Appraiser and Appraisal Definitions
Appraisal Management Company (AMC) is a third party organization that oversees a panel of independent appraisers and contracts with these appraisers to perform appraisal assignments. The AMC may provide other services like appraisal quality control examination for compliance and completeness. This is different than an appraisal company that actually employs appraisers. AMCs became more popular by lenders in recent years, due to government oversight, as a way for lending institutions to outsource appraisal ordering and assigning for the purpose of protecting appraiser independence. Prior to new appraiser independence regulation, it was common for appraisers to get calls from mortgage originators saying something like, “If you can make this loan work for me, I will send you more work.” AMCs and regulations have significantly reduced this type of pressure on appraisers.
ANSI:American National Standard Institute (ANSI) is an organization that uses consensus to produce voluntary standards for use in industry. The ANSI standard is recognized in residential real estate in NW Oregon and SW Washington. For application in appraisal comparison, it is important to recognize what standards were used for comparable data and to only compare apples to apples.
Appraisal:An appraisal is a process or act of determining a value opinion. See blog post, "What Does a Real Estate Appraiser Do?"
An appraiser is someone who uses the appraisal process to estimate a value for property. See blog post, “What is an Oregon Certified Residential Appraiser?”
Any area of a building that is partly (even just a small portion of entire level) below the grade of land.
Buyer’s Market:A marketplace where supply and demand are out of balance, shifting toward greater supply of real estate listings than the number of ready buyers. In this market, sellers have lots of competition for buyers and therefore, professional marketing of the property is more important.
GLA:Gross Livable Area (GLA) is a summation of above grade finished residential living space.
Highest and Best Use:
Highest and best use is simply the use of a property that will bring the highest value in the market. Highest and best use can be looked at from a standpoint of “as is” and “as if vacant”. There are four tests that help to determine highest and best use that are legally permitted, physically possible, financially feasible, and maximally productive. Highest and best use is described further in this recent blog post.
Market Area:A market area is a geographic area where one would expect buyers to search for a particular type of property. A market area, unlike a neighborhood, is different depending on the property. For example, a five-acre riverfront estate in Portland may have a very different market area than a more typical sized single-family residence in a typical subdivision. However, both of these example residences might be located in the same neighborhood.
Market Value:See related recent blog post on Most Probable Price.
“Market value means the most probable price which a property should bring in a competitive and open market under all conditions requisite to 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 sale as of 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 acting in what they consider their own best interest;
3. a reasonable time is allowed for exposure in the open market;
4. payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and
5. the price represents the nominal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.” (2010 USPAP line 58)
Neighborhood:According to the Dictionary of Real Estate Appraisal, a neighborhood is, “A group of complimentary land uses; a congruous grouping of inhabitants, buildings, or business enterprises.” A neighborhood is typically larger than a subdivision or builder’s development; because, neighborhoods normally include supporting businesses like neighborhood grocery stores.
Amarketplace where supply and demand are also out of balance but in the opposite direction of the former example. Here, ready buyers exceed available listings. Bidding wars may result when the seller’s prices are set too low; buyers are often faced with making offers more attractive by increasing earnest deposits and negotiating fewer concessions.
Total Economic Life (TEL)
TEL is the amount of time that a home or other improvement will contribute value to the land. Please see a blog we posted on this topic: Portland Appraiser Explains How to Estimate Total Economic Life
UAD stands for the Uniform Appraisal Dataset. This was developed by Fannie Mae and Freddie Mac as a way to standardize appraisal requirements in regards to how data is entered and abbreviated into the appraisal report form.
USPAP:The Uniform Standards of Professional Appraisal Practice (USPAP) is a document that licensed and certified real estate appraisers are required to follow. USPAP is designed to “promote and maintain a high level of public trust in appraisal practice by establishing requirements for appraisers” (2010 USPAP line 150).
Scope of Work:The 2010 USPAP line 404 states that “The scope of work must include the research and analysis that are necessary to develop credible assignment results.”
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