Fair Market Value?
If you’re buying or selling a home, the concept of fair market value is important. Each home, even if it were built identically to its neighbors, is unique. Variables such as physical condition, improvements or damages, location and overall desirability can each affect the perceived value of any property.
Fair market value is the price a property would sell for in an open and competitive market where the buyer and seller each have adequate information of relevant facts. Buyers and sellers must act in their own interests and not be compelled by outside forces. They must agree to the price without coercion as well as give each other a reasonable time period to complete the transaction. So how do buyers and sellers agree to fair market values?
Since there’s no exact figure to begin with, most people rely on their Realtor to provide a comparative market analysis outlining comparable homes for sale (active), currently pending homes, and recently sold homes, which is found in the local multiple listing service (MLS).
Keep in mind that these professionals are providing you with an educated starting point. You won’t know the true fair market value of your home until it’s offered on the open market and you reach an agreement with a willing buyer or seller. An additional item to remember is that unless it's an all cash transaction, an appraiser will also need to perform their inspection and provide their own opinion of the value, which can also dictate what the house ultimately sells for.
A few items that are NOT relevant in determining value are: equity in the home, price paid by the seller when they purchased, sellers proceeds, amount spent on improvements, etc.
Do you have any questions on this information? If so, I'm always happy to help so just give me a call! Kylie