What is a home’s fair market value, and how is it calculated?

What is fair market value?

A home’s fair market value lets you know how much a home would theoretically sell for in an ideal market where logic is a determining factor. In other words, it’s what a seller would get if they were given the perfect offer.Fair market value is not solely what either party thinks the value of the home is, nor is it just the appraised price. It’s also not the tax value. These factors can play into fair market value, but there ultimately isn’t a specific formula; homes are assets subject to the ups and downs of the market. Primarily, supply and demand play a role in the value of a home.

Some elements that can be considered when calculating for market value include:

  • Current market trends
  • Comparative market analysis of similar properties in the area
  • The value assigned by an appraiser
  • The price per square foot

“Fair market value is what a seller would get for their home with an ideal offer.”

Figuring out a home’s fair market value is something that real estate agents are experts at, which is one of the reasons why people opt to hire us rather than trying to sell their homes independently. It’s important to know not only the facts of the property itself but also what’s happening in the real estate market.

So how is fair market value used? Typically once the fair market value has been calculated, that figure is then used to determine the home’s selling price, albeit with caveats. For example, if the home’s fair market value is $250,000 based on market trends but is located in a popular neighborhood, the asking price might go up to $300,000 or higher.

If you’d like an evaluation of your own home’s fair market value or if you have any questions about real estate, feel free to reach out to us. We’d be glad to meet with you.