Who Determines the Fair Market Value of a House?
The fair market value of a house is the ultimate price homes are bought and sold for. Prior to buying or selling a property, knowing its fair market value is crucial to pricing and knowing what you should be paying. There are many factors that determine the fair market value of any property that will impact pricing and appraisal values. Because there is more than one source that will determine the fair market value for a property, knowing the sources of information utilized to come to this complex equation is important to research in any real estate transaction.
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Appraisal Value
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The appraised value of a property is the first factor in determining fair market value. Professional appraisers will use factors about a home, like the square footage, condition of the property, improvements to the property, location and sales of comparable homes within a 1-mile radius, in order to assess the value of a property. This is one of the most important factors in fair market value, as the appraisal for buyers can make or break a sale of a home. Because buyers do not have to purchase a property if it appraises for less than what they are financing, a proper appraisal can make the difference between a quick sale and no sale.
Realtor Assessment
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Professional Realtors can provide you with a comparative market analysis free of charge that will allow you to evaluate other properties in your immediate area that are for sale and illustrate the amount properties in your area have sold for recently. An exceptional agent will be able to provide you with detailed information on the adjustments in pricing made due to repairs needed or improvements made to homes similar to your own. This is crucial to setting a proper price for your property.
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Public Opinion
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The largest driving factor in fair market value is what the public is willing to pay in any area for real estate. This can be clearly seen when pulling statistics for homes sold in your immediate area over the past 6 months. Pricing for all real estate is based on what the public is wiling to pay, not what a seller believes a property to be worth.
Considerations
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Selling a property when there are numerous other properties for sale in the neighborhood can be both a blessing and a curse. If there are numerous properties for sale in your immediate area that have been foreclosed on and are being sold for pennies on the dollar, this can impact the fair market value of your property negatively. Conversely, if properties in your area are being sold near to the amount you have in mind as an asking price, being a competitor during this time can mean a fast sale.
Warnings
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Selling a property below market value will have a negative effect on any other family attempting to sell a property in your immediate area. Realtors who continuously encourage price reductions are harming your neighborhood and overall property value. Consider this when hiring a Realtor to represent you and inquire as to their pricing strategies upon interview.
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