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

Way of valuing real estate that computes the discounted present value of an expected stream of income, including rental income and future capital gains or losses. ...

Nature and ability of soil and other materials to withstand weight of a structure. ...

Structure have two dwelling units under the same roof. Two-story apartment unit. ...

Organizational governing group. Either an appointed or elected body overseeing the management of an organization and rendering advice on current issues. Members are legally responsible for ...

Same as term graduated lease: A rental stipulation a varying rental rate. Rental rate are determined tied to periodic appraisals or an inflation or an inflation index. The provision is more ...

Canceling a legal contract either with the permission of both parties or by one party exercising the right of rescission, based on legal grounds. ...

British thermal unit-a unit of energy associated with the creation of heat. Prior to 1929, it was defined as the amount of heat required to raised the temperature of 1 pound of water 1 ...

Range reconnaissance, or surveying, for the purpose of preparing grazing capacity estimates. There are two parts to a range survey: mapping of grazing cover varieties and associated ...

Mortgage that has an interest rate that changes based on some event. For example, the interest rate may vary depending on changes in the prime rate or inflation rate. ...