Portland Area Real Estate Appraisal Discussion

Portland Appraiser Explains Most Probable Price
May 19th, 2014 2:49 PM

An appraisal of a home includes a definition of value. Typically, that definition of value is for “market value” or something similar. There are many official appraisal definitions of market value. Often such definitions begin with the phrase “The most probable price,” as shown in the example below. Do you know what the most probable price is?

Fannie Mae Definition of Market Value


The above market value definition, from the 1004 Uniform Residential Appraisal Report form, starts with, “The most probable price….” What does that mean?

The concept of most probable price suggests that if a single property were hypothetically exposed to the market many times over the same period, it would not always sell for the same price. If the property sold enough times, the resulting sale prices would likely be distributed along a range and resemble a bell curve when graphed.

Bell Curve of Portland Home Sales Prices


In the above illustration of a bell curve, the sale price range would be from left to right of the graph or on the x-axis. The number of times that the property sold at a particular price would be graphed bottom to top or on the y-axis.

The bell curve shows that most of the sales are likely clustered in the center with fewer and fewer sales moving up or down on the price scale (away from the center of the curve). This means that an accurate appraisal should conclude a value close to the peak of the bell curve. Appraisers can also provide a value opinion in the form of a range, but a single point is often requested and value opinions will vary among appraisers.

If more than one appraisal is ordered for the same property, most appraisers should conclude a value that is close to the peak of the bell curve. The larger the quantity of comparable sales data, the closer one would expect appraisers to be able to find the peak of the bell curve accurately and the closer the value opinions would be among different appraisers. Since small differences between appraiser opinions of value can significantly affect the lives of people who use appraisals, it is important to select your appraiser carefully.

If you find this information interesting or useful, please subscribe to my blog. Also, please support us by making Portland real estate appraisal related comments on our blogs and YouTube videos. If you need Portland, Oregon area residential real estate appraisal services for any reason, please contact us. We will do everything possible to assist you.

Thanks for reading,


Posted by Gary Kristensen on May 19th, 2014 2:49 PMPost a Comment

Subscribe to this blog
Nice job, Gary. I always try to explain to others that if 100 buyers wanted to purchase the property, how much would they pay? This helps rule out the 1 or 2 buyers that would pay exponentially more than anyone else.

Posted by http://www.SacramentoAppraisalBlog.com on May 20th, 2014 7:15 AM
Thank you for the comment Ryan. I too try to educate clients about the home value product that I am providing. Users of appraisals need to know that an appraisal is an opinion of a range and not a guarantee of sales price.

Posted by Gary Kristensen on May 20th, 2014 9:06 AM
Great article. Thanks for the info, it’s easy to understand. BTW, if anyone needs to fill out a 2005 Freddie Mac 70 / Fannie Mae 1004, Mar 2005,I found a blank form here: http://goo.gl/jrlpXl. This site also has some tutorials on how to fill it out and a few related real estate documents.

Posted by Elie Fabros on November 17th, 2014 11:52 PM


My Favorite Blogs:

Sites That Link to This Blog: