Predominant Value

[DTB]

Don,

My question of similar was referring to the Single family $ and age in the neighborhood section. Are you only using similar, i.e. ranches, to the subject for this analysis? Seems to me the form is trying to indicate an idea of the overall neighborhood without specificity to similarity.

 

[xm39hnu]

Predominant: that which predominATES. Predominant is the noun, predominate is the verb.

Average: An indication of the centralizing tendency of data. There are three such indicators: Mean, median and mode. All three are "averages." One or more will be an appropriate indication of centralizing tendency of any particular data set. One or more may be particularly useless on any given data set.

The mean may not be useful if you have three one-million dollar properties and twenty $50,000 properties in the set. Mean works well only where the distribution is normal. Median may be more generally useful for wierd distributions. Mode may occasionally be useful as an indicator of centralizing tendency; it too works best with normal distributions. Mode can be particularly useful as an aid to identifying subsegments within the set (bi- and tri- modal sets).

 

[mdappr]

For me to figure out the predominant value of the subjects neighborhood takes a little time in the appraisal process I actually try to pick out the mode from a six month solds group out the MLS and if there is none I choose the mean. And if the subjects opinion of value is higher than the PV I just make a comment. I mostly see the PV and the opinion of value the same in reviews.

 

[Michael Edwards]

I think that some UW's condition some appraiser's to indicate that the predominant value and the market value are the same.

I got an UW condition just the other day wanting an explanation as to why the market value is higher than predominant value (first time I have been asked that in 11 years). My first thought was that the UW wants to see these two the same. I politely explained that some homes in the neighborhood are higher and some are lower than the predominant value and that based on the 3 most similar sales in the neighborhood, the subject happens to be higher.

I personally do not see why this needs explanation. It is obvious that some property is going to be higher and some lower than predominant. If this were not the case then our job would be to give a predominant value and not market value.

 

[john snyder]

Please be careful when using only a CMA for your subject neighborhood. I recently had a reviewer that checked my age and range used in the neighborhood analysis. After doing his own CMA he insisted I change the numbers.

His mistake is he did not want me to use the newer subdivison where my subject was located. This new subdivsion was situated in a general area where the older housing price range was lower.

I always felt that an inspection of the neighborhood including the subject's subdivsions should be used. The subject's subdivsion is this case had about fifty homes built and closed for $ 125 to $ 250k The surrounding older subdivsions 15 to 30 years old were priced at $ 100 to $ 150k if one used just a CMA.

Guess I am old school-drive in way to the property-drive out the other way.

John

 

[spittman]

Originally posted by Lee Ann@Aug 29 2004, 04:33 PM
Mean = predominate if and only if the median price and the mean are fairly similar...

Correct me if I'm wrong guys ... the predominant price is not necessarily the mean? Predominant equals "mode" which is most occuring , Mean is the average of a high/low range.

OOps ... this thread is old. Nevermind.

 

[George Hatch]

Fannie assumes that the predominant value for a neighborhood is one wherein most properties will either be at that value or below. That's why it's a red flag if the subject appraises higher than that without a good explanation - they consider it to be indicative of either a gassed appraisal or an overimproved subject. I don't think those are unreasonable assumptions from which to start.

If my subject property is indeed better than the predominant value in its neighborhood then I definitely want to address and reconcile that in my report, because that it the wrinkle in the analysis. Besides, I know an AVM will catch that and I'd much rather deal with the problem up front than have to come back and do repair work later. I think the practice of appraisers pegging the neighborhood's predominant value at whatever their subject's value is has occurred out of laziness. They don't want to flag the problem and then have to address it - it requires too much thinking and thinking doesn't pay.

 

[Jason Cowan]

I normally use the subject's zip code and sold within the past 3 months as my only MLS search perameters. I normally find the average and median sales price and if they are close (within 10K) I average the two numbers. I have often wandered how this would stand up to review since I often narrow my "neighborhood" much smaller than the confines of the zip code. Is this a problem. I must admit that I use the zip code rather than searching by map since it is a time saver and I get a lot more data.

 

[xm39hnu]

Jason,
It could be a problem in some areas. Maybe in your area the zip code will have composition similar to your described neighborhood. But if it doesn't, you're misleading, and you're reporting market information on flawed data.

 

[Mister Ed]

predominant... in my last appraisal report that I wrote before Christmas I found that there were 12 sales in the subdivision in the past 12 months (the subdivision is nearly 1.3 sq miles (smallest lots are one acre+-). There was no predominant value (one showing up more than once). There was a range of values in about a 20k spread that I reported as 260-80. I let them worry about it.

I have NEVER had anyone call me back on it. If the value of the subject is higher or lower than that range... not a problem to me. It takes two sentences to say, "This house is a one year old house with all the bells and whistles and three or four similar while the majority are 15 years older and not kept in anywhere near as nice condition."

Just my 2 cents worth after a week away from the rat race of appraising.

I hope ALL had a GREAT Christmas holiday.

-ed-