Definitions
For Commercial Terminology

Calibrate - The process of estimating the coefficients of a mass appraisal model

Coefficient - Values and ratios that are multiplied by dependant variables in valuation models, e.g. $X per square foot or Y% vacancy rate

Cost Approach - The sum of the land value plus depreciated improvement value

Highest & Best Use - The most profitable use of land or a building given legal, physical, and financial limitations

Income Capitalization Approach - Convert a potential stabilized income stream into a value estimate based on it’s quality, quantity, and duration. The basic formula is income / cap rate = value

Mass Appraisal - The valuation of a group of properties as of a given date, using standard procedures and statistical testing

Model - A depiction of how something works. In real estate appraisal, a model explains the relationship between value and supply/demand variables in the real estate market. It’s used to predict the theoretical sale price of a property.

Sales Comparison Approach - Comparing the property being appraised with properties that have sold

Single-Property Appraisal - The valuation of a specific property as of a given date

Specify - The process of designing models based on theory and market analysis

Value Update - An annual adjustment applied to properties between inspections