Glossary of Terms - Property Value
Definitions are referenced from various governmental real estate sites,
IAAO
Mailing Address
The legal mailing address of the registered owner of any given property, which may
be different than the physical address and the tax billing address.
Macroeconomics
The economics of the economy as a whole-the forces causing recession, depression,
and inflation together with the forces resulting in economic growth.
Management Rate
A rate that reflects the costs of managing the property. This management rate is
added to the risk rate, the safe rate, and the nonliquidity rate to yield the return
rate in the summation method.
Mann-Whitney Test
A test in inferential statistics, similar to the Kruskal-Wallis test, that seeks
to determine whether the differences in values between two sets of observations
from any population are statistically significant.
Map
A conventional representation, usually on a plane surface and at an established
scale, of the physical features (natural, artificial, or both) of a part or the
whole of the earth's surface. Features are identified by means of signs and symbols,
and geographical orientation is indicated.
Map Book and Page System
A system for parcel identification in which a code (usually numeric) is used to
identify each parcel, each code containing four elements: the volume or book of
maps in which the parcel is to be found, the page on which it is to be found, the
block, and the individual parcel on the block.
Map, Planimetric
A map that shows only the horizontal positions of the features represented. See
also map, topographic.
Map, Tax
A map drawn to scale and delineated for lot lines or property lines or both, with
dimensions or areas and identifying numbers, letters, or names for all delineated
lots or parcels.
Map, Topographic
A map showing the horizontal and vertical locations of natural and artificial features.
It is distinguished from a planimetric map by the presence of quantitative symbols
showing the relief.
Margin of Error
A measure of the uncertainty associated with statistical estimates of a parameter.
It is typically linked to consumer surveys or political poll questions. A margin
of error is a key component of a confidence interval. It reports a "plus or minus"
percentage or proportion quantity in a confidence interval at a specified level
of probability (typically 95 percent). See also confidence interval.
Marginal Utility Theory
A theory of consumer choice that says that consumers will maximize welfare by allocation
of their budget such that the marginal utility per dollar is equalized across all
purchased goods.
Market
(1) The topical area of common interest in which buyers and sellers interact. (2)
The collective body of buyers and sellers for a particular product.
Market Adjustment Factors
Market adjustment factors, reflecting supply and demand preferences, are often required to adjust values obtained from the cost approach to the market. These adjustments
should be applied by type of property and area and are based on sales ratio studies
or other market analysis. Accurate cost schedules, condition ratings, and depreciation
schedules will minimize the need for market adjustment factors.
Market Analysis
A study of real estate market conditions for a specific type of property.
Market Approach
A valuation term with several meanings. In its broadest use, it might denote any
valuation procedure intended to produce an estimate of market value, or any valuation
procedure that incorporates market-derived data, such as the stock and debt technique,
gross rent multiplier method, and allocation by ratio. In its narrowest use, it
might denote the sales comparison approach.
Market Area
Market Price
The price a particular buyer and seller agree to in a particular transaction; the
amount actually paid. Compare market value.
Market Rate of Return
The typical return on an investment in a given type of property in a given market.
It is distinct from the actual rate of return indicated by a property's actual income.
Market Rent
The rent currently prevailing in the market for properties comparable to the subject
property. Market rent is capitalized into an estimate of value in the income approach.
Market System
A type of economic system in which the questions of what to produce, for whom, and
how are decided by the workings of an open and competitive market.
Market Value
Market value is the major focus of most real property appraisal assignments. Both
economic and legal definitions of market value have been developed and refined.
A current economic definition agreed upon by agencies that regulate federal financial
institutions in the United States is: The most probable price (in terms of money)
which a property should bring in a competitive and open market under all conditions
requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably,
and assuming the price is not affected by undue stimulus. Implicit in this definition
is the consummation of a sale as of a specified date and the passing of title from
seller to buyer under conditions whereby: The buyer and seller are typically motivated;
Both parties are well informed or well advised, and acting in what they consider
their best interests; A reasonable time is allowed for exposure in the open market;
Payment is made in terms of cash in United States dollars or in terms of financial
arrangements comparable thereto; The price represents the normal consideration for
the property sold unaffected by special or creative financing or sales concessions
granted by anyone associated with the sale.
Market-Related Adjustment
Accounts for changes in market conditions between the time a comparable sold and
the effective date of the appraisal. See market adjustment factors.
Market-Value Standard
A requirement of law or practice that the assessment ratio of all properties be
equal to 1. Two issues are implicit here: that fractional assessment levels be avoided
and that all property be assessed on the basis of its market value and not on the
basis of its value in some particular use-for example, agriculture-unless that use
is the only use to which the property can legally be put (in which case its use
value would be equal to its market value).
Marketability
The salability of a property at a specific time, price, and terms.
Mass Appraisal
The process of valuing a group of properties as of a given date, using standard
methods, employing common data, and allowing for statistical testing.
Mass Appraisal Model
A mathematical expression of how supply and demand factors interact in a market.
Mean
A measure of central tendency. The result of adding all the values of a variable
and dividing by the number of values. For example, the mean of 3, 5, and 10 is 18
divided by 3, or 6. Also called arithmetic mean.
Measure of Tax
The unit that makes up the tax base. Note: The measure of a tax is distinguished
in law from the subject of tax. For example, the measure of a gasoline tax is a
gallon, whereas the subject of the tax may be the privilege of selling gasoline;
the measure of a property is $1, $100, or $1,000 worth of property, and the subject
may be either the property or the person owning it. Compare object of tax; subject
of tax.
Median
A measure of central tendency. The value of the middle item in an uneven number
of items arranged or arrayed according to size; the arithmetic average of the two
central items in an even number of items similarly arranged; a positional average
that is not affected by the size of extreme values.
Median Absolute Deviation
The median of the absolute deviations from the median. In a symmetrical distribution,
the measure approximates one-half the interquartile range.
Median Percent Deviation
The median of the absolute percent deviations from the median; calculated by dividing
the median absolute deviation by one-hundredth of the median.
Mercator Projection
Refers to one of several mathematical projections of the curved surface of the earth
on an imaginary cylinder, which is then flattened. The original Mercator projection
was on a cylinder the axis of which was in a north-south direction. Transverse Mercator
projections are on imaginary cylinders with an east-west orientation. Transverse
Mercator projections are more common than the original Mercator projection. In addition
to the universal transverse Mercator (UTM) projection, there are the modified transverse
Mercator system (MTMS), and the state transverse Mercator (STM) system.
Merge Line
An imaginary line dividing a through lot or parcel into two parts, along which,
corner and alley influence being ignored, the value of the land is at its minimum and is the same whether the depth be calculated from one street or the other. Note:
It is customary to locate the merge line of a rectangular through lot at a point
at which the ratio of its distances from the two streets is equal to the ratio of
the respective unit-foot values of the two streets. This formula, however, does
not produce results consistent with the above definition when used in conjunction
with any of the standard depth tables.
Meridian
(1) An imaginary line on the earth's surface running due north and south from which
differences of longitude (or departures) and azimuths are reckoned. (2) A principal
north-south line in the rectangular land survey system.
Metes and Bounds
Measurement of angles and distances; a description of a parcel of land accomplished
by beginning at a known reference point, proceeding to a point on the perimeter
of the property being described, and then tracing the boundaries until one returns
to the first point on the perimeter, usually a corner. The angles are described
by reference to points of the compass, and the distances are described in feet or
chains; curves are treated as arcs on a circle.
Microeconomics
The economics of units, such as firms and neighborhoods, of an economic system (as
opposed to macroeconomics, which studies the economy as a whole).
Millage; Mill Rate
A tax rate expressed as mills per dollar. For example, a 2 percent tax rate is $2
per $100, $20 per $1,000, or 20 mills per dollar.
Mineral Rights
The right to extract ore, petroleum, or other minerals from a property.
Minkowski Metric
Any of a family of possible ways of measuring distance. Euclidean distance, a member
of this family, computes straight-line distances (as the crow flies) by squaring
differences in like coordinates, summing them, and taking the square root of the
sum. In mass appraisal model building, Minkowski metric usually refers to the sum
of absolute differences (not squared) in each dimension, and resembles a "taxicab"
or city block pattern. Other alternatives are possible, including the distance as
calculated only for the dimension of greatest difference, but the city block distance
is most common.
Mode
A measure of central tendency. (1) In an array of the values of a variable, the
most frequently occurring value. (2) By extension for grouped data, the class with
the greatest number of observations.
Model
(1)A representation of how something works. (2) For purposes of appraisal,
a representation (in words or an equation) that explains the relationship between
value or estimated sale price and variables representing factors of supply and demand.
Model Calibration
The development of adjustments, or coefficients based on market analysis, that identifies
specific factors with an actual effect on market value.
Model Specification
The formal development of a model in a statement or equation, based on data analysis
and appraisal theory.
Moratorium
A period of suspension of legal remedies or rights that is commonly used by local
government agencies.
Mortgage
A contract under the terms of which the legal, but not the equitable, title to a
specific property of one person (the mortgagor) is conditionally conveyed to a second
person (the mortgagee) as security for the payment of a debt or performance of some
other act. Note: In some states, legal title to mortgaged property passes to the
mortgagee on execution of the mortgage; in others, legal title passes when the debt
secured by the mortgage is in default; in still others, the mortgage is simply a
lien, and legal title does not pass until foreclosure proceedings have been completed.
Mortgage Coefficient
A component of the basic rate in the Ellwood variant of mortgage-equity analysis.
Mortgage Constant (RM)
Annual debt service expressed as a percentage of the initial principal amount of
the loan; also called the "mortgage capitalization rate."
Mortgage, Chattel
A mortgage in which the security consists of tangible personal property. Note: A
chattel mortgage usually takes the form of a bill of sale drawn in favor of the
mortgagee with a clause defeating the transfer during compliance by the mortgagor
with specified conditions.
Mortgage-Equity Analysis
A technique used to estimate the value of a property from a knowledge of the equity
yield rate, typical mortgage terms (including the interest rate, the loan-to-value
ratio, the term of the loan, and the amortization provisions), the holding period,
and the percentage by which the property will appreciate or depreciate over the
holding period. The solution is reached by using the Ellwood formula.
Mortgaged Fee Interest
The borrower's ownership interest in a mortgaged property.
A percentage of a loan or mortgage value that is paid to the lender as compensation for loaning funds.
Mortgage Interest Rate Type
The type of interest rate on the first mortgage. Typically a fixed interest rate or and adjustable rate mortgage.
Mortgagee
The person who lends money in a mortgage transaction.
Mortgagor
The person who borrows money in a mortgage transaction.
Movables (or Movables)
(1) In civil law states (Louisiana),
a term used instead of, and more or less synonymously with, the term "personal property."
(2) All things that are subject to ownership other than land and improvements.
Moving Average
A statistic used to smooth the values of a variable when those values are erratic
over distance or time, as in the case of land values and mortgage commitments. For
example, a five-block simple moving average of land values along a major street
would assign to block 16 the average of the values for blocks 14-18; it would assign
to block 17 the average of the values for blocks 15-19, and so on.
Multicollinearity
Correlation among two or more variables. In regression analysis, high multicollinearity
among the independent variables complicates modeling and will compromise the reliability
of the resulting coefficients. If the multicollinearity is perfect, the multiple
regression algorithms simply will not work and either an error message may result
or the software may purge one or more of the problem variables.
Multicollinearity
The phenomenon of two or more variables being correlated. If the two correlated
variables are both independent variables (note that if they are correlated they
are not truly independent in the relationship sense) used to predict the value of
some other, dependent, variable, then modeling problems will arise. If the multicollinearity
is perfect, the multiple regression algorithms simply will not work; if the multicollinearity
is serious but imperfect, the coefficients generated by the algorithm will be individually
meaningless (although the model as a whole may still be useful).
Multiple Listing Service (MLS)
A computerized database subscription service used by real estate brokers and agents
to share information about properties for sale. Hundreds of systems are located throughout the
U.S. and Canada to serve local market areas.
Multiple Regression, Multiple Regression Analysis (MRA)
A particular statistical technique, similar to correlation, used to analyze data
in order
to predict the value of one variable (the dependent variable), such as
market value, from the known values of other variables (called "independent variables"),
such as lot size, number of rooms, and so on. If only one independent variable is
used, the procedure is called simple regression analysis and differs from correlation
analysis only in that correlation measures the strength of relationship, whereas
regression predicts the value of one variable from the value of the other. When
two or more variables are used, the procedure is called multiple regression analysis.
See linear regression.
Multiplicative Model
A mathematical model in which the coefficients of independent variables serve as
powers (exponents) to which the independent variables are raised or in which independent
variables themselves serve as exponents; the results are then multiplied to estimate
the value of the dependent variable.
Multiplicative Transformation
A transformation of a set of variables accomplished by multiplying a variable by
one or more other variables. For example, room area is a multiplicative transformation
of length and width.
Multispectral
Refers to remote sensing in two or more spectral bands, such as visible and near-infrared
regions of the spectrum.
Multivariate Statistical Technique
Any of a number of statistical analysis in which data (such as the information on
a single property record card) containing a number of variables (such as lot size,
number of rooms, and construction type) are analyzed to predict the value of some
other variable. See also multiple regression analysis.
MVS
Marshall Valuation Service, published by Marshall & Swift.
