Glossary of Terms

A sale between two unrelated parties, both seeking to maximize their position from the transaction.

The phenomenon whereby one or more events of economic consequence expected to happen in the future exert an economic effect on things in the present. Specifically, the conversion of expected income and rate of return into an estimated value in the income approach to value.

A system of appraising property that incorporates statistical analyses such as multiple regression analysis and adaptive estimation procedure to assist skilled and trained appraisers in estimating real property values.

The cost approach is based on the principle of substitution that a rational, informed buyer would pay no more for a property than the cost of building an acceptable substitute with like utility. The cost approach seeks to determine the replacement cost of an improvement less depreciation plus land value.

The income approach uses capitalization to convert the anticipated benefits of the ownership of property into an estimate of present value.

The market approach applies a set of procedures in which a value indication is derived by comparing the property being appraised to similar properties that have been sold recently, applying appropriate units of comparison, and making adjustments to the sales prices of the comparables based on the elements of comparison.

Market value is the price that a willing and informed buyer and seller would agree upon under usual and ordinary circumstances. It is the most probable price a property would bring if exposed to the open market for a reasonable period of time.

Original cost is the gross capitalized cost before depreciation.

A value representing the cost of materials used in an incomplete structure as of January 1 plus the land value. Partial value is also known as a ‘Materials Assessment.” TCA § 67-5-603 allows the Assessor of Property to assess “such incomplete structure as real property based on the fair market value of the materials used therein.”

An appraisal that reflects any changes made to improvements located on a property due to new construction or demolition that occurs after January 1 and before September 1 of the tax year. A prorated value is a fraction of the full value that is ordinarily assessed for a full year as of the appraisal date of January 1. The prorated value is based on the number of days that a property was complete for a given tax year.

Qualified sales, as defined by the Assessor, are sales transactions between two unrelated parties acting knowledgably, each seeking to maximize their position in an arms-length transaction. The Tennessee Division of Property Assessments requires the Assessor to review every sale to determine whether it meets the standard of a qualified sale. Qualified sales are used to help establish Reappraisal values during Reappraisal periods. Foreclosures and sales between family members are not considered qualified sales.