Every job field has their set of terms that most of the time, no normal person has any idea what they mean. These kinds of terms just become part of your everyday vocabulary after working in a certain field for awhile and eventually you don’t even realize that no one has any idea what you are talking about when you use them. Here is a list of real estate appraisal terms.
I put together this list of terms that appraisers frequently use, so that people who are unfamiliar with them can have a better understanding of what we are talking about all of the time.
This list is a working list so I will add to the list every so often.
The term “adjustment” is used when talking about comparable properties in the appraisal report.
Once the appraiser has identified the comparable properties that are most similar to the property that is being appraised, he will make “adjustments” to the sale or list price of each comparable. These adjustments are made in the form of dollar amounts and are used to bring the comparable properties into equivalency with the subject property.
“As Is” a term that is used when discussing the condition of property. All it refers to is the property in it’s current state. The majority of appraisals are written for the “As Is” quality and condition of the property.
“As Completed” or “Subject To”
These terms can be used interchangeably, but sometimes mean different things in different circumstances. Sometimes an appraisal can be written on a property that is not complete yet, or that is suffering from items that need to be repaired before further action can be taken.
Both of these terms refer to the property as if it has been completed or repaired.
Comparable or “Comp”
Comps! This is the one word of appraiser jargon that you will most likely hear the most and probably already hear a million times if you have ever dealt with an appraiser. Comparables, or “Comps” for short, are the comparable properties that the appraiser uses to compare to the subject property being appraised.
*Many times clients will request a “comp check” ahead of the appraisal to see if the property is worth the value they need to make the loan.
There are three approaches to value that can be used to estimate the value of property.
Typically, the sales comparison approach is always used. But the Cost Approach is another approach to value that is used in most residential appraisals as well. The basis for the Cost Approach is basically how much the subject property would cost if it were to be reproduced at that point in time.
The term Drive-By (No, not a drive-by shooting) is a pretty simple one that needs little if no explaining. It refers to an exterior only inspection. It is called a “Drive-By” because all the appraiser has to do is drive by and take pictures of the property.
The effective date is an important date in an appraisal report because it is the date of when the value is effective. The effective date is typically the date that the appraiser went out and inspected the property, but when an appraisal is being done for an estate, a common effective date in this situation is the date of death.
The grid is an essential part of the sales comparison approach (Discussed further down this page). It is where all of the comparable properties are laid out, each with their property traits, such as lot size, square footage, bedroom/bathroom count, and more. The grid is where the adjustments are made to bring the comparable properties into equivalency with the subject property.
As mentioned before there are three approaches to valuing a property. The income approach is one of these three and is typically only used when a property is making income or will be in the future.
Inspections are what the appraiser typically does before writing the appraisal report. Inspections can be done in the form of a full inspection or an exterior only inspection. A full inspection is when the appraiser comes out to measure the property and inspect the interior. An “exterior only” or “drive-by” inspection is where the appraiser just takes photos from the exterior and doesn’t measure the property.
GLA is a simple acronym that stands for Gross Living Area. GLA is all of the above grade floor space inside your home. The appraiser will typically determine the GLA of a property by measuring its exterior dimensions.
GBA is also a simple acronym that stands for Gross Building Area. Not to be confused with Gross Living Area, Gross Building Area is all of the space including below grade space, as long as it is finished. GBA is typically used when referring to 2-4 unit properties and commercial properties. Not so much with single family residential properties.
The Multiple Listing Service is basically like Google for residential real estate. Brokers use the MLS to list properties for sale, so all of the listings, sales, expirations, cancellations and more are shown on the MLS. This is where the majority of our information comes from when writing a residential appraisal report.
Obsolescence occurs when a property is no longer desirable because there are more desirable alternatives available. There are two kinds of obsolescence in real estate appraisal practice. These can be divided into functional obsolescence and external obsolescence.
Functional obsolescence is obsolescence that pertains to the property itself. Functional obsolescence is divided into two categories, curable and incurable. Curable means that the cost of “curing” the obsolescence is less that the value it will add back to your home. Incurable means that the cost of “curing” the obsolescence is more than the value it will add back.
External Obsolescence is a little different because it is outside factor that is out of your control and affects the value of your property. This is typically something like a busy road or commercial building that is adjacent to the property.
Planned unit development, or PUD’s for short, are communities of homes that can include single family homes, condos, and even commercial properties. All the homes are built around the same time, and there are typically only a few different floor plans, so they all look similar. Planned Unit Developments are similar to condominium complexes in the fact that they have an HOA, but they are different in the way repairs and other maintenance issues are handled. PUDs are extremely common in urban and suburban areas, especially where I live in Southern California.
Sales Comparison Approach
The third and most commonly used approach to value is the Sales Comparison Approach. This is the approach that you think of if you have ever had any exposure to appraisals. The sales comparison approach is performed by finding comparable properties and making adjustments to these comparable properties to come to an opinion of value for the subject property. These comparable properties and their specific traits are laid out in a grid, where the adjustments are made.
Scope of Work
The scope of work essential consists of six key parts including the client and intended users, intended use of the report, the definition of the value, any hypothetical conditions or extraordinary assumptions, the effective date, and the salient features of the property. But all you need to know is that the scope of work is just explaining the need for the appraisal and why it was ordered in the first place.
This is a unit of measurement that you will see it a lot when you are communicating with appraisers. It stands for square foot and is a measurement that appraisers use all the time, whether it is referring to lot size or the size of the home itself.
Subject Property, or subject for short, is the property that is being appraised. A lot of times appraisers will just refer to it as the subject since it is easier than saying subject property.
URAR stands for Uniform Residential Appraisal Report. This is an appraisal form used to appraise single family homes. This is arguably the most common and widely used appraisal form for real estate appraisers.
This is another appraisal acronym that stands for Uniform Standards of Professional Appraisal Practice. You could call it the law of appraisal practice. Basically what USPAP is, is a lengthy book of quality control guidelines for real estate appraisal practice.
The acronym UAD stands for Universal Appraisal Dataset. Simply put, UAD is the acceptable terms and values allowed on an appraisal report. It is a set of standard rules and abbreviations for use in appraisal reports.
However, there are only a select few UAD forms that are in use. These include the 1004, 1073, 2055, and 1075 forms. These four forms are otherwise known as the forms used to appraise single family residential properties and condominiums.
A Walk-Through is what an appraiser does when he comes to inspect the property. He “walks-through” the home to mark down the rooms on his sketch, take pictures of each room, take note of the finishes and other necessary details. A walk-through is part of the appraisal inspection (Talked about further up the page).