| To be able to fully understand the concepts of | | | | outflow. For example, a home buyer wants to |
| residential real estate appraisal, here is a list of | | | | purchase a property. He estimates the future |
| important terms with meaning. Appraisal becomes | | | | cash flow that the property would generate. |
| important in times of selling the property, buying a | | | | Then, he discounts the cash flow into a lump sum |
| property, divorcing the partner, settling the | | | | value amount. Let us say $450,000. If the home |
| estate, and relocating an employee. In some point | | | | owner sells less than $450,000, the home buyer |
| of our lifetime, we are going to encounter | | | | considers in purchasing the property. |
| appraisals at least once. | | | | Investment Value |
| Fair Market Value | | | | It is the amount that the investor would pay to |
| It is the median price between the highest price | | | | acquire the property. The Investment Value may |
| acceptable to buyer and lowest price acceptable | | | | be higher or lower than the fair Market value. |
| to seller. | | | | Insurable Value |
| Market Value | | | | The Insurance Policy covers the value of the |
| It is the most likely price at which the property | | | | property which is the Insurable Value. |
| would sell. The property must sell at a right price | | | | Subject Property |
| in which the price is not too high and low. Thus, an | | | | It is the property which the appraiser evaluates |
| overprice property will sell a little longer. In most | | | | or analyzes. The Appraiser analyzes the location, |
| cases, an overprice property sells when the | | | | amenities, and condition of the subject property |
| market value catch up with the selling price. | | | | to arrive to the fair market value. |
| Price | | | | Comparables or Comps |
| It is often confuse with Market Value. Price | | | | Appraiser compares the subject property to |
| differs slightly from Market Value. Although the | | | | another local property. The other local property is |
| Market Value gives the seller an idea how much | | | | called Comparables or Comps. With the |
| to sell the property, the price may be higher or | | | | information from Comparables or Comps, the |
| lower than the Market Value. For example, a | | | | Appraiser calculates the fair market value of the |
| buyer is willing to pay $20,000 more than the | | | | subject property. |
| Market Value. This happens when there are many | | | | Real Estate Appraisal covers a huge scope. It is |
| potential buyers for the property. | | | | impossible to include all appraisal terms. For any |
| Value in Use | | | | missing key terms, you may consider online |
| This relates to the net present value (NPV) of | | | | mortgage dictionary. A dictionary awaits your |
| the property use. The NPV is the difference | | | | command. In an instant, it searches for possible |
| between present value of cash inflow and | | | | definition. |