America's Real Estate Academy, Inc.

A value loss that occurs because of factors external to the property. Economic obsolescence (sometimes referred to locational, external, or environmental obsolescence) is a value loss associated with detrimental or inharmonious nearby land uses which detract from the subject property’s appeal, utility, marketability, and consequently, its value.

Some common examples:

• Properties adversely affected by take-offs and landings at a nearby airport.
• Properties adversely affected by odors from an adjacent or nearby land fill.
• Properties adversely affected by proximity to noise from highway traffic.

Note that in each instance, the source of the loss in value is outside the boundaries of the property being appraised. Although technically, there may be some instances where economic obsolescence may be curable, it is generally considered to be incurable.

is the apparent or relative age of a component or structure. Effective age may the same as actual or chronological age, but it may also be different.

A house that has an actual age of five years may only have an effective age of two years if the house were well-maintained, updated, and redecorated to stay current. In other words, the five year-old house may compete with houses that are only two years old because the improvements have been kept current.

is the single date (point in time) for which the value estimate is effective and it is valid for that one day (point in time) only. Real estate markets are constantly changing and factors affecting value are dynamic. The effective date establishes the economic framework in place on the valuation date and is necessary to make the value estimate valid. The effective date of an appraisal can be for sometime in the past (retrospective), a current date, or some date in the future (prospective) – relative to the date of the report. The effective date is determined by the client. A common retrospective appraisal would be for an estate appraisal and the effective date is usually the date of death. If the property was repaired after the death or the area went through some changes the appraiser must factor in those elements to determine the accurate value on the effective date.

is a realistic estimate of the actual gross income for an income producing property because it provides an allowance for vacancy and collection losses.

The EGI is equal to the potential gross income (PGI) minus the appropriate vacancy and collection losses for the type of property.

Efficient markets adjust prices quickly to changes in supply and demand. Efficient markets tend to have the characteristics of a theoretical “perfect market.”

a process of integrating information in a real estate transaction between clients, lender and title and closing agents electronically.

an act that makes contracts (including signatures) and records legally enforceable regardless of the medium in which they are created.

Growing crops, such as grapes and corn, that are produces annually through labor and industry; also called fructus industriales.

is the power of the government to take private property for public use for just compensation under the Fifth Amendment to the U.S. Constitution. This is one of the four powers of government which institutes public limitations on real property. The four powers are: Police power, Eminent domain, Taxation, and Escheat, remembered by the acronym PETE.  

A recent decision in Kelo v. City of New London, 545 U.S. 469 (2005) has challenged the historical understanding. In Kelo, the Supreme Court of the United States permitted the city of New London, Connecticut to use eminent domain to transfer land from one private owner to another private owner to further economic development. The Court held in a 5-4 decision that the general benefits a community enjoyed from economic growth qualified such redevelopment plans as a permissible "public use" under the Takings Clause of the Fifth Amendment.

someone who works as a direct employee of an employer and has employee status. The employer is obligated to withhold income taxes and social security taxes from the compensation of employess. See also independent contractor.