How to Calculate Fair Market Value on a Home
If you are preparing to sell your home, a crucial decision you will have to make is determining your selling price. According to HGTV's Front Door, calculating the fair market value of your home is a good way to determine an equitable asking price for the home. Fair market value is not related to the price paid for the home. Instead, fair market value is based on the price of recent sales of similar homes in your area. Fair market value is also based on the assumption of a normal market situation, in which neither the seller nor the buyer is desperate to make the transaction.
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Instructions
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Survey real estate websites to find the price of homes on the market in your area. Many of these websites, such as Zillow and Domania, will also help you survey the price of recent home sales in your area.
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Ask your real estate agent to prepare a Comparative Market Analysis, or CMA, report. This report lists recent sales prices of homes in your area as well as the listing prices of similar homes currently on the market.
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Select three to five of the recently sold homes from the report. Choose homes that are most similar to your home. Add up the total square footage of the selected homes and divide by the number of homes to get the average square footage. Add the sold price amounts together and divide by the number of homes to find the average sold price. Take the average price and divide it by the average square footage to get the average price per square foot.
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Take the square footage of your home and multiply it by the average price per square foot of the recently sold homes. This number will give you the fair market value of your home based on recent sales.
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Tips & Warnings
You can hire an appraiser to get an appraisal of the value, but the fair market value could differ depending on market conditions.
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- Photo Credit house image by Cora Reed from Fotolia.com
