When it comes to appraisal management and appraisal management companies, there are tons of terms you should know. However, trust us when we say that we understand: there’s only so much space in your brain, and with your own roles and responsibilities, how can you squeeze another inch of information in there? No need to worry. We’ve developed a list of the top 50 appraisal management terms you need to know, according to USPAP 6th Edition Dictionary. You’ll be able to refer to this glossary if ever you’re ever reading an appraisal or reviewing a review and find yourself thinking “what exactly does this mean?” Bookmark it, print it, or simply make a mental note. Whatever you do, file it away as an A to Z resource you can always come back to and use again and again. 

Top 50 appraisal management terms you need to know:

  1. Absorption: Sometimes referred to as the absorption rate, absorption is the amount of inventory or units of a specific commercial property type that becomes occupied during a time period in a particular market.
  2. Accumulated Cost Recovery: Total cost recovery deductions taken throughout the time a property is held.
  3. Add-on Factor: The ratio of rentable square feet to useable square feet.
  4. Add Value: Transaction management process related to a transaction manager’s planning, effort, and contact with key decision-makers and investors, along with contact with other professionals.
  5. Adjusted Basis: The original cost basis of a property plus capital improvements, minus total accumulated cost recovery deductions and partial sales taken during the holding period.
  6. Appraisal: (noun) the act or process of developing an opinion of value; an opinion of value. (adjective) of or pertaining to appraising and related functions such as appraisal practice or appraisal services.
  7. Appraisal Review: The act or process of developing and communicating an opinion about the quality of another appraiser’s work that was performed as part of an appraisal or appraisal review assignment.
  8. Appraiser: One who is expected to perform valuation services competently and in a manner that is independent, impartial, and objective.
  9. Automated Valuation Model (AVM): A computer program that estimates a property’s value based on market, economic, and demographic factors.
  10. Balloon Payment: The final payment of the balance due on a partially amortized loan.
  11. Breakpoint: The sales threshold over which percentage rent is due.
  12. Building Classifications: Building classifications refer to Class “A”, “B”, “C” and sometimes “D” properties. Ratings assigned are generally subjective.
  13. Cap Rate: Abbreviation for capitalization rate. Unleveraged initial yield on the investment expressed as the annual Net Operating Income divided by the property price or asking price.
  14. Capital Expenditures: Also called operating expenses. Property improvements that cannot be expensed as a current operating expenses for tax purposes.
  15. Commercial Mortgage Backed Securities: A type of bond commonly issued in security markets, and backed by mortgages on commercial properties.
  16. Common Area Maintenance (CAM): The additional rent charged to the tenant to maintain the common areas of the property.
  17. Co-broker: When brokers partner to view and rent the property, and split the commission should their client end up leasing the property.
  18. Concessions: These are most often free rent, lease buyouts, moving allowances, or above-standard tenant improvement allowances.
  19. Desktop GIS: GIS software programs that support a wide variety of functions, queries, and mapping geared toward visual presentation and descriptive analysis of geo-coded data.
  20. Easement: The right of a non-owner to have control over a portion or all of the property.
  21. Effective Date of the Appraisal: Date to which an appraiser’s analyses, opinions, and conclusions apply. 
  22. Eminent Domain: The right of the federal government to obtain private land for public purposes.
  23. Escalation Clause: Used in long-term commercial leases to help landlords cover the increasing cost of property ownership year over year, an escalation clause increases the rent on an annual basis.
  24. Extraordinary Assumption: An assumption, directly related to a specific assignment, as of the effective date of the assignment results, which, if found to be false, could alter the appraiser’s opinions or conclusions.
  25. Federally Regulated Institution: A national or state-chartered bank, bank holding company, federal savings, savings and loan association, or credit union.
  26. Federally Related Transaction: Any real estate related transaction in which a regulated institution uses an appraiser.
  27. Fee Simple: An unencumbered ownership right in a piece of property.
  28. Going Concern Premise: One of the premises under which the total assets of a business can be valued; the assumption that a company is expected to continue operating well into the future (usually indefinitely).
  29. Gross Income: Total income from a property before deducting any expenses, customarily stated on an annual basis.
  30. Gross Lease: A property lease whereby the landlord pays for all property costs including utilities, taxes, and maintenance.
  31. 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.
  32. Intended Use: The use or uses of an appraiser’s reported appraisal or appraisal review assignment opinions and conclusions, as identified by the appraiser based on communication with the client at the time of the assignment.
  33. Intended User: The client and any other party as identified, by name or type, as users of the appraisal or appraisal review report by the appraiser on the basis of communication with the client at the time of the assignment.
  34. Latent Defect: A fault in the property that was not revealed through inspection.
  35. Leasehold Interest: When a fee simple land-owner enters into an agreement or contract.
  36. Lease Fee: A landlord’s right of use of property and the right to lease to others
  37. Letter of Intent: An informal agreement between landlord and lessee showing their intent to move forward. Often referred to as the LOI. 
  38. Percentage Lease: A lease in which the costs are based on the percentage of the sales made at the property.
  39. Personal Property: Identifiable tangible objects that are considered by the general public as being “personal” — for example, furnishings, artwork, antiques, gems and jewelry, collectibles, machinery and equipment; all tangible property that is not classified as real estate.
  40. Net Absorption: The net change in occupied space in a given market between the current period and the last period.
  41. Sales History and Pending Sales: All current agreements of sales or listings of the property as of the effective date of the appraisal along with all sales of the property three years prior to the effective date.
  42. Scope of Work: The type and extent of analysis of each appraisal assignment.
  43. Sublease Clause: The clause in a lease that states whether or not subleasing is allowed.
  44. Range of Value: In final reconciliation, the range in which the final market value opinion of a property may fall; usually stated as the interval between a high and low value limit.
  45. REIT (Real Estate Investment Trust): A security that sells like stocks and invests in real estate directly either through properties or mortgages.
  46. Report: Any communication, written or oral, of an appraisal or appraisal review that is transmitted to the client or a party authorized by the client upon completion of an assignment.  
  47. Tenant Improvements or Tenant Improvement Allowance (TI): Alterations or updates an owner makes to rental space as part of a lease in order to create a space that fits the needs of a particular tenant.
  48. Valuation Service: Services pertaining to aspects of property value.
  49. Uniform Standards of Professional Appraisal Practice (USPAP): The Uniform Standards of Professional Appraisal Practice (USPAP) is the generally recognized ethical and performance standards for the appraisal profession in the United States.  USPAP was adopted by Congress in 1989, and contains standards for all types of appraisal services, including real estate, personal property, business and mass appraisal. 
  50. USDA: A mortgage loan offered to rural property owners by the Department of Agriculture.