DEFINITIONS
"APPRAISAL: (noun) the act or process of developing an opinion of value: an opinion of value.
(adjective) of or pertaining to appraising and related functions such as appraisal practice or appraisal services." (USPAP, 2008-2009, Pg. U-1)
"APPRAISAL CONSULTING: the act or process of developing an analysis, recommendation, or opinion to solve a problem, where an opinion of value is a component of the analysis leading to the assignment results." (USPAP, 2008-2009, Pg. U-1)
"APPRAISAL REVIEW: the act or process of developing and communicating an opinion about the quality of another appraiser's work that was preformed as part of an appraisal, appraisal review, or appraisal consulting assignment." (USPAP, 2008-2009, Pg. U-1)
"APPRAISER: one who is expected to perform valuation services competently and in a manner that is independent, impartial, and objective." (USPAP, 2008-2009, Pg. U-1)
"ASSIGNMENT: a valuation service provided as a consequence of an agreement between an appraiser and a client." USPAP, 2008-2009, Pg. U-2)
"CLIENT: the party or parties who engage an appraiser (by employment or contract) in a specific assignment.
Comment: The client identified by the appraiser in an appraisal, appraisal review, or appraisal consulting assignment (or in the assignment work file) is the party or parties with whom the appraisers has an appraiser-client relationship in the related assignment, and may be an individual, group, or entity." (USPAP, 2008-2009, Pg. U-2)
NOTE: An appraisal management company, attorney, or other third party may be the agent of the client.
"ESTIMATE OF VALUE: (OPINION of Value vs. ESTIMATE of Value) Current terminology uses Opinion of Value instead of Estimate of Value.
"EXTRAORDINARY ASSUMPTION: an assumption, directly related to a specific assignment, which, if found to be false, could alter the appraiser's opinions or conclusions.
Comment: Extraordinary assumptions presume as fact otherwise uncertain information 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." (USPAP, 2008-2009, Pg. U-3)
Example: Roof and foundation (structural) condition, previous repairs, required permits.
"FAIR VALUE: (Market Value vs. Fair Value in Real Property Appraisals) Fair value is an accounting term and market value is an appraisal term. (USPAP, AO-8, 2005)
"HYPOTHETICAL CONDITION: that which is contrary to what exists but is supposed for the purpose of analysis."
Comment: Hypothetical conditions assume conditions 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." (USPAP, 2008-2009, Pg. U-3)
An opinion of value for proposed construction, home improvement, or AS REPAIRED is a hypothetical condition.
"HIGHEST and BEST USE: In appraising real property: The reasonably probable and legal use of the property that is physically possible, appropriately supported, and financially feasible, and that results in the highest value.
Typical considerations of the Highest and Best Use of any property measure the potential dollar return to the property. The more dollar amount returned to the property the better the use, i.e. the "Highest and Best Use." There are many examples where the "best use" of a property does not return the most dollars to the property. Parks, greenbelts, nature preserves, arboretums, camp grounds for boys and girl scouts, boys and girls clubs, among others are important uses of land that does not return the highest dollar amount to the land.
"HOME INSPECTION: A service provided by a Home Inspector. In the State of Texas, Home Inspectors are licensed through the Texas Real Estate Commission. If the client/borrower has any questions concerning the condition of mechanical equipment or structural items, proper inspections should be obtained. An appraiser observes, a home inspector inspects.
"INTENDED USE: the use or uses of an appraiser's reported appraisal, appraisal review, or appraisal consulting assignment opinions and conclusions, as identified by the appraiser based upon communication with the client at the time of the assignment." (USPAP, 2006, Pg. 3)
"INTENDED USER: the client and any other party as identified, by name or type, as users of the appraisal, appraisal review, or appraisal consulting report by the appraiser on the basis of communication with the client at the time of the assignment." (USPAP, 2008-2009, Pg. U-3)
"RETROSPECTIVE VALUE OPINIONS: "effective date of the appraisal prior to the date of the report...." (USPAP, SMT 3, 2008-2009, Pg. U-82)
Retrospective appraisals may be required for property tax matters, estate or inheritance tax matters, condemnation proceedings, suites to recover damages, and similar situations. Standards Rules 2-2(a), (b), & (c) require that each appraisal report specify the effective date of the appraisal and the date of the report. The date of the report (date of valuation) indicates the perspective from which the appraiser is examining the market. The effective date of the appraisal establishes the context for the value opinion. The date of the report is when the report is written.
"SCOPE OF WORK: the type and extent of research and analyses in an assignment." (USPAP, 2008-2009, Pg. U-4)
"SCOPE OF WORK RULE: "For each appraisal, appraisal review, appraisal consulting assignment, an appraiser must:
1. Identify the problem to be solved;
2. Determine and perform the scope of work necessary to develop credible assignment results; and
3. Disclose the scope of work in the report." (USPAP, 2008-2009, AO-28, Pg. A-95)
"STIGMA: ("a blemish"; "a sign of social unacceptability"): In real estate, stigma is a loss in market value due to buyer’s resistance to a condition or concern which may be real or perceived. This market resistance can be due to structural repairs, environmental concerns, and or trauma to or in the property. Examples of buyers’ resistance include reoccurring termites, foundation repairs or failure, mold, murder, or any number of other factors. Usually if the market resistance is to some type of structural situation or an environmental type of problem this market resistance is not measurable after a period of time, i.e., the further away in time from the repairs or event the less distinguishable any market resistance. In addition, generally these historic repairs or environments abatements are not a concern to a buyer if the problem appears to have been successfully repaired and/or abated. Stigma is not a given, not all property that have had structural or environmental repairs are sold at a discount. Legal filings tend to enhance market resistance as the potential purchaser may then confronted with a mass of documents to consider in the buying process. Other factors included the price range of the affected property, the significance of the problem, and the cost to cure.
"Uniform Standard of Professional Appraisal Practice (USPAP). Real estate appraisers must comply with USPAP regulations in accordance with the Financial Institutions Reform, Recovery and Enforcement Act of 1989. State Appraiser Certification and Licensing Boards; federal, state, and local agencies; appraisal services; and appraisal trade associations require compliance. USPAP is published by The Appraisal Standards Board of the Appraisal Foundation (www.appraisalfoundation.org).
"VALUE: the monetary relationship between properties and those who buy, sell, or use those properties.
Comment: Value expresses an economic concept. As such, it is never a fact but always an opinion of the worth of a property at a given time in accordance with a specific definition of value. In appraisal practice, value must always be qualified - for example, market value, liquidation value, or investment value." USPAP, 2008-2009, Pg U-5)