What is Fair Market Value

Fair market value is defined by the Merriam Webster dictionary as, “The price for property which would be agreed upon between a willing and informed buyer and a willing and informed seller under usual and ordinary circumstances; it shall be the highest price estimated in terms of money which property will bring if exposed for sale on the open market with reasonable time allowed to find a purchaser who is buying with knowledge of all the uses and purposes to which the property is best adapted and for which it can be legally used." It is essentially the equilibrium price at which both the seller and buyer are happy with.

Fair market value is used for a variety of situations, including but not limited to pricing a home for sale, calculating property taxes and even dividing a home’s value amongst two people during a divorce settlement!

The complication involved with fair market value is that it may have different values to different people. One person may believe a property is worth more while another believes it is worth less. There are many factors that must be taken into consideration when determining fair market value, including the property’s size, location, condition, and age.

The best people to turn to are local brokers and appraisers that know the area quite well. Brokers offer a “competitive market analysis” in which your property is compared with similar properties that have recently been sold. Appraisers will take an analysis of the entire home and then try to come up with a value based on what they see. I recommend a broker.

It will cost you but it is worth the expense. If your property is sold at a price that is too low, you will be losing money. If you set the price too high, then nobody will want to buy it. If you cannot afford a broker, other available sources for general information on prices include newspaper ads and tax offices.