How To Calculate The Fair Market Value Of A Property?

Definition of "How to calculate the fair market value of a property?"

Wondering how to calculate the fair market value of a property?

It helps if you understand that it’s all about an estimate; you’ll hardly bull’s-eye-it.

Fair market value is the highest value a home seller and home buyer can agree to in the sale of a property.

So you can read articles about how to calculate the fair market value of a property – like this one – and try to understand the many factors that can influence not only home buyers but also home sellers and kid around trying to calculate it, but the reality is that the only way of finding out the fair market value is after hand are shaken and the deal is through.

Ok, now that we’ve established that calculating the fair market value is a way of having an “idea” more than a concrete fact, let’s take a look at the most important factors when learning how to calculate the fair market value of a property:

  • Market value: how are similar properties doing price-wise? How much are its owners asking and how much is it actually selling for? An appraisal will give you this information.
  • Home seller’s expectation: what does it matter if home buyer’s will pay $300,000 if the home seller will only accept selling the home for over $4,000? Some home sellers have no problem leaving the house on the market until it reaches the point of which they think the house is worth, so any other calculation is useless.
  • Home buyer’s purchase power: like the last one, what does it matter how many rooms the house has and how much similar houses sold in the past if *right now* (for whatever reason) there’s no one with money to spend?

So if you’re wondering why should I use a real estate agent, now you can see why. With all those factors and the variations within them, it’s fundamental that you find an experienced local real estate agent because he or she will know how to calculate the fair market value of a property and guide you throughout the home buying (or selling) process.

image of a real estate dictionary page

Have a question or comment?

We're here to help.

*** Your email address will remain confidential.
 

 

Popular Real Estate Questions

Popular Real Estate Glossary Terms

An insurance company or underwriter. An insurance policy is a legal instrument assuming the risk of loss for stated perils to real property in exchange for insurance premiums paid. ...

Map which documents the area, perimeter location, dimensions, and other data relating to land for purposes of assessing annual real estate taxes. ...

To define access rights, we must understand the need for access rights. There are several reasons for using access rights for any property; some are necessary and granted with little to no ...

Type of mortgage, which is not based on a constant interest rate. ...

The term’s balance sheet definition can be described as a financial statement that a company uses to report its liabilities, assets, and shareholders’ equity at a given time. A ...

In a principal gent transaction or contract where a third party knows the name of the principal the agent represents. This is a typical setting in real estate situations. In this ...

Property taken over by the government because the owner has failed to pay taxes on it. The property may revert back to the owner when the taxes are paid. If not, the government may sell the ...

Percentage of rental property that is unoccupied. For example, a vacancy rate of 25% means that 25% of the rental unites are nor being used. Idle space can cause a significant cash drain ...

Grades have various definitions related to real estate and surveying land. Let’s have a look at the most common meanings of grades you’ll encounter in everyday life! Grades ...