In reporting a neighborhood price range for a Fannie Mae appraisal, how should isolated high and low sales be handled?
Correct Answer
B) They should be excluded from the range
Isolated high and low extremes should be excluded from the price range; the predominant price is the most common price and is stated as a single whole-number figure.
Why This Is the Correct Answer
Option B is correct because Fannie Mae's Selling Guide says isolated high and low extremes should be excluded from the range. Excluding them keeps the reported range representative, and the predominant price is the price most commonly found in the neighborhood.
Why the Other Options Are Wrong
Option A: They define the range and must be included
Option A says isolated highs and lows define the range and must be included. Fannie Mae says these extremes should be excluded so they do not distort the range.
Option C: They should be averaged to find the predominant price
Option C says the extremes should be averaged to find the predominant price. The predominant price is the most common or most frequently found price, not an average of outliers.
Option D: They should be reported in place of the predominant price
Option D says the extremes should be reported in place of the predominant price. Isolated extremes are the opposite of predominant; the predominant price is the most common one.
Predominant means most common
Think of the predominant price as the mode: the price you see most often, with lonely outliers left out.
How to use: Use this link when a question mixes up range, average and predominant price.
Exam Tip
Do not equate predominant with average; it is the most frequently found price.
Common Mistakes to Avoid
- -Including isolated outliers in the reported price range
- -Calculating the predominant price as an average
- -Reporting an extreme sale as the predominant price
Concept Deep Dive
Analysis
This question tests Fannie Mae's instructions for reporting the neighborhood price range and predominant price. Isolated high and low extremes are excluded so the range reflects the typical market. The predominant price is the most common price, not an average.
Background Knowledge
The neighborhood section of the appraisal report describes the price range and the predominant price of one-unit housing. Excluding isolated extremes gives lenders a more accurate picture of typical values in the area.
Real-World Application
A neighborhood has mostly homes selling between moderate prices, plus one estate and one distressed sale far outside that band. The appraiser excludes those two extremes from the reported range and reports the most common price as predominant.
More Market Questions
In market area analysis, what characteristic distinguishes a district from a neighborhood?
Under USPAP Standards Rule 1-3(a), which item must an appraiser identify and analyze when necessary for credible results in a market value assignment?
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