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  • Actual Age

    The actual number of years since an improvement was constructed.

    Additions

    The act of adding implies that there is a pre-existing structure or base to which something is added. These are made to land and improvements, including fixtures.

    Adjusted Base Year Value

    The base year value, as determined in accordance with Revenue and taxation Code section 110.1, with the ADJUSTMENTS permitted by subdivision (b) of section 2 of article XIII A of the California Constitution and section 110.1 (f).

    Ad Valorem

    Latin phrase meaning "in proportion to the value." In California, the property tax is considered to be an ad valorem tax.

    Alteration

    The act of process of altering; a modification or change.

    Annuity

    A periodic series of obligatory payment. Can be level, increasing, decreasing, or a combination thereof.

    Annuity Factor

    In yield capitalization, the number, usually obtained from financial tables, that is multiplied by an income amount to produce an estimate of present value.

    Anticipated Income

    Income payments expected or hoped for by an investor.

    Anticipation, Principle of

    The principle that value is created by the expectation of benefits to be derived in the future.

    Appraisal Unit

    The unit that (1) people in the market typically buy and sell or that is normally valued separately.

    Appreciation

    The increase in property value resulting from an excess of demand for a property relative to its supply.

    Assemblage

    The combining of two or more parcels, usually but not necessarily contiguous, into one ownership or use.

    Assessed Value

    The taxable value of a property against which the tax rate is applied.

    Assessee

    Person who owns, claims, possesses, or controls a property on the lien date.

    Assessment

    Placing a value on property for the purpose of property taxation.

    Assessment Roll

    A listing of all taxable property within a county. It identifies, at a minimum: (1) the property (usually by APN); (2) the tax-rate area where the property is located; (3) the name (if known) and mailing address of the assessee; (4) the assessed value of the property, including separate assessed values for land, improvements, and personal property; (5) penalties (if any); and (6) the amount (if any) of specified exemptions. Distinct assessment rolls include the locally assessed secured and unsecured regular assessment rolls, the locally assessed supplemental assessment roll, and the state assessed roll (added to the locally assessed secured roll).

    Audit

    Means of collecting data relevant to the determination of taxability, situs, and value of property.

    Audit Program

    System used to select and conduct audits.

    Band of Investment

    A technique in which the capitalization rates attributable to the components of a capital investment are weighted and combined to derive a weighted-average rate attributable to the total investment.

    Base Year Value

    In accordance with section 110.1, this value is a property's fair market value as of either the 1975 lien date or the date the property was last purchased, newly constructed, or underwent a change in ownership after the 1975 lien date.

    Capitalization

    Any method of converting expected future benefits into an indicator of present value; the discounting of projected income to a present value.

    Capitalization Rate

    Any rate used to convert income into an indicator of value; a ratio that expresses a relationship between income and value.

    Change in Ownership

    A transfer of a present interest in real property, including the beneficial use therof, the value of which is substantially equal to the value of the fee interest.

    Comparative Sales Approach

    An approach to value by reference to sale prices of the subject property or comparable properties; the preferred approach when reliable market data are available.

    Compound Interest

    Interest on the sum of principal and the accrued interest, combined at regular intervals; interest on interest.

    Contract Rent

    The actual amount of rent a property is earning as specified in a lease; the existing rent on property as distinguished from rent that could be expected if the property were available for rent on the open market.

    Cost

    The expenditure required to develop and construct an improvement or acquire personal property.

    Cost Approach

    A value approach using the following procedures to derive a value indicator: (1) estimate the current cost to reproduce or replace an existing structure without untimely delays; (2) deduct all accrued depreciation; and (3) add the estimated land value and an amount to compensate for entrepreneurial profit (if present).

    Cost-Estimating Methods

    (1) Quantity Survey Method, (2) Square Foot Method, (3) Unit-In-Place Method

    Quantity Survey Method

    One of the cost-estimating methods. Under this method, all costs of each piece of material and all labor are estimated and summed; this method accounts for the quantity and quality of all the agents of production necessary to develop and construct an improvement.

    Square Foot Method

    One of the cost-estimating methods. This method uses the known costs of similar buildings, adjusted for physical differences and market conditions. The costs are estimated in terms of dollars per unit, such as $100 per square foot; costs per unit for properties of equal utility are often obtained from data compiled and published by cost-estimating firms. Also known as the Comparative Unit method.

    Unit-In-Place Method

    One of the cost-estimating methods. This method adds together the unit cost of each component of an improvement, such as the cost of a foundation, a wall, or a roof; costs for walls and foundations are usually estimated per linear foot and are often obtained from data compiled and published by cost-estimating firms.

    Direct Billing

    System developed and implemented by an assessor to appraise selected accounts periodically, in lieu of annual property statements.

    Direct Capitalization

    A capitalization method used to convert a single year's income expectancy into an indicator of value, either by dividing the income estimate by an appropriate rate or by multiplying the income estimate by an appropriate factor.

    Direct Costs

    Expenditures required for the labor and materials necessary to develop and construct an improvement; sometimes referred to as "hard costs."

    Discount

    Conversion of future payments to present value.

    Discounted Cash Flow (DCF) Method

    A capitalization method in which a discount rate is applied to a series of projected income payments, including the reversion, in order to arrive at an estimate of present value (i.e., current market value). The DCF method can be applied with any yield capitalization technique.

    Discount Rate

    A selected yield rate used to convert expected future payments into an estimate of present value.

    Economic Life

    The period of time over which improvements to real property contribute to property value.

    Depreciation

    A decrease in utility resulting in a loss in property value; the difference between estimated replacement or reproduction cost new as of a given date and market value as of the same date. There are three principal categories of deprecation: Physical, Functional and External.

    Physical Deterioration

    The loss in utility and value due to some physical deterioration in the property; considered curable if the cost to cure it is equal to or less than the value added by curing it.

    Functional Obsolescence

    The loss in utility and value due to changes in the desirability of the property; attributable to changes in tastes and style or the result of a poor original design. This form of deprecation is curable if the cost to cure it is equal to or less than the value added by curing.

    External (or Economic) Obsolescence

    The loss in utility and value due to an incurable defect caused by external negative influences outside the property itself; results from the immobility of real property.

    Economic Rent

    The amount of rental income that could be expected from a property if available for rent on the open market, as indicated by the prevailing rental rates for comparable properties under similar terms and conditions; economic rent is distinguished from contract rent. Also referred to as market rent.

    Effective Age

    The age indicated by the condition and utility of the property.

    Effective Gross Income

    The estimated potential gross income less allowances for vacancy and collection losses.

    Equity Dividend

    A single year's cash flow after debt service but before income taxes (i.e., a single year's net income before recapture (NIBR) less debt service).

    Equity Capitalization Rate

    A rate that reflects the relationship between the equity dividend and the equity investment (i.e., a single year's net income before recapture less debt service divided by the the equity investment); a rate used to convert the equity dividend into an indicator of equity value; also known as the equity dividend rate, the cash on cash rate or the cash flow rate.

    Equipment Index

    Multiplier used to "trend" the historical cost of property an estimated reproduction or replacement cost new.

    Escape Assessment

    Assessment made after the completion of the regular assessment roll.

    Expense Ratio

    The ratio of total expenses, excluding debt service, to either potential or effective gross income.

    Factor

    One of two or more numbers that when multiplied together produce a third number; a multiplier. A capitalization factor is the reciprocal of a capitalization rate.

    Fee Simple Estate

    Absolute ownership unencumbered by any other interest or estate, subject only to the limitations of eminent domain, escheat, police power, and taxation.

    Fixture

    An item of tangible property, the nature of which is originally personal property, but which is classified as real property for property tax purposes because it is physically or constructively annexed to real property with the intent that it remain annexed indefinitely.

    Fair Market Value

    The amount of cash or its equivalent that property would bring if exposed for sale in an open market under conditions in which neither buyer nor seller take advantage of the exigencies of the other and both with knowledge of all the uses and purposes to which the property is adapted and for which it is capable of being used, and of the enforceable restrictions upon those uses and purposes.

    Fee Interest

    The absolute legal possession and ownership of land, property, or rights, including mineral rights. Can be sold (in its entirety or in part) or passed on to heirs or successors.

    Fiscal Year

    Period of time beginning July 1 and ending June 30.

    Full Cash Value

    The same as market value.

    Full Economic Cost

    Cost for appraisal purposes. Includes all market costs (direct and indirect) necessary to purchase or construct property and make it ready for its intended use.

    Full Value of New Construction

    That portion of the increases in value of a total property upon completion that is attributable directly to the qualifying new construction.

    Going Concern Value

    Generally, the total value of an operating business enterprise. It includes the value of the real property, tangible personal property (e.g., machinery and equipment), labor, the marketing operation, and intangible assets and rights. It includes the incremental value of the business concern, which is distinct from the value of the real property.

    Gross Income

    Income from the operation of a business or the management of property, customarily stated on an annual basis. Gross income is income the property from all sources.

    Gross Income Multiplier

    The relationship between sale price (or value) and gross income, expressed as a factor; used to estimate value as a multiple of income. Gross income is usually (though not always) expressed in annual terms, and includes income to the property from all sources. In an apartment property, for example, the gross income could be the sum of living unit rent, parking space rent, vending machine income, and laundry facility income.

    Gross Rent

    Income to the property only from rental of the principal improvements. In an apartment property, for example, the gross rent would be from living units only would exclude income from parking space rent, vending machine, and laundry facility income.

    Gross Rent Multiplier

    The relationship between sale price (or value) and gross rent, expressed as a factor; used to estimate value as a multiple of income. Gross rent is usually (though not always) expressed in annual terms.

    Highest and Best Use

    The most profitable use of a property at the time of the appraisal; that available use and program of future use that produces the highest present land value; must be legal, physically possible, financially feasible, and maximally profitable.

    Historical Cost

    The total cost of a property when it was originally constructed.

    Improvements

    All buildings, structures, fixtures, and fences erected on or affixed to the land; all fruit, nut bearing, ornamental trees and vines, not of natural growth, and not exempt from taxation, except date palms under eight years of age

    Income Approach

    Any method of converting an income stream or a series of future income payments into an indicator of present value.

    Income Rate (R^o or R^e)

    A rate that expresses the relationship between one year's income and the corresponding total value of a property; or, in the case of R^e, with the value of only the equity interest.

    Indirect Costs

    The outlay for items, other than labor and materials, required to develop and construct an improvement; includes such costs as legal fees, property taxes, construction financing, administrative expenses, appraisal fees, and lease-up expenses; sometimes referred to as "soft costs."

    Interest Rate

    The rate of return on debt capital; the price paid for borrowing money.

    Inventory

    Exempt items of personalty that become part of the product or are themselves a product that is held for sale or lease in the ordinary course of business.

    Investment Value

    The specific value of property to a particular investor, based upon individual investment requirements, as distinguished from the concept of market value.

    Land

    Real estate, or real property, except improvements. It includes the possession of, claim to, ownership of, or right to possession of land; and all mines, minerals, and quarries in the land; all standing timber whether or not belonging to the owner of the land; all standing timber whether or not belonging to the owner of the land; and all rights and privileges appertaining thereto.

    Lease

    A written document in which the rights to use and occupy land or structures are transferred by the owner to another for a specified period of time in return for a specified rent.

    Leaseback

    A transaction in which an investor purchases property and leases it back to the seller, generally under lease terms and conditions that were negotiated at the time of the sale.

    Leased Fee Interest or Estate

    The lessor's interest in property; an ownership interest held by a landlord with the right of use and occupancy conveyed by lease to others; the right to receive rent stipulated in the lease and to receive the property (the reversionary right) at the end of the lease term.

    Leasehold

    The lessee's interest in property; the right to use and occupy real property during the term of a lease, subject to any contractual restrictions.

    Lessee

    One who has the right to use or occupy property under a lease agreement; a tenant.

    Lessor

    One who conveys the right to use and occupy property under a lease agreement; a landlord.

    Lien Date

    All taxable property (both state and locally assessed) is assessed annually for property tax purposes as of 12:01 AM on January 1. It is referred to this name because on this date the taxes become a lien against all real property assessed on the secured roll.

    Loan-to-Value Ratio

    The ratio between the mortgage amount and the value of the property pledged as security for the debt; usually expressed as a percentage.

    Major Rehabilitation

    Major rehabilitation is defined as any rehabilitation, renovation, or modernization, which converts an improvement to the substantial equivalent to new.

    Mandatory Audit

    Audits required by law. For taxpayers owning or possessing tangible business personal property and fixtures with a full cash value of $400,000 or more, section 469 requires an audit at least once in each four-year period.

    Market Rent

    The amount of rental income that could be expected from a property if available for rent on the open market, indicated by the prevailing rental rates for comparable properties under similar terms and conditions; distinguished from contract rent, which is the actual rental for the subject property as specified in a lease; also referred to as economic rent.

    Market Value

    Also referred to as full cash value or fair market value. It means the amount of cash or its equivalent that property would bring if exposed for sale in the open market.

    Modernization

    Taking corrective measures to bring a property into conformity with changes in style, whether exterior or interior, or additions necessary to meet standards of current demand. Modernization normally involves replacing part of the structure or mechanical equipment with modern replacements of the same kind. For property tax purposes, modernization implies curing functional obsolescence and physical deterioration to the degree that the structure or fixture is substantially equivalent to new.

    Mortgage Constant

    The capitalization rate for debt; the ratio of the annual debt service to the principal amount of the mortgage loan; the total annual amount required to pay off an amortizing loan with level monthly payments, expressed as a percentage of the original loan amount.

    Multiplier

    A figure that is multiplied by income to produce an estimate of value.

    Net Income Before Recapture and Taxes (NIBR&T or NIBR)

    The annual net income remaining after deducting all operating expenses but before deducting other charges such as recapture, debt service, and property taxes. For property tax appraisal purposes, this is capitalized into an indicator of value using various income capitalization techniques.

    Net Lease

    A lease where the lessee pays not only for the use of the property, but also for stipulated additional charges such as property taxes, insurance, and maintenance.

    New Construction

    Any addition to real property, whether land or improvements (including
    fixtures) since the last lien date; any alteration of land or improvements
    (including fixtures) since the last lien date that constitutes a major
    rehabilitation thereof or which converts the property to a different use.

    Nonmandatory Audit

    Audits not required by law, but authorized by section 470 and Rule 192 (e).

    Normal Maintence

    The action of continuing, carrying on, preserving, or retaining something; it is the work of keeping something in proper condition. Maintenance performed on real property is normal when it is regular, standard, and typical. Normal maintenance keeps a property in condition to perform efficiently the service for which it is intended and ensures that a property will experience an economic life of typical duration.

    Off-Site Improvements

    Improvements that are located outside the subject property (often termed infrastructure) that add value to land. Includes such works as transportation systems; sewage, water and drainage systems; and facilities for electric and gas power and telephonic communication.

    Operating Expenses

    The periodic expenditures necessary to maintain the real property and
    continue production of the effective gross income, assuming prudent and
    competent management; sometimes referred to as "allowable expenses."

    Overall Rate (Ro)

    The relationship between the anticipated net income before deducting for
    recapture (NIBR) and the sale price; the rate implies the investor's
    perception of both return on and recapture of the investment.

    Percent Good

    The complement of depreciation; if a property is 20 percent depreciated, its percent good is 80 percent; percent good refers to the portion of benefits remaining in an asset compared to the total benefits when new.

    Personal Property

    Includes all property except real property.

    Plottage

    An increment of value that results when two or more sites are assembled
    under single ownership, producing greater utility.

    Possessory Interest

    Interest in real property that exists as a result of (1) a possession of
    real property that is independent, durable and exclusive of rights
    held by others in the real property, and that provides a private
    benefit to the possessor, except when coupled with the ownership
    of a fee simple or life estate in the real property in the same
    person; or (2) a right to the possession of real property, or a claim
    to a right to the possession of real property, that is independent,
    durable and exclusive of rights held by others in the real property,
    and that provides a private benefit to the possessor, except when
    coupled with the ownership of a fee simple or life estate in the real
    property in the same person; or (3) possession of taxable
    improvements on tax-exempt land.

    Potential Gross Income

    The (possible) total income of a property before deducting vacancy and collection losses or operating expenses.

    Present Value (PV)

    The value of a future payment or series of future payments
    discounted to the current date or to time period zero.

    Principal

    A capital sum; a payment for reduction of the capital borrowed as distinguished from the payment of interest.

    Principle of Substitution

    A buyer will not pay more for one property than for another that is equally desirable. This principle assumes rational, prudent market behavior with no undue cost due to delay. When several similar or commensurate commodities, goods, or services are available, the one with the lowest price attracts the greatest demand and widest distribution.

    Projection Period

    The holding period; a period of time over which net income is projected
    for valuation purposes; a presumed period of investment in property.

    Property

    Includes all matters and things—real, personal, and mixed—that
    are capable of private ownership.

    Purchase Price

    The amount of money a buyer agrees to pay and a seller agrees to
    accept in an exchange of property rights; based on a
    particular transaction, not necessarily on what the typical buyer
    would pay or the typical seller would accept.

    Real Property

    The possession of, claim to, ownership of, or right to the possession of
    land; all mines, minerals, and quarries in the land; all standing timber
    whether or not belonging to the owner of the land, and all rights and
    privileges appertaining thereto; and improvements; in California property
    tax law, the term is synonymous with "real estate."

    Recapture

    The return of invested capital; in real estate investments, capital may be returned gradually as part of the annual income; this can be done all or in part through resale of the property, or through a combination of both.

    Reciprocal

    The quantity resulting from the division of 1 by a given number.

    Regular Assessment Roll

    Roll covering period starting July 1 of the current calendar year to
    June 30 of the next year. Assessment period for the regular roll
    must be completed on or before July 1.

    Rehabilitation

    The restoration of a property to satisfactory condition without
    changing the plan, form, or style of a structure. It involves curing
    physical deterioration.

    Remaining Economic Life

    The estimated period during which the improvement will continue to contribute to a property's value.

    Replacement Cost

    The cost required to replace an existing property with a property that has
    equivalent utility.

    Reproduction Cost

    The cost required to reproduce an exact replica of an existing property

    Replacement

    Substituting an item that is fundamentally the same type or utility for an item that is exhausted, worn out, or inadequate.

    Residual Techniques

    Capitalization techniques (within the income approach) in which an income amount is allocated to a property component of unknown value after subtracting the income return required by the property component of known value. This income amount is then capitalized into an estimate of value of the unknown component.

    Reversion

    A lump-sum benefit that an investor receives or expects to receive at the termination of an investment. In a taxable possessory interest, the land and improvements that revert back to the public owner at the termination of the taxable possessory interest.

    Reversionary Rights

    The rights of the lessor at the expiration of a lease; the estate returned or
    due to be returned.

    Risk

    Uncertainty about the outcome of future events; uncertainty about the
    future profitability of investments or projects; the possibility of not
    receiving the projected income.

    Risk Rate

    The annual rate of return on capital that is commensurate with the risk or
    uncertainty assumed by the investor; the rate of return or yield required to
    attract capital to the level of risk or uncertainty of that investment.

    Safe Rate

    The minimum rate of return on invested capital. Theoretically, the difference between the total rate of return and the safe rate is considered a premium to compensate the investor for risk, the burden of management, and the illiquidity of the capital invested; also known as the risk-free rate.

    Sale Price

    The amount of money a buyer agrees to pay and a seller agrees to accept in an exchange of property rights; sale price is based on a particular transaction, not necessarily on what the typical buyer would pay or the typical seller would accept.

    Sale Price Adjustments

    A procedure for deriving a value indicator by comparing the property being
    appraised to similar properties recently sold, by adjusting the sale prices of
    the comparables using elements of comparison.

    Salvage Value

    The value of property at the end of its economic life in its present use; the
    estimated market value for an entire property (e.g., a house) or for a part (or parts) of a property (e.g., the plumbing fixtures or doors of a house) that is removed from the premises for use elsewhere.

    Scarcity

    The present or anticipated under-supply of an item relative to the demand
    for it.

    Secured Roll

    That part of the assessment roll containing state assessed property and property the taxes on which are a lien on real property sufficient, in the opinion of the assessor, to secure payment of taxes.

    Secured Tax Rate

    The percentage at which property on the secured roll is taxed.
    Taxes on real property cannot exceed 1 percent of its taxable value
    plus an amount to pay the interest and redemption charges on (1)
    debts approved by voters prior to June 6, 1978, (2) debts approved
    by a two-thirds vote of the qualified voters after that date, or (3)
    effective January 1, 2001, certain bonded indebtedness for school
    facilities approved by 55 percent of the voters.

    Severance Tax

    A tax on mineral or forest products at the time they are removed or
    severed from the soil, usually regarded as a form of property
    taxation. (Also see yield tax).

    Situs

    The place where property is legally situated; the more or less
    permanent location of the property.

    State Assessees

    Certain owners and users of property assessed by the State Board
    of Equalization on the Board roll.

    Structure

    An edifice or building; an improvement whose primary use or
    purpose is for housing or accommodation of personnel, personalty,
    or fixtures and has no direct application to the process or function of
    the industry, trade, or profession.

    Supplemental Assessment

    An assessment of the full cash value of property as of the date a
    change in ownership occurs or new construction is completed
    which establishes a new base year value for the property or for the
    new construction.

    Taxable Possessory Interest

    Possessory interests in publicly owned real property. Excluded
    from the meaning are any possessory interests in real property
    located within an area to which the United States has exclusive
    jurisdiction concerning taxation. Such areas are commonly
    referred to as federal enclaves.

    Taxable Value

    For real property subject to article XIII A of the California Constitution, the base year full value adjusted for any given lien date as required by law or the full cash value for the same date, whichever is less, as set forth in section 51(a). For personal property, the full cash value (market value) on the lien date each year.

    Tenancy in Common

    A form of concurrent property ownership in which multiple
    owners have an undivided interest in the property.

    Trade Level

    Property normally increase in value as it progresses through
    production and distribution channels.

    Unit of Comparison

    The components into which a property may be divided in order to make
    comparisons, e.g., an apartment might be compared by price per apartment unit, price per room, price per gross square footage, or price per leasable square footage.

    Unsecured Roll

    Remainder of the secured roll. The taxes are a personal liability of the owner.

    Utility

    The capacity of goods to evoke a desire for possession; wantedness; want-satisfying power.

    Value

    The power of one commodity to command other commodities in
    exchange; a ratio of exchange; present worth of future net benefits.

    Weighted Average

    An average that is calculated by weighting each component by a factor that represents its relative importance to the whole, multiplying each component by its assigned weight, and adding the products; used in the band of investment method.

    Yield

    The return on investment.

    Yield Capitalization

    A capitalization method used to convert future benefits to present value by discounting each future benefit at an appropriate yield rate or by developing an overall rate that reflects the investment's income pattern, value change, and yield rate.

    Yield Rate

    A measure of investment return (usually annualized) that is applied
    to a series of incomes to obtain the present value of each;
    examples are the interest rate, the discount rate, the internal rate of
    return, and the equity yield rate.

    Yield Tax

    The tax on harvested timber; a form of severance tax based on the
    value of the timber where and when it is cut.

    Capital Recapture Rate

    The rate of return of an invested amount in a wasting asset.

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