"The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently, knowledgeably and assuming the price is not affected by any undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: (1) buyer and seller are typically motivated; (2) both parties are well informed or well advised, and each acting in what he considers his own best interest; (3) a reasonable time is allowed for exposure in the market; (4) payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; (5) the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale."
Note that the definition is "the most probable price" not "the highest price" or the "lowest price" but the "most probable." Some earlier definitions of Present Market Value stated the "highest price", which is not proper in my opinion. An appraisal is an opinion of value and can be expressed as a specific number or a range of value. It is certainly more accurate to provide a range of value than a specific figure. I suspect that nearly everyone will have bought or sold something in a given lifetime. As a seller, we have a price range we are willing to accept and as a buyer we have a price range we are willing to pay. An appraiser's working definition of Present Market Value reflects those ranges.
Perhaps part of the present home ownership crisis is due to a lack of understanding of Present Market Value. Unethical appraisers did not appraise according to the definition above but according to their own definition which was perhaps "the highest value that may be even remotely possible in order to refinance this property, get the broker a commission fee and the property owners all the fancy toys they want." In reality, the value should be the same regardless if the appraisal is to be used for a refinance, a purchase, pre-sale, divorce, or any other purpose, provided the value sought is Present Market Value. In all mortgage lending, the value sought should be Present Market Value.
Hopefully everyone reading this blog has enlisted the experience of an ethical appraiser who utlizes the proper definition of Present Market Value. Using such will not ensure that you do not owe more on your property than it was worth but it will likely have lessened the impact in areas where values have declined.