In the world of real estate, there are many terms that are used to describe the value of a property. Two of the most common terms used are fair market value and assessed value. While these terms may sound similar, they have very different meanings. In this article, we will explore the difference between fair market value and other values used in real estate.
What is Fair Market Value?
Fair market value is the price that a willing buyer would pay and a willing seller would accept for a property, in an open and competitive market, without any undue pressure or influence. It is determined by a combination of factors such as the location, condition, size, and features of the property, as well as current market trends and economic conditions.
How is Fair Market Value Different from Assessed Value?
Assessed value is the value of a property as determined by a tax assessor for the purpose of calculating property taxes. This value is based on a formula that takes into account factors such as the size, age, and condition of the property. Unlike fair market value, which can fluctuate with changes in the real estate market, assessed value typically remains the same until the property is sold or improvements are made.
How is Fair Market Value Different from Appraised Value?
Appraised value is the value of a property as determined by a licensed appraiser. Appraisers take into account many of the same factors that determine fair market value, such as location, condition, and features of the property, as well as comparable sales in the area. However, an appraisal is typically done for a specific purpose, such as for a mortgage loan or for a divorce settlement, and may not reflect the true fair market value of the property.
How is Fair Market Value Different from Market Value?
Market value is similar to fair market value in that it represents the price that a willing buyer would pay and a willing seller would accept for a property in an open and competitive market. However, market value is typically used to refer to the value of properties that are currently for sale or under contract, whereas fair market value is used to determine the value of a property in a hypothetical transaction.
Conclusion
Understanding the difference between fair market value and other values used in real estate is important for buyers, sellers, and anyone involved in the real estate industry. While assessed value, appraised value, and market value may be useful in certain situations, fair market value is the most important value to consider when buying or selling a property, as it represents the true value of the property in an open and competitive market.
