Understanding industry jargon can help you spot any red flags in your home appraisal report and discuss them with your appraiser.
Your home real estate appraiser uses many terms to communicate the state and value of your property. Understanding these common terms and phrases can help you communicate with your professional home real estate appraiser as he describes your home or a home that you are considering purchasing. This will improve your chances of spotting indicators of damage, structural problems, or pitfalls with your home investment.
Home Real Estate Appraiser Glossary:
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Abstraction Method – The process through which the appraiser looks at several properties similar to your own to create an estimate value for your property. The selected properties should be similar to yours in geography, style, and size.
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Amenity –A property feature that adds value and distinguishes your home from surrounding properties. A superior view, a 300-year-old oak tree, or a landscaped pool area are all examples of an amenity.
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Built-ins – Furnishings or appliances installed in the home that are likely to be considered part of the sale package. Over-the-oven microwaves and dishwashers are built-in items; the kitchen table is not.
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Effective age –If the property seems older than its true age, an effective age may be given. This term is most often used to describe homes that are distressed, poorly maintained, or show extreme wear and tear (see wear and tear below). It could also apply to a property that seems newer and well maintained. This is a subjective term.
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Externality –Things that are not directly attached to your property can still affect its value. High capacity power lines that run behind—but not through—the back yard can negatively influence a home’s final value. Foreclosed and empty homes in your neighborhood can also bring down the value of your home appraisal.
Externality can also be positive. Proximity to a lake or other local attraction may have a positive effect on your home’s value, even though the feature is not located on your property.
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Gross Area – The overall square footage of the entire home, including closets and hallways. The gross area is usually found by measuring along the outer walls of the home.
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Hidden Amenity – A feature that adds value to a property, but that is not immediately visible to the casual observer. Homes constructed with hurricane clips, specialty or eco-friendly materials, or those with high-efficiency or smart alarm-systems can be included in this category.
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Latent Defects – Problems with the home that are not immediately visible. You can spot a gaping hole in the roof, but shingle damage is much more subtle. This hard-to-spot damage may require repair work to make the home livable. An expert appraiser might spot these hidden defects and make sure you know about them.
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Major Deficiency – A large, difficult to fix problem – a red flag. A major deficiency would include foundation problems, termites, black mold, septic tank issues, and other time-consuming or costly repairs. Cosmetic issues and minor repairs are not included in this category.
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Open Space – Used to describe desirable areas within a neighborhood, rather than on the actual property. An open space could refer to a park, playground, or other feature close to the home in question.
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Wear and Tear –Used to describe the typical damage caused by people living in a home over time. Wear and tear is generally minor, cosmetic, and easily fixed.
If you have any questions about appraisal terminology or having your home appraised, speak to an experienced home real estate appraiser at Ferstl Valuation Services by calling 501.313.0641 to schedule a consultation.
