictionary
Vacancy and Collection Loss (V&C) #
Lost income from vacancies and collections, measured as a percent of PGI.
Source: StartDeck
Zoning Variance #
A zoning variance is an official permit allowing property owners to deviate from established zoning regulations, which typically control land use, building sizes, setbacks, and other structural requirements. There are two main types of variances: use variances, which permit property uses not allowed by current zoning ordinances, and area variances, which provide relief from specific dimensional requirements like building height, setbacks, and lot coverage. A zoning variance is a legal non-conforming use.
Source: StartDeck