Market Value Defined

Market value is a popular term in the real estate market, though its usage spreads over a wider range of valuable assets. While this can include anything from antiques to cars to medical services, real estate appraisals and sales are the most common usage for the term "market value." If you plan to sell your home or commercial property, or have an interest in working in the real estate industry, a clear understanding of this phrase is essential.

Function

The purpose of market value is to determine the price an asset would receive as compared to the sale price for other similar assets. There is no equation or standardized method for determining market value, rather, it's typically an estimation. It is a concept many individuals and businesses depend on, but the determined number varies depending on the "expert" opinion obtained and several other factors.

Types

Market value tends to be an all encompassing term. However, several versions of the term pertain to more specific assets. For example "fair market value" (also known as FMV) deals directly with real/commercial property, and is the amount a willing buyer is likely to pay for a piece of property. The phrase "open market value" also refers to property, but actually refers to the best price one can expect for a property, rather than the value estimation. It's important to note that the market value of a corporation does, in fact, have an equation and the results are not estimation, though it does fluctuate. Determine this market value by multiplying the number of outstanding shares by the current market price of the corporation's shares.

Real Estate Sales

Realtors suggest the listing price for a property to their clients based upon the local market value for a similar property. They consider a number of factors and continually reassess the market value of the property during the lifetime of the listing, in order to help the make sure the property sells.

Assessor/Taxes

Another common use of market value is by your local Assessor's Office. While the process for determining market value varies from county to county and state to state, the use of that value remains virtually the same. County Assessor's offices use the market value to determine the property taxes that residents pay each year. For this purpose, and with the understanding that market values fluctuate, Assessor's offices reassess market values for properties every year. If you feel the assessment is inaccurate, you can typically file an appeal with your local Assessor's office to straighten that out.

Factors

The factors that contribute to determining the market value of a property can vary between "experts," especially in regard to real estate. Sales comparisons are the most likely reference. Real estate agents and assessors look at the final selling price for properties in the area that are similar to the property in question, both in size and amenities. The condition, size and age of the property are also important. Amenities, such as landscaping, fixtures, extras (such as a swimming pool or privacy fence), lot size and location, among others, also help determine market value.

References

• New York Office of Real Property Services: How Estimates of Market Value are Determined for Residential Properties

Resources

• Determining Market Value
• Real Estate Terminology