What is the fair market value of my real estate and who determines it? - Town Assessor (2024)

FAQs

What is the fair market value of my real estate and who determines it? - Town Assessor? ›

The buyer and seller of real estate determine the fair market value of real estate. The appraiser or assessor analyzes real estate transactions that occur within a community and determine the factors that lead to the final sale prices.

Fair market value (FMV) in real estate is the determined price that a property will sell for in an open market. The FMV is agreed upon between a willing buyer and seller, both of whom are reasonably knowledgeable about the property in question.

In most cases, there's only a 10% to 20% difference between market value and assessed value, with market value usually being the higher of the two. However, it's essential to remember that assessed value is primarily used for tax purposes and may not always reflect the current market conditions accurately.

Utilizing the services of a professional home appraiser is the most accurate way of calculating the fair market value of a home. However, it is possible to crunch the numbers without hiring an appraisal service by analyzing the sale prices of similar homes that have sold in the prior 6 months in the same neighborhood.

The Fair Market Value (FMV) refers to the current price that interested buyers in the open market are willing to pay to purchase a certain asset, such as property.

The buyer and seller of real estate determine the fair market value of real estate. The appraiser or assessor analyzes real estate transactions that occur within a community and determine the factors that lead to the final sale prices.

Market value is determined by the valuations or multiples accorded by investors to companies, such as price-to-sales, price-to-earnings, enterprise value-to-EBITDA, and so on. The higher the valuations, the greater the market value.

If buyers are few and far between when you list your home, there's a chance the market value will be lower than the appraised value. On the other hand, if you're seeing a ton of interest in your home from multiple buyers, you may find that the market value is higher than the appraisal value.

The GRM method determines the market value of a property by multiplying the gross rent multiplier (GRM) by the property's annual gross rental income. The formula to compute the GRM divides the sale price of a property by its annual gross rental income, which can be rearranged to isolate the price variable.

Market value is the company's value calculated from its current stock price and rarely reflects the actual current value of a company. Market value is, instead, almost more of a measure of public sentiment about a company.

What is the formula for fair market value? ›

How fair market value is calculated. There's no absolute formula for calculating fair market value. But is often calculated by taking the value of three or more comparable homes, or comps, that have recently sold and obtaining an average, Garrity says.

Determining FMV

You should consider all the facts and circ*mstances connected with the property, including any recent transactions, in determining value. Value may also be based on desirability, use, condition, scarcity, and mar- ket demand for that property.

Fair value is most often used to gauge the true worth of an asset by looking at factors like its potential for growth or the cost to replace it. Market value is the observed and actual value for which an asset or liability is exchanged.

For example, if a seller lists a home for $350,000, and an interested buyer offers $300,000, and the buyer and seller negotiate and agree on the purchase price of $310,000, that is the fair market value.

It's not necessarily the same as what you paid for your house or what you'd like to receive from selling it; instead, it reflects how much someone else might be willing to pay for it. This basically sums up the difference between assessed value vs market value.

"The highest price, expressed in terms of money, that a property would bring, in an open and unrestricted market, between a willing buyer and a willing seller who are both knowledgeable, informed, and prudent, and who are acting independently of each other."

The fair market value of a house is the price it would fetch in an open market, agreed upon by willing buyers and sellers with reasonable knowledge of that house. It is determined based on factors such as size, location, condition, comparable home prices, and current market trends.

Most of the time, "fair and reasonable" pricing is determined by market research that the Contracting Officer performs prior to the negotiation call. This market research is through goods or services that are “like and similar” to that of the proposed goods or services.

Stock ownership

This would be done by a business appraiser who uses techniques such as discounted cash flow to do the valuation. If you need the FMV of stocks or bonds that you own, the current market value on the stock exchange would be used.

Key Takeaways

Fair value is the estimated price at which an asset is bought or sold when both the buyer and seller freely agree on a price. Individuals and businesses may compare current market value, growth potential, and replacement cost to determine the fair value of an asset.