This glossary is abbreviated, commonly used terms in real estate appraisal, recognized by professional standards such as those from the Appraisal Institute (AI), the American Society of Appraisers (ASA), USPAP (Uniform Standards of Professional Appraisal Practice), and the National Association of REALTORS (NAR).

• Adjustment: A modification made to the sale price of a comparable property to account for differences from the subject property (e.g., adding value for an extra bedroom).

 

• Appraisal: An appraisal is any expression of value stated by an appropriately licensed/certified and qualified appraiser. Without a professional license issued by the state of Alaska as a “Real Estate Appraiser,” the value opinion or market value determination, is NOT an appraisal. Value opinions stated by real estate sales agents/brokers are NOT appraisals. Value opinions stated by tax assessors are NOT appraisals.

 

• As-Is Value: The value of a property in its current condition, without/before any needed repairs or improvements.

 

• Assessed Value: Assessed value is the dollar amount assigned to a property by a local government tax assessor for the purpose of calculating property taxes; in Alaska, state law requires it to be set at full fair market value as of a specific date (typically January 1^st of each tax year). A property tax assessment is typically a mass valuation process (often without interior inspections) aimed at equitable taxation across many properties, while a private appraisal is a detailed, independent opinion of market value performed by a licensed appraiser. Unlike an appraisal, which reflects current market conditions for a specific transaction, the assessed value may not always align perfectly with real-time market value due to assessment cycles, exemptions, or standardized methods. In non-disclosure states like Alaska, assessors (if they follow the law) do not have access to the same information that appraisers do. Disclosing your purchase or sales price of your property in Alaska to ANY government entity (from local to state) is NEVER required despite tactics often employed by many tax assessment offices. Every property owner in Alaska has a right to appeal a tax assessment, typically an appraisal is the BEST tool to win an appeal.

 

• AVM: Automated Valuation Model, increasingly utilized by financial institutions to estimate value based on large sources of data collection. May utilize artificial intelligence (AI) or other tools to estimate a value. Often doesn’t involved a qualified or licensed appraiser. Sites such as Zillow and RE utilize an AVM to guess at the value expressed on the site. In markets with a lot of data and disclosure of sales, these models can be accurate enough to make macro level decisions. In non-disclosure states such as Alaska the data fed into the AVM is unreliable, limited, and often inaccurate. These models are not considered accurate at any level for Alaska.

 

• BPO: Broker Price Opinion offered by marketing agents as a product to attract a client to utilize their services. BPO’s are NOT appraisals. Similar to a CMA -see below.

 

• Bulk Sale: The sale of multiple parcels of real estate to one buyer in one transaction. A bulk sale may include dissimilar properties in different locations or a group of lots or units in the same project. Typically, the bulk sale price is less than the sum of the values of individual parcels.

 

• Bulk Value: The value of multiple units, subdivided plots, for properties in a portfolio as though sold together in a single transaction.

 

• Client: Under USPAP, the client is the individual, group, or entity that engages the appraiser (by employment or contract) for a specific assignment; this engagement can be direct or through an agent, such as a lender or appraisal management company. The client is always an intended user of the report, and the appraiser’s primary obligations—including confidentiality—run to the client. Importantly, who pays the fee does not determine the client; it is the party that hires the appraiser that establishes the relationship. Typically, in mortgage lending, the lender is the client despite who pays the appraisal fee. Payment of the appraisal fee does NOT convey any automatic rights to the appraisal product.

 

• CMA: Comparable Market Analysis, a list of properties chosen by a person without an appraisal license. Often offered by real estate sales agent as evidence for a BPO. The quality and reliability of the product varies greatly by the education and experience of the agent creating the product. CMA’s are NOT appraisals. 

 

• Comparable Sales (Comps): Recently sold properties that are similar to the subject in location, size, condition, and other features, used in the sales comparison approach. 

 

• Cost Approach: A valuation method estimating value by calculating the cost to replace the property in the current market, then deducting depreciation before adding back the current land value. The Cost Approach is a reliable indicator of market value. The Cost Approach is nearly NEVER not relevant to the market value of a property. Omission of the approach in any appraisal of improved property must be explained sufficiently or the appraisal is not compliant with Alaska State Statutes and USPAP. 

 

• Desktop Appraisal/Drive-by Appraisal: An appraisal where the appraiser will not visit the property or only view the exterior from the public right-of-way. Appraisal is performed based on assumptions of quality, condition and additional features. 

 

• Depreciation: Loss in property value due to physical deterioration, functional obsolescence, or other external factors.

 

• Effective Age: The age a property appears to be based on its current condition, rather than its actual chronological age. 

 

• Exposure Time: The estimated length of time the property would have been on the market prior to selling at the appraised value. An appraiser utilizes market evidence of similar properties to determine the exposure time, it is not a guess. 

 

• Extraordinary Assumption: an assignment-specific assumption as of the effective date regarding uncertain information used in an analysis which, if found to be false, could alter the appraiser’s opinions or conclusions. 

 

• Fee Simple Interest: Absolute ownership of property, unencumbered by leases or other interests. 

 

• Functional Obsolescence: A type of depreciation. The impairment of the functional capacity of improvements according to market tastes and standards. May be curable or incurable. 

 

• Highest and Best Use: The legally permissible, physically possible, financially feasible, and maximally productive use of a property that results in the highest value. The foundational analysis of all appraisals.

 

• Hybrid Appraisal: On-site information from the property is gathered by a person OTHER than an appraiser. An appraiser is given the information to perform the appraisal without performing a site visit in person. 

 

• Hypothetical Condition: a condition, directly related to a specific assignment, which is contrary to what is known by the appraiser to exist on the effective date of the assignment results, but is used for the purpose of analysis. 

 

• Income Approach: A valuation method for income-producing properties, capitalizing net operating income into an indication of value. Omission of the approach in any appraisal of improved property must be explained sufficiently or the appraisal is not compliant with Alaska State Statutes and USPAP. 

 

• Intended User: Intended users are the client and any other specific parties (identified by name or type) that the appraiser, in communication with the client, designates as authorized to rely on the appraisal report. This identification happens at the start of the assignment and ensures the report is tailored to their needs while limiting reliance to only those parties. Third parties not named as intended users cannot depend on the report’s findings under USPAP guidelines. 

 

• Leasehold Interest: The right held by the lessee to use and occupy real estate for a stated term and under the conditions specified in the lease. 

 

• Leased Fee Interest: The ownership interest held by the lessor, which includes the right to receive the contract rent specified in the lease plus the reversionary right when the lease expires. 

 

• Market Rent: the most probable rent that a property should bring in a competitive and open market under all conditions requisite to a fair lease transaction, the lessee and lessor each acting prudently and knowledgeably, and assuming the rent is not affected by undue stimulus. Implicit in this definition is the execution of a lease as of a specified date under conditions whereby
  • Lessee and lessor are typically motivated;
  • Both parties are well informed or well advised, and acting in what they consider their best interests;
  • Payment is made in terms of cash or in terms of financial arrangements comparable thereto; and
  • The rent reflects specified terms and conditions typically found in that market, such as permitted uses, use restrictions, expense obligations, duration, concessions, rental adjustments and revaluations, renewal and purchase options, frequency of payments (annual, monthly, etc.) and tenant improvements (TIs). 

 

• Market Value: The most probable price a property would sell for in a competitive, open market with informed buyers and sellers, purchased with cash or typical financing, and with a reasonable exposure time. 

 

• Narrative Appraisal Report: A Narrative Appraisal Report, commonly referred to as a full “Appraisal Report” under current USPAP, is a comprehensive written report that provides a detailed summary of the appraiser’s analysis, reasoning, and supporting data leading to the value opinion. It is designed for use by the client and any intended/authorized users, allowing them to fully understand the appraisal process without needing additional information from the appraiser’s workfile. This format is typically used for complex properties or when third parties, such as lenders, need to rely on the report. This is the most commonly used appraisal format for commercial real estate. 

 

• Reconciliation: The final step in the appraisal process where the appraiser weighs the results from the different approaches developed to arrive at a final value opinion. 

 

• Restricted Appraisal Report: A Restricted Appraisal Report is a concise version of an appraisal that simply states the appraiser’s opinion of value along with minimal supporting details. It is intended only for the specific client (and any named intended users) who are already familiar with the property and do not need extensive explanations. Unlike a full appraisal report, it omits in-depth analysis from being presented within the report body, and is not typically suitable for third parties, such as lenders, to rely upon. In states where disclosure of sales is restricted by law (non-reporting), like Alaska, the restricted appraisal report format is common and recommended in property tax appeal.

 

• Sales Comparison Approach: The most common method for appraising residential properties, valuing based on adjusted prices of comparable sales. Omission of the approach in any appraisal must be explained sufficiently or the appraisal is not compliant with Alaska State Statutes and USPAP. 

 

• Scope of Work: The type and extent of research and analysis to be included in an appraisal assignment. All appraisers are required to include a sufficient scope of work for an appraisal to NOT be misleading or unreliable, and cannot accept appraisal contracts or assignments with limits to the scope of work that might result in a misleading or unreliable value opinion. 

 

• USPAP (Uniform Standards of Professional Appraisal Practice): The ethics and performance standards for appraisers in the U.S., promoting credibility and public trust. Set each year by the Appraisal Foundation. ALL real property appraisals in Alaska are required by state statutes to be USPAP compliant. 

 

• URAR (Uniform Residential Appraisal Report): The standard form used for most single-family home appraisals.