Fair Market Value (FMV)
Definition:
Fair Market Value (FMV) refers to the price that a property would sell for on the open market under normal conditions, where both the buyer and seller are knowledgeable, willing, and not under any pressure to buy or sell. FMV is an estimate of the value of a property based on factors such as comparable sales, current market conditions, and the property's physical characteristics.
🔍 Did You Know?
FMV is often used by lenders, appraisers, and tax assessors to determine property taxes, mortgage lending amounts, and insurance coverage.
Examples:
Example 1:
A home is appraised for $450,000 in a neighborhood where similar properties have sold for between $440,000 and $460,000. This represents the fair market value of the property based on comparable sales.
Example 2:
During divorce proceedings, a couple needs to determine the FMV of their jointly owned property in order to fairly divide their assets.
Why It’s Important:
Fair market value is critical for buyers, sellers, and investors to understand whether they are paying or receiving a fair price for a property. It also affects taxation and insurance policies, which are often based on FMV.
Who Should Care:
- Homebuyers and investors looking to make informed offers on properties.
- Appraisers and tax assessors who calculate taxes or determine property values for loans.
- Sellers who want to ensure they’re listing their property at a competitive price.
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