Ruelle's

Appraisal Glossary

This glossary prepared by Gene Ruelle

Appraising - Appraising is simply a process. It has no significance except in relation to some other action: taxation sale, inventorying, financing, acquisition, compensating, advising, investment analysis, or some other action.
A valuation or an estimation of value of property by disinterested persons of suitable qualifications. The process of ascertaining a value of an asset or liability that involves expert opinion rather than explicit market transactions.
Appraisal Process - Calling the market or ascertaining as best we may what price the property will probably bring.
Valuation Methods - Selection of an appraisal method depends on the purpose of the appraisal. It does not, as so many of our texts contend, depend on the nature of the property or the nature of the market in which it will presumably be sold.
An example of a a valuation method is the following: the client is executor of an estate which must pay taxes on an antique chair, the appraiser may select the Market Comparison method of estimating Fair Market Value.
Fair Market Value - The fair market value is "the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having knowledge of relevant facts." (Treasury Regulation)
Replacement Value - The highest price in terms of cash or other precisely revealed terms that would be required to replace a property with another of similar age, quality, origin, appearance, provenance and condition, within a reasonable length of time in an appropriate and relevant market. This definition includes various anticipated costs such as:
a) Purchase from an appropriate gallery or dealer
b) Purchase at a well publicized public auction where comparable property is regularly sold
c) Engagement of an interior designer, commissionaire or any other consultant
Replacement Cost New - The cost to replace property with a substitute which is new, using modern materials, techniques, and standards which, however, satisfy the description or use of the replaced property.
Reproduction Cost - The total cost to reproduce an exact replica of property, at current costs, using a similar or the same artist or craftsman, materials and design as the original property.
Appropriate Market Level - Personal property is commonly bought and sold in or at several market levels depending on the quantity, quality and condition of the property. The purpose and function of the appraisal determines the appropriate market that an appraiser analyzes and reports on, relevant to the subject property at auction, wholesale, retail and liquidation. Implied in the definition of Fair Market Value and of market value, is the fact that the appraiser knows the appropriate and relevant market level at which a property changes hands under certain circumstances.
Immediate Cash Liquidation Market Level - This represents a market in which similar property is regularly sold, for immediate cash, to willing buyers within a very limited time. The buyers typically are antique dealers, auctioneers, auction houses, second hand dealers, jobbers, wholesalers. This represents a bargain or distress market level.
Orderly Cash Liquidation Market Level - This represents a market in which similar property is regulary sold to willing buyers with time constraints, but in an orderly and advertised manner. This includes, butis not limited to, auctions, auction houses, advertised house, shop, and gallery sales. The buyers typically are antique dealers, seconhand dealers, jobbers, wholesalers, collectors, et al.
Major Auction Liquidation Market Level - This represents the most frequently realized price level at major auction, including the buyer and seller premium.
Minor Auction Liquidation Market Level - This represents the most frequently realized price level at a minor regional auction, including the buyer and seller premium.
Wholesale Market Level - This is the price at which wholesalers can buy from the market or sell property to the trade.
Retail Market Level - This is the most common retail price at which property is offered for sale in a geographical region.
Highest and Best Use - The real estate concept that can be applied to personal property is the "Appropriate Market Place."
The Mean - The mean is the statistical average arrived at by adding all observations and dividing the sum by the number of observations used.
The Mode - The mode is that numerical observation which appears most frequently in the sample population.

The Median - The median is the middle numerical observation of a ranked population. That number which splits the sample population into the upper half and the lower half.
The Range - The range is the difference between the largest and smallest numerical observation.