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Abatement
The exemption of all or part of the value of an improvement for a finite term of years.
Acquisition Value
The market value of property at the time it was acquired by the present owner
or of the last major physical change to the property.
Ad Valorem Tax
A tax levied in proportion to the value of property being taxed.
Aerial Photograph
A photograph of a part of the earth's surface taken by an aircraft-supported
camera.
Appeal
A process in which a property owner contests a property valuation either informally or formally.
Arm's Length Sale
A sale between two unrelated parties, both seeking to maximize their positions
from the transaction.
Assessment Date
The status date for tax purposes. Appraised values reflect the status of the
property and any partially completed construction as of
this date.
Assessment Equity
The degree to which assessments bear a consistent relationship to market value.
Assessment Ratio
(1) The fractional relationship an assessed value bears to the market value of
the property in question. (2) By extension, the fractional relationship the
total of the assessment roll bears to the total market value of all taxable
property in a jurisdiction.
Assessment Ratio Study
An investigation intended to determine the assessment ratio and assessment
equity.
Assessment Progressivity (Regressivity)
An appraisal bias such that high-value properties are appraised higher (or
lower) than low-value properties in relation to market values.
Benchmark
(1) A term used in land surveying to mean a known point
Cadastral Map
A scale map displaying property ownership boundaries and showing the dimensions
of each parcel with related information such as parcel identifier, survey lines
and easements.
Capitalization Rate
Any rate used to convert an estimate of future income to an estimate of present
market value.
Class
A set of items defined by common characteristics (1) In property taxation,
property classes such as residential, agricultural, and industrial may be
defined. (2) In assessment, building classification system based on type of
building design, quality of construction or structural type are common. (3) In
statistics, a predefined category into which data may be put for further
analysis. For example, ratios may be grouped into the following classes: less
than 0.500,0.500 to 0.599, 0.600 to 0.699, and so forth.
Coding
(1) the act of reducing a description of a unique object, such as parcel of
real estate to a set of one or more measures or counts of certain of its
characteristics, such as square footage, number of bathrooms, and the like. (2)
Encoding, a related term, is usually used to refer to the act of translating
coded descriptions useful to human beings into a form that can be processed by
computers. (3) Coding is sometimes also used to refer to writing of
instructions that direct the processing done by computers.
Coefficient
(1) In a mathematical expression, a number or letter preceding and multiplying
another quantity. For example, in the expression, 5x, 5 is the coefficient of
x, and in the expression ay, a is the co-efficient of y. (2) A dimensionless
statistic, useful as a measure of change or relationship; for example,
correction coefficient.
Coefficient of Dispersion
The average deviation of a group of numbers from the median expressed as a
percentage of the median. In ratio studies, the average percentage deviation
from the median ratio.
Commercial Property
Generally, any non-industrial, nonresidential realty of commercial enterprise.
Includes realty used as a retail or wholesale establishment, hotel or motel,
service station, commercial garage, warehouse, theater, bank, nursing home, and
the like.
Comparable Sales; Comparables
(1) Recently sold properties that are similar in important respects to the
property being appraised. The sale price and the physical, functional, and
locational characteristics of each of the properties are compared to those of
the property being appraised in order to arrive at an estimate of value. (2) By
extension, the term "comparables " is sometimes used to refer to
properties with rent or income patterns comparable to those of a property being
appraised.
Comparative Unit Method
(1) A method of appraising land parcels in which an average or typical value is
estimated for each stratum of land. (2) A method of estimating replacement cost
in which all the direct and indirect costs of structure (except perhaps
architect's fees) are aggregated and specified with reference to a unit of
comparison such as square feet of ground area or floor area, or cubic content.
Separate factors are commonly specified for different intervals of the unit of
comparison and for different story heights, and separate schedules are commonly
used for different building types and quality classes.
Computer-Assisted Mass Appraisal (CAMA)
A system of appraising property, usually only certain types of real property,
that incorporates computer supported statistical analyses such as multiple
regression analysis and adaptive estimation procedure to assist the evaluator
in estimating value.
Cost
The money expended in obtaining an object or attaining an objective; generally
used in appraisal to mean the expense, direct and indirect, of constructing an
improvement.
Cost Approach
(1) One of the three approaches to value, the cost approach is based on the
principle of substitution-that a rational, informed purchaser would pay no more
for a property than the cost of building an acceptable substitute with like
utility. The cost approach seeks to determine the replacement cost new of an
improvement less depreciation plus land value. (2) The method of estimating the
value of property by (a) estimating the cost of construction based on
replacement or reproduction
cost new or trended historic cost (often adjusted by a local multiplier), (b)
subtracting depreciation, and (c) adding the estimated land value. The land
value is most frequently determined by the sales comparison approach.
Cost Schedules
Charts, tables, factors, curves, equations, and the like intended to help
estimate the cost of replacing a structure from a knowledge of some other
factors, such as its quality class and number of square feet.
Data
The general term for masses of numbers, codes and symbols generally.
"Data" is the plural of datum, one element of data.
Data Edit
The process of examining a record's data to ensure that element of data is
reasonable and is consistent with other recorded for the same object, such as
parcel of real estate Data editing, which may be done by persons or by
computer, is essentially a mechanical process, distinct from verifying the
correctness of the recorded information by calling or writing property owners.
Data Management
The human (and sometimes computer) procedures employed to ensure that no
information is lost through negligent handling of records from a file, that all
information is property supplemented and up-to-date, and that all information
is easily accessible.
Depreciation
Loss in value of an object, relative to its replacement cost, whatever the
cause of loss in value. Depreciation is sometimes subdivided into three types;
physical deterioration (wear and tear), functional obsolescence sub-optimal
(design in light of current technologies or tastes), and economic obsolescence
(poor location or radically diminished demand for product).
Depreciation Schedules
Tables used in mass appraisals that show the typical loss in value at various
ages or effective ages for different types of properties.
Discount Rate
The rate of return on investment; the rate an investor requires to discount
future income to its present worth.
Effective Tax Rate
(1) The relationship between dollars of tax and dollars of market value of a
property. The rate may be calculated either by dividing tax value or by
multiplying a property's assessment level by its nominal tax rate.
Elasticity (tax)
A measure of the responsiveness of tax yields to changes in economic
conditions. The yield of an elastic tax increases rapidly in a growing economy.
The yield of an inelastic tax increases slowly.
Equity
(1) In assessment, the degree to which assessments bear a consistent
relationship to market value. Measures include the coefficient of dispersion,
coefficient of variation, and price-related differential. (2) In popular usage,
a synonym for tax fairness. (3) In ownership, the net values of property after
liens and other charges have been subtracted.
Expense Ratios
The ratio of expenses to gross income.
Equalization
The process by which an appropriate governmental body attempts to ensure that
all property under its jurisdiction is assessed at the same assessment ratio or
at the ratio or ratios required by law. Equalization may be undertaken at many
different levels. Equalization among use types (such as agricultural and
industrial property) may be undertaken at the local level, as may equalization
among properties in a school district and a transportation district;
equalization among counties is usually undertaken by the state to ensure that
its aid payments are distributed fairly.
Exemption
The allowance, by statute or ordinance, for certain classes of property to not
be taxed on its real property holdings.
Factor
(1) An underlying characteristic of something (such as a house) that may
contribute to the value of a variable (such as its sale price), but is
observable only indirectly. For example, construction quality is a factor
defined by workmanship, spacing of joists, and materials used. Factor
definition and measurement may be done subjectively or by a computer assisted
statistical algorithm known as factor analysis. (2) Loosely, any characteristic
used in adjusting the sales prices of comparables. (3) The reciprocal of a rate
Assessment may be equalized by multiplying them by factor equal to the
reciprocal of the assessment ratio, and value can be estimated using the income
approach by multiplying income by a factor equal to the reciprocal of the
discount rate.
Front Foot
The unit or standard of linear measure used in measuring frontage
Fractional Assessments
Assessments that by law or by practice have assessment ratios different from 1.
Usually the assessment ratio is less than 1 and, if assessment biases are
present, different classes of property may have different fractional ratios.
Geographic Information System (GIS)
(1) a database management system used to store, retrieve, manipulate, analyze,
and display spatial information. (2) One type of computerized mapping system
capable of integrating spatial data (land information) and attribute data among
different layers on a base map.
Gross Income
The payments to an owner that a property can generate before expenses are
deducted.
Gross Income Multiplier
A capitalization technique that uses the ratio between the sale price of a
property and its potential gross income or its effective gross income.
Income Approach
One of the three approaches to value, based on concept that current value is
the present worth of future benefits to be derived through income production by
an asset over the remainder of its economic life. The Income approach uses
capitalization to convert the anticipated benefits of the ownership of property
into an estimate of present value.
Industrial Property
Generally, any property used in a manufacturing activity, such as a factory,
wholesale bakery, food processing plant, mill, mine, or quarry.
Land
(1) In economics, the surface of the earth and all natural resources and
natural productive powers over which possession of the earth's surface gives
man control. (2) In law, a portion of the earth's surface together with the
subsurface, the space above it and all things annexed thereto by nature or by
man.
Legal Description
A delineation of dimensions, boundaries and relevant attributes of a real
property parcel that serve to identify the parcel for all purposes of law. The
description may be in words or codes such as meters and bounds or coordinates.
For a Subdivided lot, the legal description would probably include lot and
block numbers and subdivision name.
Level of Appraisal
The common, or overall, ratio, of appraised values to market values. Three
concepts are usually of interest: the level required by law, the true or actual
level, and the computed level, based on ratio study.
Level of Assessment; Assessment Ratio
The common or overall of assessed values to market values. Compare Level of
Appraisal.
Levy, Property Tax
(1) The total amount of money to be raised from the property tax as set forth
in the budget of a taxing jurisdiction. (2) Loosely, by extension, the millage
rate or the property tax bill sent to an individual property owner.
Map
A conventional representation, usually on a plane surface and at an established
scale, of the physical features (natural, artificial, or both) of a part or the
whole of the earth 's surface. Features are identified by means of signs and
symbols, and geographical orientation is indicated.
Map, Tax
A map drawn to scale and delineated for lot lines or both, with dimensions or
areas and identifying numbers, letters, or names for all delineated lots or
parcels.
Market
(1) The topical area of common interest in which buyers and seller interact.
(2) The collective body of buyer and sellers for a particular product.
Market Adjustment Factors
Market adjustment factors, reflecting supply and demand preferences, are often
required to adjust values obtained from the cost approach to the market. These
adjustments should be applied by type of property and area and are based on
sales ratio studies or other market analyses. Accurate cost schedules,
condition ratings, and depreciation schedules will minimize the need for market
adjustment factors.
Market Analysis
A study of real estate market condition for specific type of property.
Market Value
Market value is major focus of most real property appraisal assignments. Both
economic and legal definitions of market value have been developed and refined.
A current economic definition agreed upon by agencies that regulate federal
financial institutions in the United States is:
The most probable price (in terms of money) 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:
The buyer and seller are typically motivated; Both parties are well informed or
well advised, and acting in what they consider their best interests; A
reasonable time is allowed for exposure in the open market; Payment is made in
terms of cash in United States dollars or in terms of financial arrangement
comparable thereto;
The price represents the normal consideration for the property sold unaffected
by special or creative financing or sales concession granted by anyone
associated with the sale.
Mass Appraisal
The process of valuing a group of properties as of a given date, using standard
methods, employing common data, and allowing for statistical testing.
Mass Appraisal Model
A mathematical expression of how supply and demand factors interact in a
market.
Millage, Mill Rate
A tax rate expressed as mills per dollar. For example, a 2 percent tax rate is
$2 per $100, $20 per $1,000, or 20 mills per dollar. One mill is one-thousandth
of one dollar or one-tenth of one cent.
Model
(1) A representation of how something works. (2) For purposes of appraisal, a
representation (in words or an equation) that explains the relationship between
values or estimated sale price and variables representing factors of supply and
demand.
Model Calibration
The development of adjustment, or coefficients, based on market analysis, that
identifies specific factors with an actual effect on market value.
Model Specification
The formal development of a model in a statement or equation, based on data
analysis and appraisal theory.
Multiple Regression, Multiple Regression Analysis (MRA)
A particular statistical technique, similar to correlation, used to analyze
data in order to predict the value of one variable (the dependent variable),
such as market value, from the known values of order variables (called
"independent variables"), such as lot size, number of rooms, and so
on. If only one independent variable is used, the procedure is called simple
regression analysis and differs from correlation analysis only in that
correlation measures the strength of relationship, whereas regression predicts
the value of the other. When two or more variables are used, the procedure is
called multiple regression analysis.
Neighborhood
(1) The environment of the subject property that has a direct and immediate
effect on value. (2) A geographic area (in which there are typically fewer than
several thousand properties) defined for some useful purpose, such as to ensure
for later multiple regression modeling that the properties are homogeneous and
share important locational characteristics.
Net Income
The income expected from a property after deduction of allowable expenses.
Net Income Multiplier
A factor expressing the relationship between value and net operating income;
the reciprocal of overall rate.
Open Market
A freely competitive market in which any buyer or seller may trade and in which
prices are determined by competition.
Overall Rate (OAR)
A capitalization rate that blends all requirements of discount, recapture, and
effective tax rates for both land and improvement; used to convert annual net
operating income into an indicates overall property value.
Parcel
A contiguous area of land described in a single legal description or as one of
a number of lots on a plat; separately owned, either publicly or privately; and
capable of being separately conveyed.
Parcel Identifier
A code, usually numerical, representing a specific land parcel's legal
description. The purpose of a parcel identifier is to permit reference to legal
descriptions by using a code of uniform and manageable size, thereby
facilitating record keeping and handling. Also called parcel identification
number.
Personal Property
Consists of every type of property that is not real property. Personal property
is movable without damage to itself or the real estate and is subdivided into
tangible and intangible.
Price, Adjusted Sale
The sale price that results from adjustment made to the stated sale price to
account for the effects of time, personal property, atypical financing, and the
like.
Price, Sale
(1) The actual amount of money exchanged for a unit of goods or services,
whether or not established in a free and open market. An indicator of market
value. (2) Loosely used synonymously with "offering "or "
asking" price. Note: The sale price is the "selling price " to
the vendor and the " cost price" to the vendee.
Property
(1) An aggregate of things or rights to things. These rights are protected by
law. There are two basic types of property; real and personal. (2) The legal
interest of an owner in a parcel or thing.
Property Record Card (Form)
An assessment document with blanks for the insertion of data for property
identification and description, for value estimation, and for property owner
satisfaction. The basic objectives of property record forms are, first, to
serve as a repository of most of the information deemed necessary for
identifying and describing a property, valuing a property, and assuring
property owners that the assessor is conversant with their property and,
second, to document property appraisals. Use of properly designed property
record forms permits an organized and uniform approach to amassing a property
inventory.
Ratio Study
A study of the relationship between appraised or assessed values and market
values. Indicators of market values may be either sales (sales ratio study) or
independent "expert" appraisals (appraisal ratio study). Of common
interest in ratio studies are the level and uniformity of the appraisals or
assessments. See also Level of Appraisal and Level of Assessment.
Rate-driven Levy
The property tax rate to be applied is specified in the budget or tax levy
ordinance of a taxing jurisdiction, as opposed to the usual situation in which
the total revenue to be raised is specified and the rate is calculated.
Real Estate
The physical parcel of land and all improvements permanently attached.
Real Property
Consists of the interests, benefits, and rights inherent in the ownership of
land or legally defined as immovable; the bundle of rights with which ownership
of real estate is endowed. To the extent that "real estate" commonly
includes land and any permanent improvements, the two terms can be understood
to have the same meaning. Also called "realty".
Reappraisal
The mass appraisal of all property within an assessment jurisdiction
accomplished within or at the beginning of a reappraisal cycle (see below
sentence 2). Also known as a revaluation or reassessment.
Reappraisal Cycle
(1) The period of time necessary for a jurisdiction to have a complete
reappraisal. For example, a cycle of five years occurs when a jurisdiction is
reappraised over a five year period and also when a jurisdiction is reappraised
all at once every five years. (2) The maximum interval between reappraisals as
stated in laws.
Reassessment
The revaluation of all real property by the regularly constituted assessing
authorities, as distinguished from assessment on the basis of valuations most
or all of which were established in some prior year.
Reconciliation
The final step in the valuation process wherein consideration is given to the
relative strengths and weakness of the three approaches to value, the nature of
the property appraised, and the quantity and quality of available data in
formation of an overall opinion of value (either a single point estimate or a
range of value). Also termed "correlation" in some texts.
Reliability
The degree to which measures are free from random error and therefore yield
consistent results on repeated trials.
Replacement Cost; Replacement Cost New
The cost, including materials, labor, and overhead, that would be incurred in
constructing an improvement having the same utility to its owner as a subject
improvement, without necessarily reproducing exactly any particular
characteristics of the subject. The replacement cost concept implicitly
eliminates all functional obsolescence from the value given. Thus, only
physical depreciation and economic obsolescence need to be subtracted to obtain
replacement cost new less depreciation (RCNLD).
Replacement cost New Less Depreciation (RCNLD)
In the cost approach, replacement cost new less physical incurable
depreciation.
Reproduction Cost; Reproduction Cost New
The cost of constructing a new
property, reasonably identical (having the same characteristics) with the given
property, excepting any observed physical depreciation, design, and quality of
workmanship, computed on the basis of prevailing prices and on the assumption
of normal competency and normal conditions.
Residential Property
A property used for housing such as single-family residences, duplexes, or
apartment buildings.
Residual
The difference between an observed value and a predicted value for a dependent
variable
Residual Technique
A method of arriving at the unknown value of a property component by
subtracting the known values of other components from a known overall value.
Revaluation
A reappraisal of property; especially a complete reappraisal of real property
after assessment for one or more years on valuations most (or all) of which
were established in some prior year.
Review
(1) Consideration by a board of Help, a board of equalization, a
board of review, or a court, of individual property class, or district
assessments, whether for the purpose of adding omitted taxable property,
removing exempt property, or equalizing the valuations placed on listed
property. (2) The act or process of critically studying a report, such as
an appraisal prepared by another.
Sale, Arm's Length
A sale in the open market between two unrelated
parties, each of whom is reasonably knowledgeable of market conditions and
under no undue pressure to buy or sell.
Sales Comparison Approach
One of three approaches to value the sales
comparison approach estimates a property's value (or some other
characteristics such as its depreciation) by reference to comparable sales.
Sales Data
(1) Information about the nature of the transaction, the sale price, and the
characteristics of a property as of the date of sale. (2) The elements of
information needed from each property for some purpose, such as appraising
properties by the direct sales comparison approach.
Sale File
A file of sale data.
Sales Ratio Study
A ratio study that uses sales prices as proxies for market values.
Single Property Appraisal
Systematic appraisal of properties one at a time.
Site
The location of a person, thing or event.
Site Characteristics
Characteristics of (and data that describe) a particular property, land size,
shape, topography, drainage and so on, as opposed to location and external
economic forces.
Special-Purpose Property
A property adapted for a single use.
Stratify
To divide, for purpose of analysis, a sample of observation into two or more
subsets according to some criterion or set of criteria.
Stratum, Strata
A class or subset that results from stratification.
Subclass
A group of properties within a class, smaller than the class, usually (although
not necessarily) defined by stratification rather than by sampling.
Subject Property
The property being appraised.
Subjective
Having the quality of requiring judgment in arriving at an appropriate value.
Sunset Provision
Provision within a statute creating a law or agency and providing for the
automatic termination of that law or agency at fixed date in future.
Tax Burden
Economic costs or losses resulting from the imposition of tax.
Burden can be determined only by detailed economic analysis of all
economic changes resulting from the tax. In popular usage, the term often
refers to the initial incidence rather than ultimate economic costs.
Tax Increment Financing (TIF)
The ideal that property taxes, or other revenue, resulting from the increase in
a tax base (for example, property values or retail sales) in specific area can
be used to repay the cost of investment in that area.
Three Approaches to Value
A convenient way to group the various methods of appraising a property. The
cost approach encompasses several methods for estimating replacement cost new
of an improvement less depreciation plus land value. The sales comparison
approach estimates values by comparison with similar properties for which sales
prices are known. The methods included in the income approach are based on the
assumption that value equals the present worth of the rights to future income.
Time-adjusted Sale Price
The price at which a property sold, adjusted for the effects of price changes
reflected in the market between the date of sale and the date of analysis.
Trending
Adjustments in the values of variables for the effects of time. Usually used to
refer to adjustments of assessments intended to reflect the effects of
inflation and deflation and sometimes also, but not necessarily, the effects of
changes in the demand for micro-locational goods and services.
Trending Factor
A figure representing the increase in cost or selling price over a period of
time. Trending accounts for the relative difference in the values of a dollar
between two periods.
Uniformity
The equality of the burden of taxation in the method of assessment.
Uniform Standards of Professional Appraisal Practice
Annual publication of the Appraisal Standards Board of The Appraisal
Foundation: "These Standards deal with the procedures to be followed in
performing an appraisal review, or appraisal consulting service and the manner
in which an appraisal, appraisal review, or appraisal consulting services is
communicated… Standard 6 establishes requirements for the development and
reporting of mass appraisals of a universe of properties for ad valorem tax
purposes or any other intended use" (The Appraisal Foundation, Appraisal
Standards Board 2002, Preamble, p 6).
Unit of Comparison
A property as a whole or some smaller measure of the size of the property used
in the sales comparison approach to estimate a price per unit.
Use Class
(1) A grouping of properties based on their use rather than, for example, their
acreage or construction. (2) One of the following classes of property;
single-family residential, multifamily residential, agricultural, commercial,
industrial, vacant land, and institutional /exempt. (3) Any subclass refinement
of the above - for example, townhouse, detached single- family, condominium,
house on farm, and so on.
Use Value
(1) The Value of property in a specific use. (2) Property entirely used for a
specific purpose or use that may entitle the property to be assessed at a
different level than others in the jurisdiction. Examples of properties that
may be assessed at use value under the statutes include agricultural land,
timberland, and historical sites.
USPAP
See Uniform Standard of Professional Appraisal Practice.
Valuation
(1) The process of estimating the value - market, investment, insured, or other
properly defined value - of a specific parcel or parcels of real estate or of
an item or items of personal property as of given date. (2) The process or
business of appraising, of making estimates of the value of something. The
value usually required to be estimated is market value.
Valuation Date
The specific date as of which assessed values are set for purposes of property
taxation. This date may also be known as the "date of finality".
Valuation Model
A representation in words or in an equation that explains the relationship
between value or estimated sale price and variables representing factors of
supply and demand.
Value
(1) The relationship between an object desired and a potential owner; the
characteristics of scarcity, utility, desirability, and transferability must be
present for value to exist. (2) Value may also be described as present worth of
future benefits arising from the ownership of real or personal property. (3)
The estimate sought in a valuation. (4) Any number between positive infinity
and negative infinity.
Variable
An item of observation that can assume various values, for example, square
feet, sales prices or sales ratios. Variables are commonly described using
measure of central tendency and dispersion.
Verify
To check the accuracy of something. For example, sales data may be verified by
interviewing the purchaser of property, and check digits may verify data
entries.
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