Glossary of Terms - Property Value

Definitions are referenced from various governmental real estate sites, IAAO

Sale of Convenience

A sale designed to correct defects in a title, create a joint or common tenancy, or serve some similar purpose. Such sales generally are transacted at only a nominal price.

The total amount of sale for the subject property which may or may not be 100% of market value.  See definition of Market Value..

Sale Price-Assessment Ratio

The reciprocal of the assessment-sale price ratio.

Sale Terms

The amount of down payment, the interest on the mortgage, and information on points and other fees involved in a real estate sale. Also called "terms of financing" or "financing terms."

Sale , Conditional

A sale, especially of chattels, in which the transfer of title is made to depend on the performance of a condition subsequent to the making of the sales contract and delivery of goods. Note: The most common condition is that the remainder of the purchase price be paid. Property held under a conditional sales contract may be repossessed without foreclosure proceeding, and the former holder has no equity of redemption. Compare mortgage, chattel.

Sale , Distress

A sale made to meet the immediate and pressing needs of the seller at whatever price the property will bring.

Sale , Forced

A sale made pursuant to law; usually an auction sale that is involuntary on the part of the owner.

Sale-Leaseback

A sale and subsequent lease given by the buyer back to the seller as part of the same transaction.

Sales Chasing

Sales chasing is the practice of using the sale of a property to trigger a reappraisal of that property at or near the selling price. If sales with such appraisal adjustments are used in a ratio study, the practice causes invalid uniformity results and causes invalid appraisal level results, unless similar unsold parcels are reappraised by a method that produces an appraisal level for unsold properties equal to the appraisal level of sold properties. (2) By extension, any practice that causes the analyzed sample to misrepresent the assessment performance for the entire population as a result of acts by the assessor’s office. A subtle, possibly inadvertent, variety of sales chasing occurs when the recorded property characteristics of sold properties are differentially changed relative to unsold properties. Then the application of a uniform valuation model to all properties results in the recently sold properties being more accurately appraised than the unsold ones.

Sales Comparison Approach

One of three approaches to value, the sales comparison approach estimates a property's value (or some other characteristic, such as its depreciation) by reference to comparable sales.

Sales Data

(1) Information about the nature of the transaction, the sale price, and the characteristics of a property as of the date of sale. (2) The elements of information needed from each property for some purpose, such as appraising properties by the direct sales comparison approach.

Sales File

A file of sales data.

Sales Ratio Study

A ratio study that uses sales prices as proxies for market values.

Sales Ratio/Assessment Ratio

The ratio of an appraised (or assessed) value to the sale price or adjusted sale price of a property. See also assessment-sale price ratio.

Sample

A set of observations selected from a population. If the sample was randomly selected, basic concepts of probability may be applied.

Sampling Error

The error reflected in ratio study statistics that results solely from the fact that a sample of the population is used rather than a census of the population.

Scale

The reduction ratio that characterizes a particular map. A ratio of 1: 100, for example, is said to be a larger scale than 1: 1,000.

Scatter Diagram or Scatter-plot

A graphic means of depicting the relationship or correlation between two variables by plotting one variable on the horizontal axis and one variable on the vertical axis. Often in ratio studies it is informative to determine how ratios are related to other variables. A variable of interest is plotted on the horizontal axis, and ratios are plotted on the vertical axis.

Scene

The area on the ground that is covered by an image or photograph.

The school district that a given property belongs to where typically the school aged children living at a given property location would attend.

Secondary Mortgage Market

A market in which the originator of a mortgage, such as a local savings bank, may sell it to another investor, such as a pension fund.

The name of the party which sold the property to the buyer.

Separated Rights

Rights to property that have been separated by deed, such as air, mineral, water, and leasehold rights.

Separation of Sources

The act of allocating a particular subject of taxation to some one or more, but not all, of the several levels of government within whose jurisdiction the subject lies.

Service Life

The period of time (or service) for an asset from the date of its installation to the date of its retirement from service.

Short-lived Items

Items of a structure that have a shorter life than the basic structure. For example, roofing, water heaters, floor covering, and interior finish.

Significance

A measure of the probability that an event is attributable to a relationship rather than merely the result of chance.

Single-Property Appraisal

Systematic appraisal of properties one at a time.

Sinking Fund

A real or accounting fund or pool of money into which deposits are periodically made; these deposits, together with the compound interest they earn, are projected to accumulate to a given amount on a given date. Some sinking funds are dedicated to a particular purpose, such as replacing a heating system; others are simply convenient ways of thinking about flows of money.

Sinking-Fund Factor

The amount that must be periodically set aside to accumulate with compound interest to $1 at the end of a specified number of years and at a specified interest rate. The sinking-fund factor is sometimes known (in connection with annuity capitalization) as the capital recovery rate.

Sinking-Fund Method

Annuity Premise-Assumes that the interest rate on a sinking fund is equal to the investor's discount rate.

Sinking-Fund Method

A way of calculating the recapture rate in the income approach. It assumes that an investor will deposit recapture income in an interest-bearing account and will thus, in effect, accelerate recapture. To use it, an appraiser goes to a compound interest table to locate the interest rate the investor would probably get and looks down the column of sinking-fund factors to the number of years equal to remaining economic life of the improvements. Adding that sinking-fund factor to the discount rate gives the recapture rate.

Site

The location of a person, thing, or event.

Site Amenities

The specific location-related positive attributes of a property: topography, utilities, street traffic, view, and so on.

Site Analysis

A study that determines the suitability of a specific parcel of land for a specific purpose.

Site Characteristics

(1) Characteristics of (and data that describe) a particular property, especially land size, shape, topography, drainage, and so on, as opposed to location and external economic forces. (2) By extension, any characteristics of either the site or the improvement.

Site Development

Improvements made to a land site (for example, grading, utility installation, roadways, and curbs) before a building is constructed.

Situs

The actual or assumed location of a property for purposes of taxation. In personal property, situs may be the physical location of the property or, in the instance of highly mobile property, the more-or-less permanent location of the property owner.

Situs, Business

The place at which intangible property is given a legal tax situs by reason of its association with a localized business.

Situs, Constructive

The tax situs established by reasonable rules of law or practice for intangible property, or for tangibles when they are not continuously within a given tax district for the full assessment year. For example, a constructive situs is established for freight cars by allocating to a tax district a fraction of the total number of cars owned equal to the ratio of Camile's operated within the district to the total number of car miles operated within and without the district.

Situs, Tax

The place at which property is legally taxable, that is, the jurisdiction within which property actually lies or is said to lie for tax purposes.

Skewed

The quality of a frequency distribution that makes it asymmetrical. Distributions with longer tails on the right than on the left are said to be skewed to the right or to be positively skewed; distributions with longer tails to the left are said to be skewed to the left or to be negatively skewed.

Slope

The change in the dependent variable associated with a change of one in the independent variable of interest. The slope is given by the coefficient of the independent variable.

Spatial

Refers to the location of, proximity to, or orientation of objects with respect to one another in N-dimensional space. Generally refers to phenomena that can be mapped in two or three dimensions on or near the earth's surface.

Spatial Resolution

(1) The ability of an entire remote sensor system, including lens, antennas, display, exposure, processing, and other factors, to render a sharply defined image. (2) A measure of the smallest angular or linear separation between two objects that can be resolved by the sensor.

Spearman Rank Test

A standard nonparametric test useful in examining assessment bias, among other things. It is based on the correlation of two sets of ranks.

Special Benefits

Any benefits that remain with a property after partial taking by eminent domain.

Specific Property Tax Rate Limits

A form of tax and expenditure limitation, applicable to specific types of local government or specific functions in the state, in which an upper limit is placed on either the property tax rate or the rate of increase in the property tax rate.

Geographical area designated by the Department of Housing and Urban Development as having an above average risk of flooding. In support of the National Flood Insurance Program (NFIP), FEMA has undertaken a massive effort of flood hazard identification and mapping to produce Flood Hazard Boundary Maps, Flood Insurance Rate Maps, and Flood Boundary and Floodway Maps. Several areas of flood hazards are commonly identified on these maps. One of these areas is the Special Flood Hazard Area (SFHA), which is defined as an area of land that would be inundated by a flood having a 1% chance of occurring in any given year (previously referred to as the base flood or 100-year flood). The 1% annual chance standard was chosen after considering various alternatives. The standard constitutes a reasonable compromise between the need for building restrictions to minimize potential loss of life and property and the economic benefits to be derived from floodplain development. Development may take place within the SFHA, provided that development complies with local floodplain management ordinances, which must meet the minimum Federal requirements. Flood insurance is required for insurable structures within the SFHA to protect federally funded or federally backed investments and assistance used for acquisition and/or construction purposes within communities participating in the NFIP.

The term "100-year flood" is misleading. It is not the flood that will occur once every 100 years. Rather, it is the flood elevation that has a 1- percent chance of being equaled or exceeded each year. Thus, the 100-year flood could occur more than once in a relatively short period of time. The "100-year flood" which is the standard used by most Federal and state agencies, is used by the National Flood Insurance Program (NFIP) as the standard for floodplain management and to determine the need for flood insurance. A structure located within a special flood hazard area shown on an NFIP map has a 26 percent chance of suffering flood damage during the term of a 30-year mortgage.

Standard Deviation

The statistic calculated from a set of numbers by subtracting the mean from each value and squaring the remainders, adding together all the squares, dividing by the size of the sample less one, and taking the square root of the result. When the data are normally distributed, one can calculate the percentage of observations within any number of standard deviations of the mean from normal probability tables. When the data are not normally distributed, the standard deviation is less meaningful, and one should proceed cautiously.

Standard Error

A measure of the precision of a measure of central tendency; the smaller the standard error, the more reliable the measure of central tendency. Standard errors are used in calculating a confidence interval about the arithmetic mean and the weighted mean.

Standard Error of the Estimate (SEE)

An expression for the standard deviation of the observed values about the regression line; thus it provides an estimate of the variation likely to be encountered in making predictions from the regression equation.

Standardize

(1) To transform a variable to standard form; that is, to make the mean of the frequency distribution equal to zero and the standard deviation equal to one. (2) To adjust, for appraisal purposes, reported data such as income and expenses, so as to remove the effects of non-real estate factors, such as abnormally good or bad management, weather, and the like. The more common term for this adjustment process is "normalization."

State Assessed Property

That property for which the assessed value is set by a state agency, either for taxation by the local jurisdiction affected, or for state taxation. Most often, this term applies to utility property or property with special characteristics where the state preempts local authority to achieve uniformity in assessments.

State Property Tax Tribunal

A quasi-judicial administrative review agency organized by at least one state (Michigan) to separate the state's review and appeal responsibilities from its administrative and equalization functions.

Statistical Accuracy

The closeness between the statistical estimate and the true (but unknown) population parameter value it was designed to measure. It is usually characterized in terms of error or the potential significance of error and can be decomposed into sampling error and non sampling error components. Accuracy can be specified by the level of confidence selected for a statistical test. See also accuracy.

Statistical Precision

A reference to how closely the survey results from a sample can reproduce the results that would be obtained from the entire population (a complete census). The amount by which a sample statistic can vary from the true population parameter is due to error. Even if all the sample data are perfectly accurate, random (sampling) error affects statistical precision (measured by the standard error or standard deviation). The dispersion of ratios in the population and the sample size have a controlling influence over the precision of any statistical estimate. When the reliability of a statistical measure is being evaluated, narrower confidence intervals have greater precision. See also precision.

Statistics

(1) Numerical descriptions calculated from a sample, for example, the median, mean, or coefficient of dispersion. Statistics are used to estimate corresponding measures, termed parameters, for the population. (2) The science of studying numerical data systematically and of presenting the results usefully. Two main branches exist: descriptive statistics and inferential statistics.

Stepwise Regression Analysis

A kind of multiple regression analysis in which the independent variables enter the model, and leave it if appropriate, one by one according to their ability to improve the equation's power to predict the value of the dependent variable.

Stigma

A perception that a property continues to be contaminated even though it has been cleaned up. Stigma may affect property value.

Straight-Line Capitalization

A means of estimating value whereby net operating income is divided by a capitalization rate composed of the discount rate, the reciprocal of remaining economic life as the recapture rate, and sometimes the effective tax rate. The method implicitly assumes that net operating income will decline by an equal dollar amount each year.

Straight-Line Method

A method of amortizing investments and other sources of cash flows so that equal amounts are attributed to each of several equal intervals of time.

Stratification

The division of a sample of observations into two or more subsets according to some criterion or set of criteria. Such a division may be made to analyze disparate property types, locations, or characteristics, for example.

Stratify

To divide, for purposes of analysis, a sample of observations into two or more subsets according to some criterion or set of criteria.

Street, Main

Among two or more streets affecting the value of a lot, the one that is considered to contribute the highest unit-foot value. Synonymous with "principal street."

Street, Rear

Among two or more streets affecting the value of a lot, the one that is either parallel to the main street or that runs in the same general direction as the main street.

Street, Side

Among two or more intersecting streets affecting the value of a lot, the one that is considered to contribute the lower unit-foot value. Synonymous with "cross street."

Structure

Any man-made improvement that rises above ground level.

Stumpage

The amount of timber "on the stump."

Stumpage Value

The value of uncut timber.

Subclass

A group of properties within a class, smaller than the class, usually (although not necessarily) defined by stratification rather than by sampling.

Subdivision

A tract of land that has been divided into marketable building lots and such public and private ways as are required for access to those lots, and that is covered by a recorded plat.

Subject of Tax

(1) The persons, property, act, privilege, or other circumstance on which a tax is levied or the existence of which gives rise to tax liability. (2) The natural persons on whom the tax burden falls after shifting (not recommended). Compare measure of tax; object of tax.

Subject Property

The property being appraised.

Subjective

Having the quality of requiring judgment in arriving at an appropriate answer or value for a variable (such as the quality class of a structure). See also objective; qualitative variable; quantitative variable.

Subjective Data

Subjective data are items for which the proper value is a matter of judgment and more difficult to verify. Examples include construction class, condition, effective year built, neighborhood desirability, and view.

Sublease

A lease in which the lessor is a lessee in a prior lease.

Subpoena Duces Tecum

A subpoena requiring the person served therewith to appear at the appointed place and before the designated tribunal with those documents or other things called for in the subpoena.

Subset

A group of properties within a sample, smaller than the sample, usually although not necessarily defined by stratification rather than by sampling.

Substitution

The appraisal principle that states that a potential owner will pay no more for a property than the amount for which a property of like utility may be purchased; that a property's value tends to be set by the cost of acquiring an equally desirable substitute.

Succession

The passing of real property by inheritance or will.

Sum of Squared Errors

The sum of the squared deviations from the predicted values (rather than the mean value).

Sum of Squares

The result obtained by adding all the squares of the individual deviations from some given value. Usually it is the sum of the squares of the deviations of the individual values of a variable from the mean value.

Sum of the Years' Digits

The method of accounting for depreciation in which a percentage of depreciable cost is allocated to each year, which percentage is equal to the number of years of remaining economic life divided by the sum of the digits for each year in the total economic life.

Sunset Provision

A provision within a statute creating a law or agency providing for the automatic termination of that law or agency at a fixed date in the future.

Super-adequacy

A feature of a property exceeding in quality or amount the corresponding feature in a typical property of the same use. Super-insulation is one example. Super-adequacies fall into the larger category of functional obsolescence.

System

(1) Structured organization of people, theory, methods, and equipment to carry out an assigned set of tasks. (2) The property operated as an integral unit under one control, management, or operating supervision. (3) An integrated group of assets that may be related entities or may be property elements such as machinery, buildings, land, and other property used in the performance of service(s) or manufacture of product(s).

t-Statistic

A particular statistic important in inferential statistics for certain kinds of hypothesis testing of certain kinds of data.