Appraisal glossary

A dollar or percentage modification applied to a comparable sale to account for differences between the comparable and the subject property. Adjustments can be for location, condition, size, features, or other characteristics.

Source: Fannie Mae Selling Guide

A third-party company that manages appraisal orders on behalf of lenders. AMCs were mandated by the Dodd-Frank Act to ensure appraiser independence by creating a buffer between lenders and appraisers.

Source: Dodd-Frank Wall Street Reform Act

The American National Standards Institute standard for measuring residential square footage. Defines which areas count as Gross Living Area (GLA), how to measure, and what to include or exclude. Adopted by Fannie Mae as the required measurement standard.

Source: ANSI Z765-2021

The act or process of developing an opinion of value for real property. An appraisal must be performed by a licensed or certified appraiser in compliance with USPAP.

Source: USPAP 2024-2025

One of two report types defined by USPAP. Contains sufficient detail for the intended users to understand the appraiser's opinions and conclusions. Provides a summary of the data, reasoning, and analyses used to develop the opinion of value.

Source: USPAP 2024-2025, Standards Rule 2-2(a)

A board of The Appraisal Foundation that establishes minimum education, experience, and examination requirements for real property appraisers. Sets the criteria that state licensing boards like TALCB enforce.

Source: The Appraisal Foundation

A sale between unrelated parties where neither is under duress. Appraisers use arm's-length transactions as comparable sales because they reflect true market value without distortion from personal relationships or pressure.

A recently sold property similar to the subject property in location, size, condition, and features. Appraisers analyze comparable sales to estimate the subject's market value using the Sales Comparison Approach.

Source: Fannie Mae Selling Guide

A UAD standardized scale for reporting property condition. C1 is brand new, C3 is well-maintained with minor deferred maintenance, C5 has significant deferred maintenance, and C6 requires substantial renovation. Most lender appraisals fall in the C3-C4 range.

Source: Fannie Mae UAD Appendix D

One of three approaches to value. Estimates what it would cost to replace the improvements (structures) on the land, minus depreciation, plus the value of the land. Most reliable for newer construction where depreciation is minimal.

Source: USPAP 2024-2025

The date to which an appraiser's opinion of value applies. Can be the date of inspection (current), a past date (retrospective, e.g. date of death for estate work), or a future date (prospective, e.g. completion of proposed construction).

Source: USPAP 2024-2025

A loss in property value from any cause. Includes physical deterioration (wear and tear), functional obsolescence (outdated design), and external obsolescence (factors outside the property like a nearby highway). Used in the Cost Approach.

An appraisal completed without a physical inspection of the subject property. The appraiser uses public records, MLS data, aerial imagery, and other available information. Allowed by some lenders for lower-risk transactions. Reported on Fannie Mae Form 1004 Desktop.

Source: Fannie Mae Selling Guide

The apparent age of a property based on its condition and maintenance, as opposed to its actual chronological age. A well-renovated 50-year-old home might have an effective age of 15 years.

A written agreement between the appraiser and the client that establishes the scope of work, fee, intended use, intended users, and other terms of the appraisal assignment. Required by USPAP before work begins on private (non-AMC) assignments.

Source: USPAP 2024-2025

An appraisal where the appraiser inspects the property from the street and does not enter the home. Interior condition is estimated from public records and MLS data. Reported on Fannie Mae Form 2055.

Source: Fannie Mae Form 2055

The Uniform Residential Appraisal Report, the most common appraisal form for single-family lending. Used for full interior/exterior inspections of one-unit properties including condominiums, townhomes, and single-family residences.

Source: Fannie Mae

The Small Residential Income Property Appraisal Report. Used for 2-4 unit residential properties. Includes income approach analysis with rental data and operating expense estimates in addition to the sales comparison approach.

Source: Fannie Mae

The Individual Condominium Unit Appraisal Report. Used specifically for condominium units and includes analysis of the condo project, HOA finances, and unit-specific comparisons.

Source: Fannie Mae

The Exterior-Only Inspection Residential Appraisal Report. Used when the appraiser does not enter the property. Relies on exterior observation, public records, and MLS data for interior assumptions.

Source: Fannie Mae

The total above-grade finished living area of a residential property, measured per ANSI Z765 standards. Basements, garages, and unfinished areas are excluded from GLA. This is the primary measure of a home's size for appraisal purposes.

Source: ANSI Z765-2021

The reasonably probable use of a property that results in the highest value. Must be legally permissible, physically possible, financially feasible, and maximally productive. Required analysis in every USPAP-compliant appraisal.

Source: USPAP 2024-2025

One of three approaches to value. Estimates value based on the income a property can generate. Most commonly used for rental and investment properties. Applies gross rent multipliers or capitalization rates to rental income.

Source: USPAP 2024-2025

The use(s) of an appraiser's reported appraisal or appraisal review, as identified by the appraiser based on communication with the client at the time of the assignment. Common intended uses include mortgage financing, estate planning, and litigation support.

Source: USPAP 2024-2025

The most probable price a property should bring in a competitive and open market, with the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. This is the value type used in most lending appraisals.

Source: USPAP 2024-2025 / Fannie Mae

A technique for extracting the value contribution of a single feature by comparing two sales that are identical except for that one feature. For example, comparing two similar homes where only one has a pool isolates the market's reaction to pools.

The sum of all positive and negative adjustments applied to a comparable sale. Fannie Mae guidelines suggest that net adjustments generally should not exceed 15% of the comparable's sale price, and gross adjustments should not exceed 25%.

Source: Fannie Mae Selling Guide

A UAD standardized scale for reporting construction quality. Q1 is the highest quality with unique architectural design and top-grade materials. Q4 is standard production housing. Q6 is the most basic construction with minimal materials and design.

Source: Fannie Mae UAD Appendix D

The process of analyzing the results from different approaches to value (Sales Comparison, Cost, Income) and comparable sales to arrive at a final opinion of value. The appraiser weighs the reliability of each approach based on available data quality.

Source: USPAP 2024-2025

One of two report types defined by USPAP. Contains less detail than an Appraisal Report and restricts use to the client only. The appraiser's workfile must still contain all supporting data and analyses.

Source: USPAP 2024-2025, Standards Rule 2-2(b)

An appraisal with an effective date in the past. Common for estate/probate (date of death), divorce (date of separation), and tax appeal purposes. The appraiser must use data available as of the historical effective date.

The primary approach to value for residential appraisals. Estimates value by comparing the subject property to recently sold similar properties (comparables), with adjustments for differences. Required in virtually all residential lending appraisals.

Source: USPAP 2024-2025

The type and extent of research and analysis in an appraisal assignment. USPAP requires the scope of work to be appropriate for the intended use and produce credible results. Defined at the outset of each assignment.

Source: USPAP 2024-2025

The estimated value of the land as if vacant and available for development to its highest and best use. Used in the Cost Approach and sometimes extracted through comparable vacant land sales or allocation from improved sales.

The property being appraised. All comparable sales are compared against the subject, and adjustments are made to the comparables to reflect how they differ from the subject.

Additional pages attached to an appraisal report for extra commentary, photos, maps, or analysis that does not fit on the standard form. Common uses include expanded comparable explanations, market trend analysis, and special conditions.

The state board that licenses and regulates real estate appraisers in Texas. Administers four credential levels: Trainee, Licensed, Certified Residential, and Certified General. Enforces USPAP compliance and handles consumer complaints.

Source: Texas Occupations Code, Chapter 1103

Texas recognizes four appraiser levels: (1) Trainee Appraiser -- works under a certified supervisor; (2) Licensed Residential Appraiser -- non-complex properties up to $1M; (3) Certified Residential Appraiser -- all 1-4 unit residential regardless of value; (4) Certified General Appraiser -- all property types including commercial.

Source: TALCB / AQB Criteria

An adjustment applied to comparable sales to account for changes in market conditions between the date of the comparable sale and the effective date of the appraisal. Reflects appreciation or depreciation in the local market over time.

A standardized data format created by Fannie Mae and Freddie Mac for appraisal reporting. Defines how property characteristics (condition, quality, view, etc.) must be coded to ensure consistency across reports and facilitate automated review.

Source: Fannie Mae / Freddie Mac

The upcoming major revision to the Uniform Appraisal Dataset that replaces the legacy 1004 form with a new redesigned data collection format. Introduces structured commentary fields, expanded property characteristic options, and enhanced analytical requirements.

Source: Fannie Mae / Freddie Mac

The nationally recognized standards for appraisal practice in the United States, published by The Appraisal Foundation. Updated on a two-year cycle (current edition: 2024-2025). All licensed and certified appraisers must comply with USPAP. Defines two report types: Appraisal Report and Restricted Appraisal Report.

Source: The Appraisal Foundation, USPAP 2024-2025

The appraiser's documentation of the data, analyses, and reasoning used to develop an opinion of value. USPAP requires the workfile to be retained for at least five years (or two years after final disposition of any judicial proceeding). Must support everything in the report.

Source: USPAP 2024-2025, Record Keeping Rule

Local government regulations that control how land can be used (residential, commercial, agricultural, etc.). Appraisers verify that the current use of the subject property conforms to local zoning ordinances, which affects highest and best use analysis.