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Glossary of Ad Valorem Terms Words Set In Italics Within Entries Are Defined Elsewhere In The Glossary Abstraction Method: A method used to estimate the value of property from a knowledge of normal net income, discount rate, remaining economic life of the property, value of the building, and income path attributable to the land. The method estimates total value by discounting the income stream attributable to the land and adding the result to an independent estimate of the value of the building. Also called land residual technique.
Accrued Depreciation: The amount of depreciation, from any and all sources, that affects the value of the property in question.
Acoustical Ceiling: In general terms, a ceiling designed to lessen sound reverberation by absorption, blocking or muffling. In construction, the most common materials are acoustical tile and acoustical plaster.
Adjusted Sale Price: The sale price that results from adjustments made to the stated sale price to account for the effects of time, personal property, financing, or the like. Adjustments: Modifications in the reported value of a variable, such as sale price or gross income, such that the adjustments can be used to estimate market value; in the sales comparison approach, for example, by adjustments for differences between comparables and subject properties.
Ad Valorem: According to value (Latin term).
Ad Valorem Tax: A tax levied in proportion to the value of the thing(s) being taxed. Exclusive of exemptions, use-value assessment laws, and the like, the property tax is an ad valorem tax.
Age: (See "Chronological Age", "Economic Life", "Effective Age").
Age/Life Method: A method of estimating accrued depreciation founded on the premise that, in the aggregate, a neat mathematical function can be used to infer accrued depreciation from the age of a property and its economic life.
Aggregate Mean: (See "Weighted Mean"). Algorithm: A precisely defined set of steps that, if followed exactly, will produce a pre-specified result.
Allocation Method: A method used to value land, in the absence of vacant land sales, by using a typical ratio of land to improvement value; also referred to as land ratio method.
Amortize: (1) To repay a loan, for example, a mortgage, by means of a series of small payments, usually a combination of principal repayment and interest charges, rather than one lump sum at the end of the term. (2) To consider, for accounting and management purposes, one unusually large investment at a single time as really being a series of smaller expenses over a period of time.
Annuity: A series of payments (often, but not necessarily, equal) receivable at regular intervals.
Anticipation: The principle that value depends on the expectation of benefits to be derived in the future.
Appraisal: An estimation of value. Appraisal Date: The date as of which the assessments for a tax year are made. For example, if January 1 is the assessment date and a lot is vacant on that date, the property is appraised and assessed as vacant land even though a building is completed on it in April and the assessment roll may not be final and made public until May 15.
Appraisal Principles: The economic concepts underlying appraisal: supply, demand, change, balance, conformity, competition, contribution, anticipation, substitution, highest and best use, surplus productivity, and variable proportions.
Appraisal Ratio: (1) The ratio of the appraised value to an indicator of market value. (2) By extension, an estimated fractional relationship between the appraisals and market values of a group of properties. (See "Level of Appraisal").
Appraisal Ratio Study: A ratio study using independent "expert" appraisals as indicators of market value.
Appraisal-Sale Price Ratio: The ratio of the appraised value to the sale price (or adjusted sale price) of a property.
Appraised Value: An estimate of the value of a property before application of any fractional assessment ratio, partial exemption, or other such adjustment. Appreciation: Increase in value of a property, in terms of money, from all causes. For example, a farm may appreciate if a shopping center is built nearby, and property of any sort may appreciate as a result of inflation.
Arithmetic Mean: (See "Mean").
Arm's-Length Sale: A sale between two unrelated parties, both seeking to maximize their positions from the transaction
Array: An ordered arrangement of data such as a listing of sales ratios in order of magnitude.
Asphalt Shingles: A type of shingle made of felt saturated with asphalt or tar pitch and surfaced with mineral granules or inorganic fiberglass saturated with asphalt and surfaced with ceramic granules.
Asphalt Tile: A resilient floor covering laid in mastic, which is available in several colors. Standard size is 9" x 9". Asphalt is normally used only in the darker colors, the lighter colors, the lighter colors having a resin base. Assessed Value: The monetary amount at which a property is put on the assessment roll. Assessed values differ from the assessor's estimate of market value (appraised value) for three major reasons: fractional assessment laws, partial exemptions, and decisions by assessing officials to override market value estimates.
Assessment-Appraisal Ratio: The ratio of the assessed value of a property to an independent appraisal.
Assessment Equity: The degree to which assessments bear a consistent relationship to market value.
Assessment Map: (See "Cadastral Map").
Assessment Progressivity (Regressivity): An appraisal bias such that high-value properties are appraised higher (lower) than low-value properties. (See "Price-Related Differential").
Assessment Ratio: (1) The ratio of the assessed value to an indicator of market value. (2) By extension, an estimated fractional relationship between the assessed values and market values of a group of properties. (See "Level of Assessment"). Assessment Roll: The basis on which the property tax levy is allocated among the property owners in a jurisdiction with taxing powers. The assessment roll usually lists an identifier for each taxable parcel in the jurisdiction, the name of the owner of record, the address of the parcel or the owner, the assessed value of the land, the assessed value of the improvement(s), applicable exemption codes if any, and the total assessed value. (Synonymous with "Cadastre, List, Grand List, Abstract of Ratables, and Rendition").
Assessment-Sale Price Ratio: The ratio of assessed value to sale price (or adjusted sale price) of a property.
Average: (See "Arithmetic Mean").
Average Absolute Deviation: (See "Average Deviation").
Average Deviation: The arithmetic mean of the absolute deviations of a set of numbers from a measure of central tendency such as the median. Taking absolute values is generally understood without being stated. The average deviation of the numbers 4, 6, and 10 about their median (6) is (2 + 0 + 4)/3, or 2. Backfill: Material used in refilling an excavation, such as for a foundation or subterranean pipe.
Backup: A lower costing material in a masonry wall which is covered by a facing of more expensive and ornamental material such as face brick, stone or marble.
Balance: The principle that markets tend to move toward equilibrium after a change in one of the determinants of supply or demand.
Band of Investment Analysis: A perspective on (and a technique for estimating) the discount rate. The discount rate is viewed as being composed of two components, each weighted in proportion to typical financing terms for properties of the type in question. For example, if 75 percent loans are available at 9 percent interest and investors are known to seek a 14 percent return on equity, then the discount rate is 10.25 percent, that is, (0.75 x 0.09 = 0.0675) + (0.25 x 14 = 0.0350) = 0.1025 = 10.25 percent.
Base-Lot Method: A method of appraising land parcels whereby each parcel to be appraised is compared with a parcel of known value, called the base lot, and differences between the two in terms of location, size, shape, topography, and the like are analyzed by the appraiser in estimating the value of the lot to be appraised. Batt Insulation: A type of blanket insulating material, usually composed of mineral fibers and made in relatively narrow widths for convenience in handling and applying between framing members.
Batten: A narrow strip of wood used to cover a joint between boards, or to simulate a covered joint for architectural purposes.
Bearing Wall: A wall which supports upper floor or roof loads.
Benchmark: (1) In property appraisal, a property of known value, and of known effective age and replacement cost. (2) By extension, a model property to be used in determining by comparison the grade or quality class of other properties. (3) A point whose elevation, above or below some definite or assumed datum, is known; may be natural or artificial and either permanent or temporary.
Blanket Insulation: A flexible type of lightweight blanket for insulating purposes, supplied in rolls, strips, or panels, sometimes fastened to heavy paper of an asphalt-treated or vapor-barrier type. Blankets may be composed of various processed materials, such as mineral wool, wood or glass fibers. Breakdown Method: (See "Observed Condition Breakdown Method").
B.T.U.: British thermal unit. A measurement of heat, i.e., the amount of heat required to raise one pound of water one degree Fahrenheit.
Building Permit: A certificate which must be obtained from the municipal government by the property owner or contractor before a building can be erected or repaired and which must be kept posted in a conspicuous place until the job is completed and passed by the building inspector.
Building Residual Technique: A technique used to estimate the value of a property from a knowledge of its net operating income, discount rate, remaining economic life, land value, the income path attributable to the building, and the income path attributable to the land. The technique estimates total value by discounting the income stream attributable to the building and adding the result to an independent estimate of the value of the land.
Built-In Appliances: Those appliances which are permanent fixtures in the residence. Cadastral Map: A map showing the boundaries of subdivisions of land, usually with the bearings and lengths thereof and the areas of individual tracts, for purposes of describing and recording ownership. A cadastral map may also show culture, drainage, and other features relating to the value and use of the land.
Cadastre: A detailed register, inventory, or statement of public record of lands, their extent, ownership, locations and value; executed by governments as a base of property tax systems. (See "Assessment Roll").
Caissons: Poured-in-place reinforced concrete pilings.
Capitalization: The phenomenon whereby one or more events of economic consequence expected to happen in the future exert an economic effect on things in the present. Specifically, the conversion of expected income and rate of return into an estimated value in the income approach to value. Property taxes, anticipated changes, and land-related government services may also be capitalized. (See "Yield Capitalization").
Capitalization of Ground Rents: A method of estimating land value in the absence of comparable sales; applicable to farmland and commercial land leased on a net basis. Capitalization Rate: Any rate used to convert an estimate of income to an estimate of market value; the ratio of net operating income to market value.
Cash-Equivalent Sale Price: An indicator of market value that is a refinement over the raw sale price, in that the effects of unusual financing arrangements and extraneous transfers of personal property have been removed. (See "Adjusted Sale Price").
Cash Flow: Amount of money left after subtracting operating expenses and debt service from rents collected. Before-tax cash flow (also called cash throw-off) signifies that income tax effect has not been considered; after-tax cash flow includes income tax savings generated by ownership.
Cash Throw-off: (See "Cash Flow").
Cement Fiber (Asbestos) Shingles: A covering, consisting largely of Portland Cement and asbestos fiber, made into the form of shingles. Central Tendency: (1) The tendency of most kinds of data to cluster around some typical or central value, such as the median or mean. (2) By extension, any or all such statistics. Some kinds of data, however, such as the weights of cars and trucks, may cluster about two or more values, and in such circumstances the meaning of central tendency becomes unclear. This may happen in ratio studies when two or more classes of property are combined in a single analysis.
Central Tendency, Measure Of: A single point in a range of observations, around which the observations tend to cluster. The three most commonly used measures of central tendency are the mean, median, and mode.
Change: The tendency of the social and economic forces affecting supply and demand to alter over time, thus influencing market value.
Chronological Age: The number of years elapsed since an original structure was built. Synonyms are actual age and historical age. (Contrast with "Effective Age").
Class: A predefined category into which data may be put for further analysis. For example, ratios may be grouped into the following classes: less than .500, .500 to .599, .600 to .699, and so forth. Clerestory Window: A series or band of vertical windows set above the primary roof line.
COD: (See "Coefficient of Dispersion").
Coefficient: A number or quantity generally placed before and multiplying another quantity, as 5 in the expression 5x, or a dimensionless statistic, useful as a measure of change or relationship; for example, correlation coefficient.
Coefficient of Concentration: The percentage of observations falling within a specified percentage (say, 15 percent) of a measure of central tendency.
Coefficient of Correlation: (See "Correlation Coefficient"). Coefficient of Determination (R squared): A statistic that characterizes two or more sets of numbers. The coefficient of determination, when multiplied by 100, gives the percentage strength of the (linear) relationship between or among the sets of numbers. (See "Correlation"). For two variables, the coefficient of determination and the square of the correlation coefficient are identical; for three or more variables, the coefficient of determination measures the strength of the relationship between the dependent variable and all the independent variables combined.
Coefficient of Dispersion (COD): The average deviation of a group of numbers from the median expressed as a percentage of the median. In ratio studies, the average percentage deviation from the median ratio.
Coefficient of Variation (COV): The standard deviation expressed as a percentage of the mean.
Common Wall: A wall separating living area and a garage when the garage is attached, or a wall shared by two living areas in a multiple-family residence. In the latter the wall can serve as a property line if separate ownership.
Comparables; Comparable Sales: Recently sold properties that are similar in important respects to a property being appraised. The sale price and the physical, functional, and locational characteristics of each of the properties are compared to the property being appraised in order to arrive at an estimate of value. By extension, the term comparables is sometimes used to refer to properties with rent or income patterns comparable to a property being appraised. Comparative Unit Method: (1) A method of appraising land parcels in which an average or typical value is estimated for each stratum of land. (2) A method of estimating replacement cost in which all the direct and indirect costs of a structure (except perhaps architect's fees) are aggregated and specified with reference to a unit of comparison such as ground area, floor area, or cubic content. Separate factors are commonly specified for different intervals of the unit of comparison and for different story heights, and separate schedules are commonly used for different building types and quality classes.
Competition: The attempt by two or more buyers or sellers to buy or sell similar commodities in the same market.
Computer-Assisted Mass Appraisal (CAMA): A computerized system of appraising property, usually only certain types of real property, that incorporates statistical analyses such as multiple regression analysis and adaptive estimation procedure to assist the appraiser in estimating value.
Condition: A judgment of the depreciation of an improvement.
Confidence Interval: For a given confidence level, the range within which one can conclude that the population parameter (such as the median or mean appraisal ratio) lies. The reliability of confidence intervals depends on the extent to which any required statistical assumptions are met. Confidence Level: The required degree of confidence in a statistical test or confidence interval, commonly 90, 95, or 99 percent. A 95 percent confidence interval would mean, for example, that one can be 95 percent confident that the population parameter (such as the median or mean ratio of appraised values to market values) falls in the indicated range.
Conformity: The principle that the value of a property depends in part on its relationship to its surroundings.
Consideration: the amount of money and other valuable goods or services upon which a buyer and a seller agree to consummate a sale.
Contract For Deed: A contract for sale in which the seller retains title until the buyer completes installment payments for the property. The sale is not recorded until title passes to the buyer; also known as land contract.
Contract Rent: The amount of rent per unit of time specified in a contract. For very old contracts, the contract rent may be substantially less than the rent the property would bring today.
Contribution: The principle that the value of a particular feature is measured by its contribution to the value of the whole property, rather than by its cost. Coordinate System: (1) A system for locating any geographic point by determining its north-south and east-west distance from some known base point. (2) By extension, a system for identifying each assessable parcel of real estate by means of coordinates, usually by recording the coordinates of the center of each parcel.
Correlation: A statistical phenomenon (and a technique for estimating its strength) whereby knowledge of one fact about a thing implies some knowledge of a second fact about that thing. For example, since the volume and weight of water are correlated, knowing that a quantity of water is 1 gallon tells you that its weight is 8 1/3 pounds. Linear correlation, the kind most often encountered, means that an increase in one factor in some proportion (say, a doubling) changes the other in the same proportion. With curvilinear correlation, as between the radius and the area of a circle, this is not true, despite the fact that the correlation may be very strong in the sense that knowledge of one fact tells you precisely the other fact. These are examples of variables perfectly correlated or nearly so; more often correlation is only partial- for example, the correlation between the age and height of a child. The correlation coefficient gives the strength of the linear relationship between the two variables.
Correlation Coefficient (r): A statistic that characterizes two or more sets of numbers and, when squared and multiplied by 100, gives the percentage strength of the (linear) relationship between the two sets of numbers. For example, if the coefficient of correlation between measures of the height and weight of a group of people were 0.9, then one would deduce that knowing the height of someone (loosely speaking) would explain (or account for) 81 percent of the weight.
Correlation Matrix: The table of numbers used to display the correlation coefficients for each pair of variables when three or more variables are thought to be correlated.
Cost: The money expended in obtaining an object or attaining an objective; generally used in appraisal to mean the expense, direct and indirect, of constructing an improvement. Cost Approach: One of the three approaches to value, the cost approach is based on the principle of substitution- that a rational, informed purchaser would pay no more for a property than the cost of building an acceptable substitute with like utility. The cost approach seeks to determine the replacement cost of an improvement less depreciation plus land value.
Cost Index: An index showing the variations in construction costs over time; sometimes, by extension, a set of similar numbers showing the relative costs of construction in different geographic areas.
Cost Manual: A guide, containing pictures, specifications of structures, and cost schedules, used to help classify construction quality and estimate the cost of replacing a structure.
Cost Schedules: Charts, tables, factors, curves, equations, and the like intended to help estimate the cost of replacing a structure from a knowledge of some other factors, such as its quality class and number of square feet.
Cost Trend Factor: A factor derived from a cost index used to estimate the contemporary cost of something based on its historical cost. COV: (See "Coefficient of Variation").
Crawl Space: A space of limited height sufficient to permit access to piping or wiring underneath the floor of a raised floor structure.
Curable Depreciation: That part of depreciation that can be reversed by correcting deferred maintenance and remodeling to relieve functional obsolescence.
Curtain Wall: A non-bearing exterior wall supported by an independent structural frame of a building. Data: Information expressed in any of a number of ways. Data is the general term for masses of numbers, codes, and symbols generally, and information is the term for meaningful data. Data is the plural of datum, one element of data.
Date of Sale: The date on which the sale was agreed to. The date of recording can be used as a proxy if it is not unduly delayed, as in a contract for deed; also referred to as date of transfer.
Debt Service: The total payments of principal and interest on a mortgage.
Deed Book: A book of public record, usually found in the county courthouse, containing all property transfer deeds which have been recorded and made a matter of public record.
Deferred Maintenance: Repairs and similar improvements that normally would have been made to a property but were not made to the property in question, thus increasing the amount of its depreciation. Dependent Variable: A variable, such as sale price, the value of which is predicted by the values of other variables, such as location and finished living area. Such a variable may be said to depend on the other (independent) variables.
Depreciation: Loss in value of an object, relative to its replacement cost, reproduction cost, or original cost, whatever the cause of the loss in value. Depreciation is sometimes subdivided into three types: physical deterioration (wear and tear), functional obsolescence (suboptimal design in light of current technologies or tastes), and economic obsolescence (poor location or radically diminished demand for the product).
Depth Table; Depth Factor: A standard, mechanical technique for determining the value of a lot of urban land having a certain depth from the value of a base lot having different dimensions.
Differential Assessments: Assessments in a system of laws that require that different classes of property be assessed with different assessment ratios. The term differential assessments is usually reserved for systems where the classes are broad and easily visible, such as classified property tax systems and use-value farmland assessment systems, although much the same effect is achieved by partial homestead exemptions, temporary exemptions to encourage rehabilitation or industrial location, and the like.
Direct Capitalization: Direct capitalization is used to convert an estimate of a single year's income expectancy into an indication of value in one direct step. The income is divided by an appropriate rate or multiplied by an appropriate factor. The chosen rate or factor represents the relationship between income and value as observed in the market..
Direct Capitalization Rate: Reflects the relationship between a single year's income and the total price or value. Synonymous with an overall rate.
Discount Rate: (1) The rate of return on an investment; the rate an investor requires to discount future income to its present worth. It is made up of an interest rate and an equity yield rate. Theoretical factors considered in setting a discount rate are the safe rate earned from a completely riskless investment (this rate may reflect anticipated loss of purchasing power due to inflation) and compensation for risk, lack of liquidity, and investment management expenses. The discount rate is most often estimated by band-of-investment analysis or a sales comparison analysis that estimates typical internal rates of return. (2) In monetary policy, the rate that the Federal Reserve Bank charges member banks to borrow.
Discovery: The process whereby the assessor identifies all taxable property in the jurisdiction and ensures that it is included on the assessment roll.
Dispersion: The degree to which data are distributed either tightly or loosely around a measure of central tendency. Measures of dispersion include the range, average deviation, standard deviation, coefficient of dispersion, and coefficient of variation.
Documentary Stamp Tax: (See "Real Property Transfer Tax"). Dormer: A projection from a sloping roof to provide more headroom under the roof and allow the installation of dormer windows.
Double Glazing: A double-glass pane in a door or window, with an air space between the two panes, which may be sealed hermetically to provide insulation.
Double Hung Window: A window with an upper and lower sash, each balanced by springs or weights to be capable of vertical movement in its own grooves.
Drywall: A finish material applied to an interior wall in a dry state as opposed to plaster, normally referred to as gypsum board or sheet rock.
Ducts: Enclosures, usually round or rectangular in shape, for distributing warm or cool air from the central unit to the various rooms. Easement: A right held by one person to use the land of another for a specific purpose, such as access to other property.
Economic Life: The period of time during which a given building or other improvement to property is expected to contribute (positively) to the value of the total property. This period is typically shorter than the period during which the improvement could be left on the property, that is, its physical life.
Economic Obsolescence: Loss in value of a property (relative to the cost of replacing it with a property of equal utility) that stems from factors external to the property. For example, a buggy-whip factory, to the extent that it could not be used economically for anything else, suffered substantial economic obsolescence when automobiles replaced horse-drawn buggies.
Economic Rent: In economics, the payment received by an owner of something being bought or rented in excess of the minimum amount for which he would have sold or rented it.
Effective Age: The typical age of a structure equivalent to the one in question with respect to its utility and condition. Knowing the effective age of an old, rehabilitated structure or a building with substantial deferred maintenance is generally more informative than knowing its chronological age. Effective Gross Income: Potential gross rent less vacancy and collection loss plus miscellaneous income.
Effective Tax Rate: The tax rate expressed as a percentage of market value; this will be different from the nominal tax rate when the assessment ratio is not equal to 1.
Elevated Slab: A horizontal reinforced concrete structure which is formed and poured-in-place above the ground level.
Equalization: The process by which an appropriate governmental body attempts to ensure that property under its jurisdiction is appraised equitably at market value or as otherwise required by law.
Equilibrium: A state of rest achieved by a balance of the forces that impel change. A market is said to be in equilibrium when the factors of production are used in the production of an array of consumer goods that maximize consumer welfare. Equity: (1) The degree to which assessments bear a consistent relationship to market value. Measures include the coefficient of dispersion (COD) and coefficient of variation (COV). (2) The net value of property after liens and other charges have been subtracted. (See "Horizontal Inequity" and "Vertical Inequity").
Equity Dividend: (Synonymous with before-tax "Cash Flow").
Equity Yield Rate: (See "Yield Rate").
Escheat: The reverting of property to the state for nonpayment of taxes or when there are no legal heirs of someone who dies without leaving a will.
Evaporative Cooler: An air conditioner which cools the air by the effect of water evaporation. Outdoor air is drawn through a moistened filter pad in a cabinet, and the cooled air is then circulated throughout the house. It is used in regions with low humidity.
Expense Ratio: The ratio of expenses to gross income. A "typical" expense ratio is the relationship of normal expenses to effective gross income. Factor: (1) An underlying characteristic of something (such as a house) that may contribute to the value of a variable (such as its sale price) but is observable only indirectly. For example, construction quality is a factor defined by workmanship, spacing of joists, and materials used. Factor definition and measurement may be done subjectively or by a computer-assisted statistical algorithm known as factor analysis. (2) Loosely, any characteristic used in adjusting the sales prices of comparables. (3) The reciprocal of a rate. Assessments may be equalized by multiplying them by a factor equal to the reciprocal of the assessment ratio, and value can be estimated using the income approach by multiplying income by a factor equal to the reciprocal of the discount rate.
Factors of Production: The four ingredients available for the production of goods and services that satisfy human wants: land, labor, capital, and management; also referred to as agents of production.
Fee Appraisal: Appraisal of properties one at a time for a fee.
Feedback: (See "Adaptive Estimation Procedure").
Fee: An absolute ownership of property Fee Simple: An estate of ownership in land without qualifications or restrictions as to the persons who may inherit it as heirs; denotes absolute ownership; also called "absolute fee: or "a fee title".
Fenestration: Generally referred to as the arrangement of windows and doors in the walls of a building.
Fixture: An item of equipment that, because of the way it is used, the say it is attached, or both, has become an integral part of a building or other improvement. A fixture, such as a bathtub, is classified as real property, but trade fixtures (fixtures used in the conduct of business) are classified as personal property.
Formica: A trade name for a hard laminated plastic surfacing, often used as a name for all such finished normally used on counter tops.
Fractional Assessments: Assessments that by law or by practice have assessment ratios different from 1. Usually the assessment ratio is less than 1 and, if assessment biases are present, different classes of property may have different fractional ratios. Fractional assessments are often condemned as offering a way to obscure assessment biases.
Frequency Distribution: A table showing the number or percentage of observations falling in the boundaries of a given set of classes. Used in ratio studies to summarize the distribution of the individual ratios. (See "Class" and "Histogram"). Gable Roof: A ridged roof that slopes up from only two walls. A gable is the triangular portion of the end of a building from the eaves to the ridge.
Gambrel Roof: A type of roof which has its slope broken by an obtuse angle, so that the lower slope is steeper than the upper slope; a roof with two pitches.
General Contractor: A builder who is responsible for all of the work in building a structure.
Geocode: A code used to locate or identify a point, such as the center of a parcel of real estate, geographically. The code is composed of the east-west and north-south coordinates of the point relative to some standard point of reference. Geometric Mean: A measure of central tendency computed by multiplying the values of all of the observations by one another and then taking the result to an exponent equal to one divided by the number of observations. The geometric mean is particularly appropriate when a typical rate of change is being calculated, such as an inflation rate or a cost index.
GIM: (See "Gross Income Multiplier").
Government Survey System: (See "U.S. Rectangular Survey").
Grade: (See "Quality Class"). GRM: (See "Gross Rent Multiplier").
Gross Income Multiplier (GIM): The factor by which gross income is multiplied in order to obtain an estimate of value.
Gross Leasable Area: All area within the outside walls, including lobbies, washrooms, janitor's closets, and so on, but excluding building stairs, fire towers, elevator shafts, flues, vents, stacks, pipe shafts, and vertical ducts if they serve more than one floor.
Gross Rent Multiplier (GRM): The factor by which gross rent is multiplied in order to obtain an estimate of value. Hardboard: A highly compressed wood fiberboard with many uses as exterior siding, interior wall covering, or concrete forms.
Heat Pump: A self-contained, reverse cycle, heating and cooling unit. On its cooling cycle it works like an air conditioner, collecting heat from inside and pumping to an outside coil where it is dissipated. On the heating cycle heat is collected by the outside coil and pumped inside.
Heterogeneous: The opposite of homogeneous.
Highest and Best Use: A concept in appraisal and in assessment law requiring that each property be appraised as though it were being put to its most profitable use, given probable legal, physical, and financial constraints. The concept is most commonly discussed in connection with under-utilized land. Hip Roof: A roof which rises by inclined planes from all four sides of a building. The line where two adjacent sloping sides of a roof meet is called the hip.
Histogram: A bar chart or graph of a frequency distribution in which the frequencies of the various classes are indicated by horizontal or vertical bars whose lengths are proportional to the number or percentage of observations in each class.
Holding Period: The length of time an investor expects to own a given property before selling it to someone else.
Homogeneous: Possessing the quality of being alike in nature and therefore comparable with respect to the parts or elements; said of data if two or more sets of data seem to be drawn from the same population; also said of data if the data are of the same type (that is, if counts, ranks, and measures are not all mixed in together).
Hybrid Model: A model that incorporates both additive and multiplicative components. (See "Additive Model" and "Multiplicative Model"). Improper Expenses: Expenses incurred in the ownership of income-producing property that are not used to calculate value in the income approach.
Improvement: Anything done to raw land with the intention of increasing its value. Thus a structure erected on the property constitutes one very common type of improvement, although other actions, such as those taken to improve drainage, are also improvements. Although such cases are rarely intentional, "improvements" can conceivably diminish the value of the land; note, however, that easements restricting the use and value of land are not considered improvements.
Income: The payments to its owner that a property is able to produce in a given time span, usually a year, and usually net of certain expenses of the property.
Income Approach: One of the three approaches to value, the income approach uses capitalization to convert the anticipated benefits of the ownership of property into an estimate of present value. Income Path: The series of payments from an investment expressed as a percentage of the first year's payment; the plot or trajectory of the income stream.
Income Stream: The series of payments (usually net income payments) receivable from an investment over the life of the investment. The series, of course, may be of any conceivable nature, including a constant series of equal payments (level), a series of decreasing payments that decrease by equal amounts each period (arithmetically decreasing), a series of increasing payments that grow larger each period at a constant rate (geometrically increasing), and so on.
Independent Variable: A variable whose value is not determined by other (dependent) variables.
Indirect Capitalization: (See "Yield Capitalization").
Inferential Statistics: The branch of statistical studies concerned with making predictions about the values of a large number of observations of a variable on the basis of a small number of observations of that variable and related facts. (2) By extension, the statistics calculated in such predictions. Insulation: Any material used to obstruct the passage of sound, heat, vibration, or electricity from one place to another.
Intercept: Graphically, the point at which a line, such as a regression line, intersects the axis on which the dependent variable is represented; the value of the predicted variable when the value of all the other values in the model is zero; the constant b0.
Interest (Interest Rate): The premium paid for the use of money; the equilibrium price in money markets. The interest rate usually incorporates a risk factor, an illiquidity factor, a time-preference factor, an inflation factor, and potentially others, too. (See "Discount Rate").
Interest (interest transferred, interest acquired): The ownership rights of a person in a property. Complete ownership is called fee simple interest. It is possible to sell (transfer) and to own separately the component interests, such as mineral rights and air rights, that make up the fee interest.
Internal Rate of Return: The rate that discounts all future cash flows to a present worth equal to the original investment. The internal rate of return is calculated, usually by trial and error, from a knowledge of the relevant cash flows.
Investment Value: The worth of an investment property to a particular investor.
Iteration: One repetition or repeated cycle in an iterative process; a process of estimating values as close as possible to actual values by repeated approximations. The results of each approximation are used in the next one. Keene's Plaster: A quick-setting, white, hard finish plaster which produces a wall of extreme durability and smooth finish coat.
Kruskal-Wallis Test: A test in inferential statistics, valid for all types of numerical data, that seeks to determine whether the observations in a sample came from one population as opposed to three or more distinct, homogeneous subpopulations. It is used in assessment to analyze assessment ratios from three or more classes of property to determine whether significant assessment biases are present among the classes of property. When only two classes are being compared, the appropriate test is the Mann-Whitney test. Land Ratio: The ratio of land area to building area. The land ratio can be an important factor in grouping properties for income approach appraisal by means of direct sales comparisons.
Land Ratio Method: (See "Allocation Method").
Land Residual Technique: (See "Abstraction Method").
Leasehold: The interests in a property that are associated with the lessee (the tenant) as opposed to the lessor (the property owner). Legal Description: A statement in words or codes identifying land for all purposes of law.
Level of Appraisal: The common or overall ratio of appraised values to market values. Three concepts are usually of interest: the level required by law, the true or actual level, and the computed level based on a ratio study.
Level of Assessment: The common or overall ratio of assessed values to market values.
Levy: (See "Property Tax Levy").
Life Estate: An estate limited to the life of the person holding it, or some other person. It presupposes a fee existing elsewhere than in the life tenant, though the later may be empowered to convey the fee. A life estate may be created by a deed, lease, or other devise, with or without stipulation for rent. A life estate is not one of inheritance. Linear Regression: A kind of statistical analysis used to investigate whether a dependent variable and a set of one or more independent variables share a linear correlation and, if they do, to predict the value of the dependent variable on the basis of the values of the other variables. Regression analysis of one dependent variable and only one independent variable is called simple linear regression, but it is the word simple (not linear) that distinguishes it from multiple regression analysis with its multiple independent variables.
Listing: The process by which the assessor ensures that records for the taxable property identified during discovery are preserved with integrity, available for use in valuation activities, and ultimately reflected in the assessment roll.
Locational Obsolescence: A component of economic obsolescence; loss in value due to suboptimal siting of an improvement.
Location Variable: A variable, such as the distance to the nearest commercial district or the traffic count on an adjoining street, that seeks to measure the contribution of locational factors to the total property value.
Lot Split: A result of the sale of a piece of property held by a single owner such that different pieces of the property are owned by different owners. Splits may or may not occur along plat lines (Also known as property split). Mann-Whitney Test: A test in inferential statistics, similar to the Kruskal-Wallis test, that seeks to determine whether the differences in values between two sets of observations from any population are statistically significant.
Mansard Roof: A roof with two slopes, the lower slope very steep, the upper slope almost flat.
Map: A representation, usually on a flat medium, of all or a portion of the earth, or other celestial body, showing the relative size and position of features to some given scale or projection. A map may emphasize, generalize, or omit the representation of certain features to satisfy specific requirements. Maps are frequently categorized and referred to according to the type of information which they are designed primarily to convey, to distinguish them from maps of other types.
Map Book and Page: A system for parcel identification in which a code (usually numeric) is used to identify each parcel, each code containing four elements: the volume or book of maps in which the parcel is to be found, the page on which it is to be found, the block, and the individual parcel on the block. (See "Deed Book"). Map Parcel Identification Numbering System (MPIN): The scheme by which parcel identifiers are generated. Parcel identifiers are constructed from elements referring to surveying systems, map projection systems, map-page numbers, and geographic areas; also known as parcel id. system.
Market Price: The price a particular buyer and seller agree to in a particular transaction.
Market Rent: The rent currently prevailing in the market for properties comparable to the subject property. Market rent is capitalized into an estimate of value in the income approach.
Market Value: The most probable sale price of a property in terms of money in a competitive and open market, assuming that the buyer and seller are acting prudently and knowledgeably, allowing sufficient time for the sale, and assuming that the transaction is not affected by undue pressures.
Market-Value Standard: A requirement of law or practice that the assessment ratio of all properties be equal to 1. Two issues are implicit here: that fractional assessment levels be avoided and that all property be assessed on the basis of its market value and not on the basis of its value in some particular use- for example, agriculture- unless that use is the only use to which the property can legally be put (in which case its use value would be equal to its market value). Masonry Construction: In building, a type of construction with concrete, concrete block, or brick load bearing exterior walls.
Mass Appraisal: The process of valuing a group of properties as of a given date, using standard methods, and allowing for statistical testing.
Mean: The result of adding all the values of a variable and dividing by the number of values. For example, the arithmetic mean of 3, 5, and 10 is 18 divided by 3, or 6. Also called the arithmetic mean, or average.
Median: The midpoint or middle value when a set of values is ranked in order of magnitude; if the number of values is even, the midpoint or average of the two middle values.
Median Absolute Deviation: The median of the absolute deviations from the median. In a symmetrical distribution, the measure approximates one-half the interquartile range. Median Percent Deviation: The median of the absolute percent deviations from the median; calculated by dividing the median absolute deviation by one hundredth of the median.
Mesh: Heavy steel wire welded together in a grid pattern used as a reinforcement for concrete work.
Metes and Bounds: Measurement of angles and distances; a description of a parcel of land accomplished by beginning at a known reference point, proceeding to a point on the perimeter of the property being described, and then tracing the boundaries until one returns to the first point on the perimeter, usually a corner. The angles are described by reference to points of the compass, and the distances are described in feet or chains; curves are treated as arcs on a circle.
Mill, Millage: One mill is one-thousandth of one dollar or one-tenth of one cent. In many states, the tax rate is expressed as mills per dollar. for example, a 2 percent tax rate is $2 per $100, $20 per $1000, or 20 mills per dollar.
Millwork: Wooden portions of a building which have been pre-built and finished in a shop and brought to the site for installation, such as cabinets, door jambs, moldings, trim, etc.
Mode: The value most often assumed by a variable. By extension for grouped data, the class in which a plurality of the observations fall. Model: A representation of how something works. For purposes of appraisal, a representation (in words or an equation) that explains the relationship between value or estimated sale price and variables representing supply and demand factors.
Modular Construction: Any building construction which is normally preassembled and shipped to the site in units.
Monolithic: One piece. Monolithic concrete is poured in a continuous process so there are no separations.
Monument: Tangible landmarks indicating boundaries; monuments of land surveys range from the deposit of some durable material, a marked wooden stake or post, a marked stone, an iron post having an inscribed cap, a marked tablet set in solid rock or concrete block, a marked tree, a rock in place marked with a cross (X) at the exact point of the corner, and other special types of markers; placed in districts where corners of the public survey and other monuments within 2 miles do not exist. (See also "Geodetic Control Network").
Mortgage Coefficient: A component of the basic rate in the Ellwood variant of mortgage-equity analysis.
Mortgage Constant: Annual debt service expressed as a percentage of the initial principle amount of the loan. Mortgage-Equity Analysis: A technique used to estimate the value of a property from a knowledge of the equity yield rate, typical mortgage terms (including the interest rate, the loan-to-value-ratio, the term of the loan, and the amortization provisions), the holding period, and the percentage by which the property will appreciate or depreciate over the holding period.
Multicollinearity: The phenomenon of two or more variables being correlated. If the two correlated variables are both independent variables (note that if they are correlated they are not truly independent in the relationship sense) used to predict the value of some other, dependent variable, then modeling problems will arise. If the multicollinearity is perfect, the multiple regression algorithms simply will not work; if the multicollinearity is serious but imperfect, the coefficients generated by the algorithm will be individually meaningless (although the model as a whole may still be useful).
Multiple Regression, Multiple Regression Analysis (MRA): A particular statistical technique, similar to correlation, used to analyze data in order to predict the value of one variable (the dependent variable), such as market value, from the known values of other variables (called independent variables), such as lot size, number of rooms, and so on. If only one independent variable is used, the procedure is called simple regression analysis and differs from correlation analysis only in that correlation measures the strength of relationship, whereas regression predicts the value of one variable from the value of the other. When two or more variables are used, the procedure is called multiple regression analysis. See linear regression.
Multiplicative Model: A model in which the coefficients of independent variables serve as powers (exponents) to which the independent variables are raised or in which independent variables themselves serve as exponents; the results are then multiplied to estimate the value of the dependent variable.
Multiplicative Transformation: A transformation of a set of variables accomplished by multiplying a variable by one or more other variables. For example, room area is a multiplicative transformation of length and width.
Multivariate Statistical Technique: Any of a number of statistical analyses in which data (such as the information on a single property record card) containing a number of variables (such as lot size, number of rooms, construction type) are analyzed to predict the value of some other variable. See also multiple regression analysis. Neighborhood: The environment of a subject property that has a direct and immediate effect on value. A geographic area (in which there are typically fewer than several thousand properties) defined for some useful purpose, such as to ensure for later multiple regression modeling that the properties are homogeneous and share important locational characteristics.
Net Operating Income (NOI): Annual net income after operating expenses are subtracted from effective gross income. Does not included payments for interest or principal.
NOI: (See "Net Operating Income").
Nominal Tax Rate: The stated tax rate, which does not necessarily correspond to the effective tax rate.
Normal Distribution: A theoretical frequency distribution often approximated in real world situations. It is symmetrical and bell-shaped; 68 percent of the observations occur within one standard deviation of the mean and 95 percent within two standard deviations of the mean. Observed Condition Breakdown Method: A method for estimating total depreciation by specifying the amount of each kind of depreciation, often for each major building component.
Observed Depreciation Method: A method for estimating total depreciation intuitively, in the aggregate by, for example, specifying percent good.
Obsolescence: A kind of depreciation. See also economic obsolescence and functional obsolescence.
Open Market: A freely competitive market in which any buyer or seller may trade and in which prices are determined by competition. Operating Expenses: Expenses necessary to maintain the flow of income from a property. These are deducted from effective gross income to obtain net operating income, which is then capitalized in the income approach to obtain an indication of market value. Such expenses generally include the costs of property insurance; heat, water, and other utilities; repairs and maintenance; reserves for the replacement of such items as heat and air-conditioning systems, water heaters, built-in appliances, elevators, roofing, floor coverings, and other items whose economic life will expire before that of the structure itself; management; and other miscellaneous items necessary to operate and maintain the property. Not considered operating expenses are depreciation charges, debt service, income taxes, capital improvements, and personal or business expenses of the owner. In addition, for assessment purposes property taxes are usually treated as an adjustment to the capitalization rate rather than an expense item.
Outliers: Observations that have unusual values, that is, they differ markedly from a measure of central tendency. Some outliers occur naturally; others are due to data errors.
Overall Rate: A capitalization rate that blends all requirements of discount, recapture and effective tax rates for both land and improvements.
Overhead and Profit: Overhead is a contractor's operating expense, including workman's compensation, fire and liability insurance, unemployment insurance, equipment, temporary facilities, security, etc., which can not be prorated to any specific category of the construction. Profit is the compensation accrued for the assumption of risk in constructing the building only. Both are proper costs of construction. These are not to be confused with a developer's or owner's overhead and profit associated with subdivision planning and administration. Parameter: Numerical descriptive measures of the population, for example, the arithmetic mean or standard deviation. Parameters are generally unknown and estimated from statistics calculated from a sample of the population.
Parametric Statistic: A statistic whose interpretation or reliability depends on the distribution of the underlying data.
Parapet Wall: The portion of a wall which projects above the roof line.
Parcel: A contiguous area of land within a section, under one ownership, that can be included under one description for assessment or appraisal purposes, after consideration of all legal and practical elements. Partial Interest: An interest (in property) that is less complete than a fee simple interest.
Partial Payment Factor: (Also known as the amortization or periodic repayment factor.) The equal periodic payment that has a present worth of $1, for a specified number of periods and at a specified discount rate.
Percentage Lease: A lease that provides for rent payments to be based on a percentage of income (gross or net), usually with a guaranteed minimum payment.
Percent Good: An estimate of the value of a property, expressed as a percentage of its replacement cost, after depreciation of all kinds has been deducted.
Perimeter: The total length of all the exterior bearing walls of a building. Perimeter Sketch: A graphic presentation of the boundaries of a property, either the land or the buildings on the land.
Personal Property: (See "Property").
PGI: (See "Potential Gross Income").
Photogrammetry: The science or art of obtaining reliable measurements by means of photographs.
Physical Deterioration: Loss in value caused by wear and tear. Pier: The short individual concrete or masonry foundation supports for the post and girder underpinning of a raised floor structure.
Pilaster: A column usually formed of the same material, and integral with, but projecting from a wall.
Pilings: Columns extending below the ground to bear the loads of a structure when the surface soil cannot. They may extend down to bearing soil or support the load by skin friction. Sheet piling is used to form bulkheads or retaining walls.
Planimetric Map: A map which presents only the horizontal positions for the features represented; distinguished from a topographic map by the omission of relief in measurable form. The natural features usually shown on a planimetric map include rivers, lakes, forest, and plains. The cultural features include cities, farms, transportation routes and public utility facilities; political and private boundary lines.
Plaster: Portland Cement mixed with sand and water to form a mortar-like consistency used for covering walls and ceilings of a building.
Plat: A map intended to show the division of land into lots or parcels. Upon recordation with the appropriate authorities, land included in the plat can thenceforth be legally described by reference to the plat, omitting a metes-and-bounds description. Plottage Value: The value of combined parcels in excess of the sum of individual values.
Plumbing Fixtures: Receptacles which receive and discharge water, liquid or water-borne wastes into a drainage system with which they are connected.
Points: Prepaid interest on a loan; one point is equal to 1 percent of the amount of the loan. It is common to deduct points in advance of the loan, so that an individual pays interest on 100 percent of the loan but gets cash on, say, only 99 percent.
Pooled Regression: Combining two or more strata to form one regression model.
Population: All the items of interest, for example, all the properties in a jurisdiction or neighborhood.
Porch: A wood or concrete platform often with a roof covering, found at the entrance. Potential Gross Income (PGI): The sum of potential gross rent and miscellaneous income, that is, the income from rent and other sources that a property could generate with normal management, before allowing for vacancies, collection losses, and normal operating expenses.
Potential Gross Rent: The total rent a property would produce if 100 percent occupied at market rent.
PRC: (See "Property Record Card").
PRD: (See "Price Related Differential").
Precast Concrete: Concrete structural components which are not formed and poured-in-place within the structure, but are cast separately either at another location or on site.
Present Worth: The value of something after discounting future payments and receipts. Present Worth of 1: (Also called the reversion factor.) The lump-sum amount that would have to be set aside to accumulate with compound interest to $1 at the end of a specified number of years and at a specified rate of interest. Alternatively, it can be viewed as the present value of $1 receivable at the end of a specified number of years and discounted at a specified rate.
Present Worth of 1 Per Period: (Also called the annuity factor, or Inwood coefficient). The present worth of a series of payments of $1, receivable at the end of each year, for a specified number of years and at a specified interest rate.
Price-Related Differential (PRD): The mean divided by the weighted mean. The statistic has a slight bias upward. Price-related differentials above 1.03 tend to indicate assessment regressivity; price-related differentials below 0.98 tend to indicate assessment progressivity.
Progressivity: (See "Assessment Progressivity (Regressivity)").
Property: An aggregate of things or rights of things. These rights are protected by law. There are two basic types of property: real and personal. Real property is the rights to land and improvements to the land. Personal property is all property other than real property; it is not permanently attached and is, therefore, movable.
Property Record Card (PRC): A record on which all information regarding a parcel, i.e., legal description, owner, improvements, condition and classification of improvements, is entered.
Property Residual Technique: A technique used to estimate the value of a property from a knowledge of its net operating income, discount rate, remaining economic life, the amount of the reversion, and the income path attributable to the property over the holding period (generally the remaining economic life of the property). The technique estimates total value by discounting anticipated income and adding the result to the present worth of the reversion.
Property Tax Levy: (1) The total amount of property tax that a local government needs to raise. (2) Loosely, by extension, the millage rate or the property tax bill sent to an individual property owner. Qualitative: Pertaining to the subjective nature of some variable of interest, that is, something that can be rated but not objectively reduced to an unambiguous scale. For example, view is a qualitative factor.
Quality Class: A subjective classification of a structure by an appraiser; intended to describe materials used, workmanship, architectural attractiveness, functional design, and the like. Quality class, or its synonym grade, is the key variable in most cost schedules.
Quantitative: Pertaining to the objective nature of some variable of interest, that is, something that can be measured or counted with little ambiguity. For example, number of bathrooms is a quantitative variable.
Quantity Survey Method: A method of estimating reproduction cost in which a complete itemization is made of all labor and material costs by component and subcomponent and all indirect costs; these are added to obtain an estimate of the cost of a structure or a reasonable bid for a contractor to submit on a proposed project. Random Sample: A sample in which each item of the population has an equal chance of being included and, by extension, each possible combination of n items has an equal chance of occurrence.
Range: (1) The maximum value of a sample minus the minimum value. (2) The difference between the maximum and minimum values that a variable may assume.
Rank: The order of a set of values according to the value of each in relation to the other. For example, the numbers 0.95, 0.87, 1.09, and 0.83 have ranks of 3, 2, 4, 1.
Rate of Return: (See "Discount Rate").
Ratio Study: A study of the relationship between appraised or assessed values and market values. Indicators of market values may be either sales (sales ratio study) or independent "expert" appraisals (appraisal ratio study). Of common interest in ratio studies are the level and uniformity of the appraisals or assessments. See also level of appraisal and level of assessment. Real Estate Transfer Documents: The various kinds of deeds whereby real property is conveyed.
Real Property: (See "Property").
Real Property Transfer Tax: The tax payable to a state (and sometimes to a locality) upon the sale of real estate and the recordation of the transfer. The payment is usually proportional to the sale price and is commonly used by appraisers in the absence of more accurate information to deduce the price for which the property sold.
Reappraisal: The mass appraisal of all property within an assessment jurisdiction accomplished within or at the beginning of an reappraisal cycle (sense 2). Also called revaluation or re-assessment.
Reappraisal Cycle: (1) The period of time necessary for a jurisdiction to have a complete reappraisal. For example, a cycle of five years occurs when one-fifth of a jurisdiction is reappraised each year and also when a jurisdiction is reappraised all at once every five years. (2) The maximum interval between reappraisals as stated in laws.
Rectangular Survey System: (See "U.S. Rectangular Survey System"). Rectify: To reconcile photographs or other representations of a curved surface, such as the earth, in order to form a single, two-dimensional representation, such as a map, of the surface features on the curved object.
Regression Analysis: (See "Multiple Regression Analysis").
Regression Coefficient: The coefficient calculated by the regression algorithm for the data supplied that, when multiplied by the value of the variable with which it is associated, will predict (for simple regression) or help to predict (for multiple regression) the value of the dependent variable. For example, in the equation, Value = $10,000 + $5,000 x number of rooms, $5,000 is a regression coefficient.
Regression Line: The line on a graph that represents the relationship defined by the regression coefficients. For example, the line from the relationship given in the definition of regression coefficient would cross the y-axis at the value $10,000 and would go up $5,000 for each movement of 1 to the right. This example illustrates one of the subtleties required in understanding regression analysis: in fact, there is no line, because the independent variable is not a continuous variable, but it is easier to talk about the relationship by pretending that the variable is continuous and represent the relationship by a line rather than the more nearly correct series of vertical bars on a bar chart.
Regressivity: (See "Assessment Progressivity (Regressivity)").
Regressivity Index: (See "Price-Related Differential"). Reinforcing Steel: Steel bars used in concrete construction for giving added strength; such bars are of various sizes and shapes.
Reject Code: A flag applied to a record indicating that it should not be used for certain purposes.
Remaining Economic Life: The number of years remaining in the economic life of a building or other improvement as of the date of the appraisal. This period is influenced by the attitudes of market participants and by market reactions to competitive properties on the market.
Replacement Cost: The cost, including material, labor, and overhead, that would be incurred in constructing an improvement having the same utility to its owner as the improvement in question, without necessarily reproducing exactly any particular characteristic of the property.
Replacement Reserve: An allowance in an annual operating statement for replacement of short-lived items that will not last for the remaining economic life of a property. Representative Sample: A sample of observations from a larger population of observations, such that statistics calculated from the sample can be expected to represent the characteristics of the population being studied.
Reproduction Cost: The cost, including material, labor, and overhead, that would be incurred in constructing an improvement having exactly the same characteristics as the improvement in question.
Required Rate of Return on Equity: a component of the discount rate, as it is understood from the point of view of band-of-investment analysis, and a component of the overall rate developed according to mortgage-equity analysis.
Residual: The difference between an observed value and a predicted value for a dependent variable.
Resilient Floor Covering: Floor covering products characterized by having dense, nonabsorbent surfaces, available in sheet or tile form. Among the various types are vinyl asbestos tile, asphalt tile, composition tile, and linoleum.
Revaluation: (See "Reappraisal"). Revenue Stamps: (See "Real Property Transfer Tax").
Reversion: The value of a property at the end of a holding period.
Review: (See "Assessment Review").
Rough-In: Drain and water line hookups for laundry facilities or for future fixture installation.
R-Value: The standard measurement of resistance to heat loss related to a given thickness of insulation required by climatic demands. Sale Price: The price for which a property was sold.
Sale Ratio: The ratio of an appraised (or assessed) value to the sale price or adjusted sale price of a property.
Sales Comparison Approach: One of the three approaches to value, the sales comparison approach estimates a property's value (or some other characteristic, such as its depreciation) by reference to comparable sales.
Sales Data: Information about the nature of the transaction, the sale price, and the characteristics of a property as of the date of sale.
Sales File: A file of sales data. Sales Ratio Study: A ratio study that uses sales prices as proxies for market values.
Sample: A set of observations selected from a population. If the sample was randomly selected, basic concepts of probability may be applied. (See "Random Sample" and "Representative Sample").
Scatter Diagram or Scatterplot: A graphic means of depicting the relationship or correlation between two variables by plotting the values of one variable on the horizontal axis and the values of the other variable on the vertical axis. Often in ratio studies it is informative to determine how ratios are related to other variables. A variable of interest is plotted on the horizontal axis, and ratios are plotted on the vertical axis.
Schedules: Tables, equations, or some other means of presenting the relationship between the values of two or more variables that are functionally related. For example, cost schedules present the relationship between cost per square foot and living area for a number of quality classes, building heights, and other characteristics. SEE: (See "Standard Error of the Estimate").
Septic Tank: A watertight settling tank in which solid sewage is decomposed by natural bacterial action.
Shake Shingle: A shingle split (not sawed) from a bolt of wood and is used for roofing and siding, or it can refer to a manufactured imitation.
Single Property Appraisal: Appraisal of properties one at a time.
Sinking Fund: A real or hypothetical fund or pool of money into which deposits are periodically made; these deposits, together with the compound interest they earn, are projected to accumulate to a given amount on a given date. Some sinking funds are dedicated to a particular purpose, such as replacing a heating system; others are simply convenient ways of thinking about flows of money. Sinking Fund Factor: The amount that must be periodically set aside to accumulate with compound interest to $1 at the end of a specified number of years and at a specified interest rate. The sinking-fund factor is sometimes known (in connection with annuity capitalization) as the capital recovery rate.
Site Characteristics: Characteristics of (and data that describe) a particular property, especially land size, shape, topography, drainage, and so on, as opposed to location and external economic forces. By extension, any characteristics of either the site or the improvement.
Situs: The actual or assumed location of a property for purposes of taxation.
Skewed: The quality of a frequency distribution that makes it asymmetrical. Distributions with longer tails on the right than on the left are said to be skewed to the right or to be positively skewed; distributions with longer tails to the left are said to be skewed to the left or to be negatively skewed.
Skylight: An opening in a roof, covered with plastic or glass, for light and ventilation.
Slope: (1) The change in the dependent variable associated with a change of 1 in the independent variable of interest. The slope is given by the coefficient of the independent variable. (2) The ratio of the rise to run to express the angle of a roof pitch.
Spearman Rank Test: A standard nonparametric test useful in examining assessment bias, among other things. It is based upon the correlation of two sets of ranks. Split: (See "Property Split").
Standard Deviation: The statistic calculated from a set of numbers by subtracting the mean from each value and squaring the remainders, adding together these squares, dividing by the size of the sample less one, and taking the square root of the result. When the data are normally distributed, one can calculate the percentage of observations within any number of standard deviations of the mean from normal probability tables. When the data are not normally distributed, the standard deviation is less meaningful and should be used with caution.
Standard Error: A measure of the precision of a measure of central tendency; the smaller the standard error, the more reliable the measure of central tendency. Standard errors are used in calculating a confidence interval about the arithmetic mean and the weighted mean.
Standard Error of the Estimate (SEE): An expression for the standard deviation of the observed values about the regression line; thus it provides an estimate of the variation likely to be encountered in making predictions from the regression equation.
Standardize: (1) To transform a variable to standard form; that is, to make the mean of the frequency distribution equal to zero and the standard deviation equal to one. (2) To adjust, for appraisal purposes, reported data such as income and expenses, so as to remove the effects of non-real estate factors, such as abnormally good or bad management, weather, and the like. The more common term for this adjustment process is normalization.
State Plane Coordinate System: The plane-rectangular coordinate system established by the U.S. Coast and Geodetic Survey, one of each State in the Union, for use in defining positions of geodetic stations in terms of plane-rectangular ("x" and "y") coordinates.
Statistics: (1) Numerical descriptions calculated from a sample, for example, the median, mean, or coefficient of dispersion. Statistics are used to estimate corresponding measures, termed parameters, for the population. (2) The science of studying numerical data systematically and of presenting the results usefully. Two main branches exist: descriptive statistics and inferential statistics. Stepwise Regression Analysis: A kind of multiple regression analysis in which the independent variables enter the model, and leave it if appropriate, one by one according to their ability to improve the equation's power to predict the value of the dependent variable.
Storm Door: An extra outside or additional door for protection against inclement weather. Such a door also serves the purpose of lessening the chill of the interior of a building, making it easier to heat, and also helps to avoid the effects of wind and rain at the entrance doorway.
Storm Window: A window placed outside an ordinary window for additional protection against severe weather; also known as a storm sash.
Straight-Line Capitalization: A means of estimating value whereby net operating income is divided by a capitalization rate composed of the discount rate, the reciprocal of remaining economic life as the recapture rate, and sometimes the effective tax rate. The method implicitly assumes that net operating income will decline by an equal dollar amount each year.
Straight-Line Method: A method of amortizing investments and other sources of cash flows so that equal amounts are attributed to each of several equal intervals of time.
Straight-Line Recapture: The recovery of capital invested in a wasting asset in equal periodic amounts over the remaining economic life of the asset.
Stratify: To divide, for purposes of analysis, a sample of observations into two or more subsets according to some criterion or set of criteria. Stratum, Strata (pl.): A class or subset that results from stratification.
Stucco: A coating for exterior walls in which cement is put on wet in layers and when dry becomes exceedingly hard and durable.
Subject Property: The property being appraised.
Subjective: Having the quality of requiring judgment in arriving at an appropriate answer or value for a variable (such as the quality class of a structure). See also objective, qualitative, and quantitative.
Subset: A group of properties within a sample, smaller than the sample, usually although not necessarily defined by stratification rather than by sampling.
Substitution: A principle stating that a property's value tends to be set by the cost of acquiring an equally desirable substitute. Sum of Squared Errors: The sum of the squared deviations from the predicted values (rather than the mean value).
Sum of Squares: The result obtained by adding all the squares of the individual deviations from some given value. Usually it is the sum of the squares of the deviations of the individual values of a variable from the mean value.
Summation Approach: (See "Cost Approach").
Sump Pump: A suction device, usually operated to remove water or waste which collects at the sump pit or tank.
Supply: A schedule showing the amount of a good or productive service that would be offered for sale at various prices during a given period. Tangible Property: Actual physical property (real or personal) in contrast to intangible property.
Task Force: A kind of organizational unit, usually temporary, composed of employees from different functional areas whose assignment is usually some kind of nonroutine task, such as assisting in a system development effort.
Tax Base: The total of all the assessed values in a given community.
Tax Levy: (See "Property Tax Levy").
Tax Rate: The percentage of assessed value at which each property is taxed in a given district. Terrazzo: A floor surface of marble chips in concrete. After the concrete has hardened, the floor is ground and polished to expose the marble chips. In epoxy terrazzo, the filler material is plastic.
Three Approaches To Value: A convenient way to group the various methods of appraising a property. The cost approach encompasses several methods for estimating replacement cost of an improvement less depreciation plus land value. The sales comparison approach estimates values by comparison with similar properties for which sales prices are known. The methods included in the income approach are based on the assumption that value equals the present worth of the rights to future income.
Time-Adjusted Sale Price: The price at which a property sold adjusted for the effects of price changes reflected in the market between the date of sale and the date of analysis.
Time Value of Money: The principle that an amount of money receivable or anticipated as income in the future is always worth less than an equal amount actually in hand at the present time.
Title: The union of all elements constituting proof of ownership or the instrument that is evidence of ownership; ownership. Tongue and Groove: Any lumber, such as boards or planks, machined in such a manner that there is a groove on one edge and a corresponding projection on the other.
Transformation: The process of changing the values and definitions of one or more variables so as to make them more useful for further analyses. If market value changes with living area, for example, a valuable transformation would be to change length and width to area, and if market value does not change proportionally with area, a valuable transformation might be to use the logarithm of area.
Transverse Mercator Coordinates: Geographic coordinates based on a transverse Mercator projection and usually expressed in meters. (See "Mercator Projection, Universal Transverse Mercator").
Trended Original Cost: The cost of constructing an improvement at a particular time, adjusted to reflect inflation and deflation, as well as changes in construction costs, between that time and the present.
Trending: Adjusting the values of a variable for the effects of time. Usually used to refer to adjustments of assessments intended to reflect the effects of inflation and deflation and sometimes also, but not necessarily, the effects of changes in the demand for microlocational goods and services. Triangular-Lot Table: A schedule of adjustments used to appraise a lot having a triangular shape (in whole or in part) by comparison with a base lot or a given unit factor, such as a front-foot rate.
t-Statistic: A particular statistic important in inferential statistics for certain kinds of hypothesis testing of certain kinds of data.
t-Test: A particular parametric statistical test useful, among other things, in testing the level of assessment. U Factor: The heat transmission factor of a wall, roof or floor assembly measured in B.T.U.'s per square foot per degree Fahrenheit.
United States Public Land Survey: The land survey begun by the United States Congress in 1785 upon which the U.S. Rectangular Survey System is based.
Unit-In-Place-Method: A method of cost estimating in which all the direct and some of the indirect costs of each individual construction component (such as the foundation walls) are specified in appropriate units (such as area, volume, or length), multiplied by an estimate of the quantity required by the particular structure, and added to obtain an estimate of the cost of the structure. (Compare "Comparative Unit Method" (sense 2) and "Quantity Survey Method"). Unit Method of Valuation: The technique of valuing a group of property items as 'one thing'. Universal Transverse Mercator: The transverse Mercator projection used in the United States. Universal transverse Mercator projection zones are 6 degrees of longitude wide and cross civil boundaries. (See "Mercator Projection").
Unweighted Mean: (See "Weighted Mean").
Usable Area: The area of land that can be used, or the equivalent area after allowance for irregular topography.
Use Class: (1) One of the following classes of property: single-family residential, multifamily residential, agricultural, commercial, industrial, vacant land, and institutional/exempt. (2) any subclass refinement of the above- for example, townhouse, detached single-family, condominium, house on farm, and so on.
Use Code: A code to indicate a property's use class or, less often, potential use. U.S. Rectangular Survey System: In 1785 the U.S. Congress authorized the first land survey of the United states. It specified that surveyed townships were to be 6 miles square. The townships are surveyed from an East-West base line and from North-South principal meridians. Townships are laid off from these base lines and meridians. To identify the townships, each is given an identification in which it is referred to by its relation to the base line and meridian. Horizontal tiers of townships are laid off North and South from the base line and numbered consecutively. Vertical columns of townships called ranges are laid off to the East and West of the principal meridians and numbered accordingly. The townships can be identified by listing the township tier number and the range number, such as "Township 2 North, Range 2 West". Each township is usually divided into 36 sections, each approximately one mile square and containing approximately 640 acres, although this may vary considerably at rivers or where base lines or meridians converge; originally the Government Land Office (GLO) surveys; the present surveys executed by the Bureau of Land Management (BLM).
Use Value: The value of property for a specific use.
U-Test: (See "Mann-Whitney Test").
UTM: (See "Universal Transverse Mercator"). Valuation: The process or business of appraising, of making estimates of the value of something. The value usually required to be estimated is market value.
Value: (1) Any number between positive infinity and negative infinity. (2) The monetary worth of something. (3) the estimate sought in a valuation. See also market value.
Value in Exchange: The amount an informed purchaser would offer in exchange for a property under given market conditions.
Value in Use: (See "Use Value").
Vapor Barrier: Material used to retard the passage of moisture through floors, roofs or exterior walls and thus prevent condensation within them; also called moisture barrier. (See "Waterproofing"). Variable: An item of observation that can assume various values, for example, square feet, sales prices, or sales ratios. Variables are commonly described using measures of central tendency and dispersion.
Variance: A measure of dispersion equal to the standard deviation squared.
Variation: (1) A general term meaning dispersion. (2) A reference to a particular statistic called the coefficient of variation (COV).
Veneer: A layer of material applied to another surface for ornamental or protective purposes. Masonry veneer refers to any masonry unit applied over wood frame construction.
Verify: To check the accuracy of something. For example, sales data may be verified by interviewing the purchaser of the property, and data entries may be verified by check digits.
Vertical Inequity: Differences in the levels of assessment of properties related to the value ranges of the properties. That is, properties of higher value have assessment levels different from properties of lower value. See horizontal inequity.
Vinyl Composition (Asbestos) Tile: A resilient floor covering laid in mastic which is available in many colors and textures. Standard size is 12" x 12". Warranty Deed: A deed conveying to the grantee title to the property free and clear of all encumbrances except those stated in the deed itself.
Wasting Asset: A property or other thing of value whose value diminishes with the passage of time. For example, buildings are a wasting asset, but land and gold, traditionally are not.
Waterproofing: Any material designed to stop passage of moisture. Plastic sheets of treated papers and asphalt are used for membranes, while various chemical sealants and asphalt applications are used to seal pores or cracks.
Weatherstripping: Strips of felt, rubber, metal or other suitable material fixed along the edges of a door or window to keep out drafts and reduce heat loss. Weighted Coefficient of Dispersion: The coefficient of dispersion (COD) when the absolute differences between individual assessment ratios and the measure of central tendency (for example, median ratio) are weighted on the basis of sale price.
Weighted Coefficient of Variation: The coefficient of variation (COV) when the squared differences between individual assessment ratios and the arithmetic mean ratio are weighted on the basis of sale price.
Weighted Mean; Weighted Average: An average in which the observations are weighted based on some criterion. In ratio studies, the weighted mean is calculated by weighting the ratios based on their sales prices. A shortcut method is to sum the appraisals or assessments, sum the sales prices, and divide the first result by the second.
Wood Frame Construction: In building, a type of construction in which the structural members are of wood or are dependent upon a wood frame for support. Yield Capitalization: Any of several methods used in the income approach to appraising. Yield methods involve certain subtleties and assumptions that vary according to the particular method employed, but include estimating such factors as the required rate of return on investment, the remaining economic life of the property, an investment holding period, the income path, anticipated depreciation or appreciation, and reversionary value. The yield methods stand in contrast to direct sales analysis methods, in which a typical relationship between incomes and sales prices is found by simply dividing observed incomes by sales prices for comparable properties, the fraction thus obtained then being applied (in the form of a gross income multiplier (GIM) or an overall rate) to the properties being appraised. See also building residual technique, discount rate, mortgage-equity analysis, and property residual technique
Yield Rate: The required rate of return on equity capital; this is a component of the capitalization rate (or discount rate or mortgage-equity overall rate) that must be separately specified in band-of-investment analysis and mortgage-equity analysis. z-Statistic: The number calculated in a z-test, whose significance is evaluated by reference to a z-table.
z-Table: A table of critical values associated with the z-test.
z-Test: A test of any of a number of hypotheses in inferential statistics that has validity if sample size is sufficiently large and the underlying data are normally distributed. |