Glossary

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Depreciation
Also called obsolescence. In the real estate industry, it is a loss in value due to any cause and consists of 3 components:

· Physical: actual material wear and tear.

· Functional: out dated or substandard design, layout, technology, etc.

· External (aka economic): negative influences beyond a property’s borders.

Depreciation may be curable (where the value gained is greater than the cost to repair) or incurable (where the cost to repair exceeds the value gained).

Discounted Cash Flow Analysis
The process of converting or discounting future cash flows to present value by way of a compounded annual rate of return (interest rate) that represents the competitive value of investments.

Drainage Easement
It, as the name implies, is an area on/in a parcel of land set aside for the flowage of water which may also include related structural components, such as: riprap, piping, etc. It is generally a partial taking of property rights, as the underlying ownership and economic utility usually remains unchanged.

Easement
An interest in real property that conveys use but not ownership of a portion a property. It is a right of one property or person, by reason of the ownership of such easement, to use the land of another for a special purpose

Economic Life
The period of time in which an additions to land, such as a building, contributes to the total value of a property. When value is no longer contributed, economic life has ended. Economic life is less than physical life.

Effective Age
The physical age a property addition, such as a building, appears to be. An upgraded and/or well maintained building often appears to be of less age than its actual chronological age and vice versa.

Encroachment
An intrusion of one person’s property into the property of another.

Fee Simple
An estate limited abso­lutely to a man and his heirs and assigns forever without limitation or condition. It is one in which the owner is entitled to the entire prop­erty, with un­conditional power of disposition during his life, and descending to his heirs. It is un­lim­ited as to dura­tion, disposition, and descendability.

FEMA
Federal Emergency Management Agency. This is the agency charged with implementing the National Flood Insurance Program.

Floodplain (Zone A)
Any normally dry land area that is susceptible to being inundated by water from any natural source. This area is usually low land adjacent to a river, stream, watercourse, ocean, or lake. A 100 year floodplain does not refer to an area that is flooded every 100 years but instead it is an area with a 1% or greater chance of being inundated in any given year.

Floodplain, (Zone C and or X)
Land areas outside the 100 year floodplain boundary. Areas of minimal flooding impact.

Full Cash Value (FCV)
A property value derived by a county assessor in Arizona, which supposedly equals market value, to which various factors are applied in order to arrive at a tax amount for that property.