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REAL ESTATE TERMINOLOGY

                                                                                                                 

AD VALOREM
 According to the value

APPRAISAL
An estimate or opinion of value.  The act or process of estimating value.  The resulting opinion of value derived from the appraisal may be informal, transmitted orally; or it may be formal, presented in written form.  Usually it is a written statement setting forth an opinion of the value of an adequately described property as of a specified date, supported by the presentation and analysis of relevant data.  Synonym:  valuation.

ARM'S LENGTH
A transaction freely arrived at in the open market, unaffected by abnormal pressure or by the absence of normal competitive negotiation as might be true in the case of a transaction between related parties.

ASSESSMENT
An official determination of the amount to be paid a property owner for the taking of all or part of his property for an improvement which is presumed and, in fact, is designed to benefit the public generally, e.g., assessment of benefits and damages for highway or school construction.  In this usage, jurisdictional rules will determine in cases of a partial taking whether (a) benefits may be employed to offset only severance damages to the remainder area, (b) only special, as opposed to general benefits may be used as an offset against damages, or (c) both general and special benefits may represent an amount that offsets all damages.

ASSESSOR
One whose duty it is to assess property for ad valorem taxes.

BOARD OF EQUALIZATION
A nonjudicial board whose function is to review assessments to see that all districts are assessed at a uniform level of value; to raise or lower the assessments to achieve this purpose, so that a uniform basis of taxation is achieved.  Also referred to as Board of Tax Review, Board of Appeals.

COST APPROACH
That approach in appraisal analysis which is based on the proposition that the informed purchaser would pay no more than the cost of producing a substitute property with the same utility as the subject property.  It is particularly applicable when the property being appraised involves relatively new improvements which represent the highest and best use of the land or when relatively unique or specialized improvements are located on the site and for which there exist no comparable properties on the market.
 
FAIR VALUE
1. Value that is reasonable and consistent with all of the known facts.  Synonym:  market value.
2. A term of legal significance and applicable in public utility rate-making practice, designating the base upon which a reasonable return could be established in connection with which service rates and charges, with equal justice to the public and to the public utility, may be predicated or analyzed.

INCOME APPROACH
That procedure in appraisal analysis which converts anticipated benefits (dollar income or amenities) to be derived from the ownership of property into a value estimate.  The income approach is widely applied in appraising income-producing properties.  Anticipated future income and/or reversions are discounted to a present worth figure through the capitalization process.

IMPROVED LAND
1. Land which has been developed for some use by the erection of buildings and other improvements pertinent thereto.
2. Land which has been prepared for development as distinguishing from raw land.  This implies such things as grading, draining, and installation of utilities or access.

IMPROVEMENTS
Broadly, buildings or other more or less permanent structures or developments located upon or attached to land.  Not a significant or informative term without qualification.

LAND
1. In an economic sense, one of the major factors of production consisting sometimes of a free good, but usually of a material economic good which is supplied by nature without the aid of man.  The term may include not only the earth's surface, both land and water, but also anything that is attached to the earth's surface.  Thus, all natural resources in their original state, such as mineral deposits, wildlife, timber, and fish, are land within the technical meaning of the term; so also are sources of energy, outside of man himself, such as water, coal deposits, and the natural fertility of the soil.
2. In a legal sense the solid part of the surface of the earth, as distinguished from water; any ground, soil or earth whatsoever, regarded as the subject of ownership, and everything annexed to it, whether by nature, such as trees, and everything in or on it, such as minerals and running water, or annexed to it by man, such as buildings and fences.
3. Property rights in land are established on the theory that the rights in fee simply ownership in land normally include the wedge-shaped area downward from the earth's surface to the center of the earth (subsurface rights) and the area upward from the earth's surface out into space (supra-surface or air rights).  The latter is limited by Acts of Congress concerning public use of navigable air space which is considered in the public domain.
 
MARKET DATA APPROACH
Traditionally, an appraisal procedure in which the market value estimate is predicated upon prices paid in actual market transactions and current listings, the former fixing the lower limit of value in a static or advancing market (price wise), and fixing the higher limit of value in a declining market; and the latter fixing the higher limit in any market.  It is a process of analyzing sales of similar recently sold properties in order to derive an indication of the most probable sales price of the property being appraised.  The reliability of this technique is dependent upon (a) the availability of comparable sales data, (b) the verification of the sales data, (c) the degree of comparability or extent of adjustment necessary for time differences, and (d) the absence of non-typical conditions affecting the sale price.  In essence, all approaches to value (particularly when the purpose of the appraisal is to establish market value) are market data approaches since the data inputs are presumably market derived.

MARKET VALUE
The highest price in terms of money which a property will bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus.

Implicit in this definition is the consummation of a sale as a specified date and the passing of title from seller to buyer under conditions whereby:
1. Buyer and seller are typically motivated.
2. Both parties are well informed or well advised, and each acting in what he considers his own best interest.
3. A reasonable time is allowed for exposure in the open market.
4. Payment is made in cash or its equivalent.
5. Financing, if any, is on terms generally available in the community at the specified date and typical for the property type in its locale.
6. The price represents a normal consideration for the property sold unaffected by special financing amounts and/or terms, services, fees, costs, or credits incurred in the transaction.

Numerous definitions of Market Value have been devised over the years by professional organizations, government bodies, courts, et cetera.

The Supreme Courts of most states have handed down definitions of Market Value for use in the state courts.  These definitions are subject to frequent change.

Persons performing appraisal services which may be subject to litigation are cautioned to seek the exact definition of Market Value in the jurisdiction in which the services are being performed.

MASS APPRAISING
A method used in revaluation of a community for tax purposes.  As the term implies, it is a method of appraising a large number of properties at one time by adopting standard techniques, and giving due consideration to the appraisal process so that uniformity or equality of values may be achieved between all properties.
 

PERSONAL PROPERTY
Generally, movable items; that is, those not permanently affixed to and a part of real estate.  In deciding whether or not a thing is personal property or real estate, usually there must be considered (1) the manner in which it is annexed; (2) the intention of the party who made the annexation (that is, to leave permanently or to remove at some time); (3) the purpose for which the premises are used.  Generally, and with exceptions, items remain personal property if they can be removed without serious injury either to the real estate or to the item itself.

PRICE
The quantity of one thing which is exchanged for another; the amount of money paid, asked, or offered where sale is contemplated; the money consideration which is expected or given in exchange for commodities or services.  Price is sometimes value expressed in terms of money.  In real estate valuation a distinction is made between price and value because price may be justified or not, while value is properly a justified price.  In economic theory, the basic device by which allocation of resources occurs in the competitive market.

REAL ESTATE
This refers to the physical land and appurtenances, including structures affixed thereto.  In some states, by statute, this term is synonymous with real property.

REAL PROPERTY
This refers to the interest, benefits, and rights inherent in the ownership of the physical real estate.  It is the bundle of rights with which the ownership of real estate is endowed.  In some states, this term, as defined by statute, is synonymous with real estate.  Does not include personal property.

REAPPRAISAL (or REVALUATION)
The mass appraisal of all property within an assessment jurisdiction to obtain equalization of assessed values.  Also for reappraisal of former assignment.

STRUCTURE
An edifice or building; an improvement.

TAX RATE
The ratio of the tax to the tax base.  The rate to be applied to the assessed value to determine the amount of tax.  The rate is obtained by dividing the amount of the tax levy by the total assessed value of the tax district; usually expressed in dollars per hundred of assessed value.



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