Mortgage List Price Vs. Fair Market Value
Fair market value is an estimate of the market value of a property. It is determined by a licensed or certified appraiser who conducts an appraisal of the property and arrives at a price. The mortgage list price is simply the asking price for the home.
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Deal Breakers
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The buyer and seller may agree on a purchase price of $200,000, only to see the appraiser later set the fair market value, or appraisal, at $175,000. The $25,000 gap would cause a problem because banks usually insist that the fair market price match or exceed the purchase price. In this case a new appraisal could be ordered or the buyer and seller could work together to close the gap.
Reviewing The Property
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A real estate appraiser begins his process by conducting a review of the property including square footage, number of bedrooms and bathrooms, and the condition of the property.
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Arriving At A Number
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An appraiser also will compare the home with similar properties that have sold in the area, with a focus on similar characteristics such as swimming pools and attached garages. The mortgage list price does not figure into his calculations because he regards it as an arbitrary number set by the seller. After analyzing all the data the appraiser will arrive at a fair market value for the property.
Online Appraisals
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Websites such as RealEstate.com, Zillow.com and Trulia.com can offer ballpark estimates on fair market value. However, Bankrate.com emphasizes that these are only estimates based on electronic data, and are not as reliable as true appraisals.
Impact of Foreclosures
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A U.S. housing crisis stretching into 2010 increased the number of foreclosures and pushed down overall fair market property values in some markets.
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