Predominant Value

[Thomas Fiehler]

One can "define" something as they wish, but the MOST predominant implies that which happens the most. So, it would be the Mode and not the average. Just another example of a poorly designed appraisal form. IMHO

 

[incognito]

Em Te,

I have made nothing up. Where are you getting this "definition" from? The AI "THE APPRAISAL OF REAL ESTATE and the AI DICTIONARY OF REAL ESTATE do not define it or address it. The AI USING RESIDENTIAL APPRAISAL REPORT FORMS does not address it. Harrison suggests using either the mode or the mean. I will defer to you IF you can show me better definitions then I have below. You won't be able to (and no, Websters does not count!)

Thomas is right, sort of. Property Economics is also right, sort of.

Granted, some more obscure appraisal texts define or describe the predominant value to be the mode. However, as a statistical measure, mode can be very misleading, without at least a glimpse of mean and median.

In my example, Ken correctly indicates that the mode is 110, and thus the predominant value must be $110K, per Ken.

PE likes the range of $110K to $150K.

I like a single point, $150K, derived from a figure in the middle 30% of all properties.

Who is right? Well, I say, which is misleading? I say $110K is, because it does not provide a credible view of what the neighborhood is really like.

However, FNMA states (and remember, it is FNMA's form, and guidelines we are adhering to):

"The predominant price is that which is the most common or most frequently found in the neighborhood. The appraiser may state the predominant price as a single figure or as a range (if that is more appropriate)."

Therefore, I believe FNMA leaves this up to the appraiser. On one hand, 110 could be correct. On the other, PE's range could be correct, and on the third hand (?) I like my figure.

Can you do better than that?

 

[EVAUSA]

Assuming a normal distribution of values (i.e., a "bell curve" if plotted), then a reasonable indicator would be the median sale price of the neighborhood.
I will typically indicate it as something like:
High: $1,200
Low: $700
Pred: $950+/-

Keep in mind the purpose of this question: The lender wants to know where the subject falls in regard to the neighborhood range and if that value is higher than what is predominantly paid. By definition, half of all properties will be above the median price, so in a stable market, your chances are almost even that your subject's value will be higher than the predominant value (assuming you use a technique similar to what I do).

Good luck!

The median is NOT the predominant. Ken B IS CORRECT. The predominant is the most recurring number (MODE). It has NOTHING to do with the median, it can be above, below, or the same.

 

[Em Tee]

Em Te,

I have made nothing up. Where are you getting this "definition" from?

Try Merriam-Webster dictionary!!!

Main Entry: pre·dom·i·nant Pronunciation: \-nənt\ Function: adjective Etymology: Middle French, from Medieval Latin praedominant-, praedominans, present participle of praedominari to predominate, from Latin prae- + dominari to rule, govern — more at dominate Date: 1576 1 : having superior strength, influence, or authority : prevailing
2 : being most frequent or common

m2:

 

[EVAUSA]

I tend to agree with these definitions:

most frequent or common
http://www.thefreedictionary.com/predominant

most frequent, noticeable, etc.; prevailing; preponderant
http://www.yourdictionary.com/predominant


but many other definitions include: importance, influence, or authority

With that said, it sounds like there is some interpretation, and the values of "importance" would be in the opinion of the appraiser. I was taught that predominant and mode are the same, and it sound like most of my peers agree.

 

[EVAUSA]

Try Merriam-Webster dictionary!!!

Main Entry: pre·dom·i·nant Pronunciation: \-nənt\ Function: adjective Etymology: Middle French, from Medieval Latin praedominant-, praedominans, present participle of praedominari to predominate, from Latin prae- + dominari to rule, govern — more at dominate Date: 1576 1 : having superior strength, influence, or authority : prevailing
2 : being most frequent or common

m2:

Most definitions I've looked up also include: Having greatest ascendancy, importance, influence, authority, or force

With that said, what is of "importance" is up to the appraisers opinion. I'm going to stick with my peers and what I was taught, predominant = mode. But if you feel the median is of greatest importance and of most influence, I dont see this as cut and dry. I've yet to find a real estate def of predominant.