National portion

Value & Appraisal vocabulary

10 terms, defined plainly. Where a term is commonly confused with another, the definition says so — that confusion is usually the wrong answer.

Market value

The most probable price a property should bring in an open, competitive market with informed parties acting without undue pressure — distinct from price (what was actually paid) and cost.

Substitution

The appraisal principle capping value at the cost of acquiring an equally desirable substitute — the foundation of the sales comparison approach.

Progression / Regression

Progression: a lesser property is pulled UP in value by superior neighbors. Regression: a superior property is pulled DOWN by lesser neighbors.

Highest and best use

The reasonably probable use that is legally permissible, physically possible, financially feasible, and maximally productive (most profitable — same thing).

Sales comparison approach

Valuing by adjusting recent comparable sales — most reliable for typical single-family homes in active markets.

Cost approach

Land value + replacement/reproduction cost of improvements − depreciation. Best for new or special-purpose buildings.

Income approach

Valuing by the income stream — net operating income ÷ capitalization rate. Used for investment property.

Functional obsolescence

Loss of value from outdated design or over-improvement WITHIN the property (poor layout, superadequacy).

External (economic) obsolescence

Loss of value from factors OUTSIDE the property (neighborhood decline, nearby nuisance) — the two names mean the SAME thing, and it is incurable.

Physical deterioration

Loss of value from wear and tear — curable (deferred maintenance) or incurable.