Fair Market Value

When selling or buying real estate, what price is a "fair" price? One land auctioneer used to begin his auction sales with the words "We're here to get as much as we can - you're here to buy it as cheap as you can what am I bid?" It was a down to earth way of saying that buyers and sellers have different viewpoints about price, but must finally agree if a sale is to take place.

 

Mortgage lenders, appraisers and real estate brokers use the term "fair market value" to identify what they believe to be a "fair" price. Fair market value is defined as ``that price which a buyer is willing to pay and at which a seller is willing to sell, both parties being knowledgeable about the property and neither party being under any time pressure to sell".

A Competitive' Market Analysis is one method for determining fair market value. It is a report which provides information about similar properties which are 1) "For Sale" at the present time, 2) already "Sold", and 3) "Expired". Homes which are currently "For Sale" indicate what the competition is asking. Although buyers have not yet agreed to those prices, they are one barometer of the maximum potential price.

Homes which have already "Sold" provide historical information about prices sellers have been willing to accept and buyers have been willing to pay. The more recent the sale, the more reliable the information. Appraisers only use sales which have actually closed.

 

Those listings which have expired without selling are an indicator of what buyers are not willing to pay. If a home was listed for sale and did not sell, the price was likely higher than buyers were willing to pay for comparable homes.

Sellers may set their asking price, however buyers actually place the final value on them, as evidenced by their willingness to pay a particular price. For detailed information about fair market value in your area, call a REALTOR. As an active member of the local real estate community, a REALTOR is able to provide accurate, up-to-date information on the local housing market.

If you are planning to sell your home soon and would like information on its current value, please call me at 260-489-7024 or outside of Fort Wayne call 1-800-395-9527.

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