Whether you’re buying or selling a home, one question that’s always front and center is the price: How much is a home worth?
A home’s fair market value is the price it would sell for in a perfectly logical world—one where both home buyer and seller are acting of their own free will (in other words, they aren’t desperate to make a sale) and are reasonably aware of a home’s good and bad points, and where the buyer could just as easily choose a different house that suits her needs better.
A home’s fair market value is comparable to a home’s market value—what it would fetch on the open market—but is used in special circumstances where the concept of fairness is important to evoke so that the home’s sales price carries more weight.
Here are some circumstances where you’ll likely hear about the fair market value of a home:
- Property tax assessments
- Home insurance claims
- Refinancing a home loan
- Estate sales
- Eminent Domain
- Short sale—this is when a home is worth less than the owners owe on their mortgage.
To determine fair market value, a licensed appraiser gathers and measures the qualities of a home, such as its square footage, condition, similar homes in the area, neighborhood, market conditions, and other factors. The appraiser’s information is used by lenders, attorneys, insurance companies, and other agencies to estimate a home’s market value.
To learn more about fair market value go to bmre.us/tip6
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