EDS Appraisal Services - Glossary and Terms

Glossary and Terms of the Industry

ARM’S LENGTH TRANSACTION: A transaction that occurred under typical conditions in the marketplace with each of the parties acting in his/hers own best interest.

COMPARABLES: Other similar properties that have sold in a certain area. Also called comps.

DOM: Days on market, the amount of time a property was on the market before it was placed underagreement.

EFFECTIVE AGE: Effective age describes how old a house “feels” or “looks”. A 20 year old house with a new roof, new heating system, new windows and exterior doors can be said to display an effective age of 10 to 12 years. If that house also offers an updated kitchen and baths then you can reduce the effective age of the house even further. Add new flooring and you have an even lower effective age.

Effective age is reflected in the appraisal as a condition adjustment.

EXTERNAL OBSOLESCENCE: This refers to anything outside the home that has a negative effect on the value of the house. This can be anything from a large employer in the area shutting its doors to a zoning change or even that house in your neighborhood that seem to attract broken down cars. The effect on value is a little harder to determine and is usually based on what similar homes outside the affected area are selling for compared to what similar homes in the affected area are selling for. The difference would generally be the adjustment that would be used.

FEE SIMPLE: The greatest estate or ownership one can have in real property because it is freely transferable and inheritable, and of indefinite duration with no conditions on the title.

FSBO: For Sale By Owner:Pretty simple a home that is being sold by the home owner with no agent involved. This does not mean that you as the buyer cannot use an agent, but that agent would have negotiate either with you or the seller for a commission. Again the contract you would enter into is a legally binding contract and should be reviewed by either a Real Estate professional or an attorney.

FUNCTIONAL OBSOLESCENCE: This is any feature in a house that has a negative effect on the value of that house. Either because it disrupts the use of the home or because it is considered to be less than the current average standard. For example a floor plan that requires you to pass through one bedroom to get to another. Or a newer four bedroom house with only one bathroom when on average most four bedroom homes would over 2 or 2.5 baths. Both examples are forms of functional obsolescence.

Functional obsolescence is reflected in the appraisal as a percentage of the total value of the home or most commonly as a dollar figure that represents the cost to add a hall was in the first example or in the second example another bathroom.

GLA: Gross Living Area. This is calculated by taking the outside measurements of the areas of your home that are above ground or grade and multiplying that by the number of stories.

For example, a 40 x 24 ranch is a 960 SqFt home. A 40 x 24 colonial is a 1920 SqFt home.

Gross living area does not include finished space in the basement or, in most cases finished space in a walkup attic.

GLA is reflected in the appraisal as a per SqFt adjustment. There is no room count adjustment.

HIGHEST AND BEST USE: The most profitable, legally permitted, economically feasible, and ph because it is freely transferable and inheritable, and of indefinite duration with no conditions on the title.

INTENDED USE: Purpose of an appraisal report, as communicated by the appraiser in the report.

INTENDED USER: The client, or other party identified in the report, to whom the appraiser is communicating.

P&S or PURCHASE AND SALE: This is the contract between buyer and seller that describes the agreement to purchase a home. It details the agreed upon purchase price and closing date as well as any other condition that must be met. This is a legally binding contract and should be reviewed by a Real Estate professional or an attorney if there is anything that you do not understand.

SELLER CONCESSIONS: This is anything that a seller might give as an incentive to a buyer for buying a house. Most often it in the form of financial aid, such as the seller paying some of the buyer closing cost. It can also be in the form of a seller offering gifts like a big screen TV or a cruise.