If you are planning to buy or sell a property, the first question that comes to mind is: what is the fair market value of the property?
To answer the question, you first need to understand what "fair market value" means.
"Fair value" is the valuation of a property that depends on its current status in the market. It depends on many factors, like the present trends in the market, the appraisal value of the property, etc.
One of the major determinants of the fair value price of the property is calculated according to the location, size, square feet, land area, interiors, surrounding assets, etc. It has a huge role to play when it comes to the buying or sale of a property. It determines the listing price of a property when an owner puts it on the market. It also determines the home insurance fees that the owner will pay when he buys the home, as well as the ease with which the home buyer will be able to secure a mortgage from the bank.
The motive of fair market value
The fair market value price of a property determines many factors when it comes to the valuation and the processes that involve buying or selling it. In this segment, we will look at some of the motivations for the fair market price of properties like homes or land.
A home's fair market value price determines the price of a home.
It is one of the first components of a home on the market that determines fair market value. In this case, one of the most difficult things a homeowner can do when selling his home is to determine the value of his property based on the price of other homes in the same market. However, he should do this without underestimating his own home and the assets it contains. It is important to remember that the true value of a home depends on the supply and demand for homes in an area. For this reason, since the open market determines the value of a property, the fair market value of a home may differ from the actual value of the home.
Loan processing is the most important step for most property buyers. The fair market value price plays a vital role in determining the type of loan that a bank is willing to give a property buyer. The bank will look at the future value of the property to determine the fair market value and will ensure not to overshoot the actual value of the property. The bank will approve a loan only after considering the factors in the listing price and appraisal price of the property in the future.
Quotes and rates for an insurance policy are determined by the fair market value of the property. Lenders evaluate the value of the property each year according to the market it belongs to. This allows the lender to determine the appreciation or depreciation of the property each year. Homeowners with a high fair market value are expected to pay a higher premium for their home insurance.
For example, if a home is a property you intend to buy, see how it applies to it.
How do you evaluate the fair market value of a home?
The fair market value of a home is decided by these factors:
1. Home Appraisal Value:
It is the estimated value of a home determined by an inspection of the property and its comparison to recently sold homes or land in the area to estimate the value. The valuation of a home is determined by a licensed home appraiser. He can determine the value of a home based on the open market and the assets of the home. Also, the fluctuation of the price depends on the open market, supply, and demand for the property. The appraised value is an important factor for the evaluation of fair market value.
2. Market State:
A professional appraiser can evaluate the fair market value by examining the comparable sales of similar properties and adjusting for factors like market conditions, location, and physical characteristics that differentiate the subject property from comparable properties. Anyway, the condition of a property and the state of the market will always affect the property’s valuation.
3. Square footage:
The fair market value of a house is evaluated by the square footage of properties in a particular location. The estimated value is typically a result of a valuation per square foot of homes in that area, then multiplied by the number of square feet in the property to determine the fair market value price.
When you buy a property, one of the most important things to keep in mind is to invest in the knowledge and support of a reputable real estate agency. When you buy your property from a reputable agency, you can be sure that it offers reasonable market value, not more than a penny.