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

'Disputable' presumption that is subject to rebuttal based on evidence. However, the presumption prevails until it is rebutted. ...

Retail businesses next to each other with common walls on each side and the same roof. ...

Appraisal approach where property values are estimated by comparing current comparable sales. See also market approach. ...

Property to be used by a retail business in the sale of merchandise or rendering of services. An example of retail property is a store. ...

An agreement allowing occupancy of a premises for a stated period of time provided certain terms are met. A limited occupancy agreement is most frequently used when a prospective buyer is ...

Legal proceeding to exercise a right in a disagreement between private individuals or businesses. One party seeks a remedy against the other. It does not involve a criminal situation. ...

In an adjustable rate mortgage (ARM), the maximum rate that can be charged during the mortgage period. For example, John obtained an $80,000 6% ARM having a lifetime rate cap of 10.5%. ...

Typically, the term rider defines a financial concept, implying a written modification applied to an insurance policy, altering its initial clauses and provisions. The rider can update the ...

An antenuptial agreement is, as the terms composition states, an agreement that happens before the nuptials, or, in other words, the wedding. The antenuptial agreement is more commonly ...