Since we buy houses Miami, Boca Raton, Orlando, and all around Florida. We know that valuing real estate is often a complex process involving several requirements and procedures to be thoroughly conducted. Home prices/values are never set in stone, and often as a buyer or seller, you will hear two or three words being used such as Fair market value, assessed value, or appraised value. If you are trying to sell your home, or better understand how your property is being valued, it is critically important you understand what these terms mean and how they differ while valuing your property. Continue reading to gain more clarity in how the Fair market value is calculated to assess the value of your Florida home. If you need to sell your home quickly and cannot afford to wait for the right buyer at the right price or the long process of a traditional real estate sale, Your Trusted Home Buyer is the perfect company to help you. We are professional Florida home buyers and can make you a fair cash offer on your home and help you close in as little as seven days!
What is the Fair Market Value (FMV)?
Fair Market value, is the price the property would sell at on the open market given all usual conditions. While there is no universally agreed-upon technique to derive the FMV, it largely comes down to the fundamentals of market economics, appraisals, comparable sales, and some other external characteristics that determine the market value of your property.
Supply and Demand are the driving force behind arriving at an FMV for your property. Property is a market good, and the principle of price discovery holds. In addition to supply and demand, other economic factors like unemployment, inflation, GDP growth, etc. can all influence how the FMV of the home is derived.
An appraisal is a professional opinion of the value of a piece of real estate given certain data points. It is conducted by professional bodies like investors, governments, agencies, etc., and will provide a more accurate illustration of what price your home will be competitive at on the open market. You can get your home appraised by a licensed professional, however, the appraised value may differ from the final sale price in the market given market conditions (see above) The most common technique of appraisals for homes is the Comparable sales approach:
- Also called the market data approach, the value of the property is derived by analyzing the sales trends of properties having similar stature and characteristics; called comparable.
- Generally, comparables are selected in the same location of the property being appraised and have been sold in the last year under typical market conditions.
- Four to five comparables are used in the process
- Comparable Qualities:
- Physical features: landscaping, quality of construction, number of rooms and square footage, etc.
- Date of Sale: Consideration into different economic conditions from the sale of the comparable and the dare of appraisal
- Location: Different neighborhoods may have different price patterns
- The final estimated value of the subject property will fall in a range of the adjusted sales prices of the comparables. Given how subjective the nature of these comparables can be, weighted consideration is given in favor of those comparables with the least amount of adjustment
Besides market conditions and a property appraisal, other characteristics like crime rate, the appeal, and condition of the neighborhood, public utilities, education, and school zones, etc. can all play a part and determining the market value of your home. For example homes in low crime areas, good school zones, and having nearby well kept public facilities will experience higher demand than those without. These factors may not reflect in the property’s appraisal, and hence why it may sell at a higher price than the estimated value provided.
Hopefully, this provided a clear understanding of what Fair Market Value means, and how it is derived in the real estate industry. So, if you keep thinking “I need the best way to sell my house Jacksonville” or anywhere else in Florida. Keep your eyes peeled for posts on other mentioned topics like assessed value, and how that differs from FMV, and what role it plays in determining your property tax.