Home Fair Market Value – The Difference Between Fair Market Value Vs Appraised Value

Home Fair Market Value

Home fair market value differs from appraised value. Both are utilized if you’re dealing with residential homes when you’re buying or selling them. That said, though, there are big differences between what the market value of a home is, and what its appraised value is.

Think, “Home fair market value” when you’re thinking of consumers, that is, other home buyers. Think “appraised value” when you think of the experts. That is, when a home has an appraised value, that’s an exact number that has been determined by an “expert” based upon data that professional gathered, as well as his or her professional judgement. This number is fixed, while home fair market value can vary depending on conditions influenced by buyers, simply because a home is only worth what buyers are willing to pay for it.

Let’s say, for example, that a seller wants to list his house for $350,000. The prospective buyer doesn’t think it’s worth that much, and only offers $230,000. The seller accepts the buyer’s offer. What does that mean, then? What’s that house really worth? Based upon what just happened between the buyer and seller, the house is worth $230,000. However, because the bank or other lender finances that house based upon its “appraised” value, an appraiser comes in and appraises the house to determine its value. The appraiser takes a look at factors that can impact the appraised value of the house either positively or negatively, such as how much other properties around the area are worth, how functional the house is, specific “special features” of the house, its overall condition, and so on. The appraiser might decide based upon these factors that a house is in fact worth $250,000. That’s the value the bank or other lender will use to base its lending on, and will ignore the market value.  For additional tips on determining your home market value, also check outHow Much Is My House Worth ?”

In other words, for the lender’s purposes, the appraised value is more important than the market value.

Figuring out fair market value as a buyer or seller

Whether you are a buyer (in the market for a house) or seller (selling your house), you’re probably going to want to know what both the appraised value of the home in question is, and what its fair market value is. How do you determine that on your own, though?

You can get a market analysis report from your real estate agent. Ask for something called the “comparative market analysis.” This will tell you about comparable homes in the area from the previous six months.

Doing your own calculations

There also are lots of places online you can look for price comparisons of this sort, such as Zillow. You simply enter any information about your home and then compare with the historical data to see how close the property valuation comes to the data. This is only going to be a guide for you, but it is helpful.

You can calculate a fair market value of your home by taking the average “sold” price of comparable homes in your area and dividing it by the number of homes sold. This will give you an average price among comparable homes sold.

If you also utilize the square footage of each of these recently sold comparable homes, you can drill down even further. You first determine an “average square footage” among comparable homes by taking the square footage for three to five of these homes, adding them up, and then dividing by the number of homes. This gives you an average figure for square footage.

Take the same three to five homes you figured out “average square footage” for, and figure out an average selling price. Simply add the selling prices of each of those three to 5 homes together, and then divide by the number of homes. This gives you an average selling price.

These two figures, average square footage and average selling price, should give you a good basic determination of what your home fair market value is. To calculate home fair market value, take the average selling price you’ve come up with from your three to five homes, and divide it by what you’ve come up with for average square footage. This is the “average price per square foot” for your particular market. Take that “average price per square foot” and multiply by the number of square feet in your home. This will give you a basic home fair market value figure for your home.

Los Angeles Appraiser – Property Appraisal Specialists | See List Of Real Estate Appraisal Services

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See resource for Free House Value Estimator

One Response to Home Fair Market Value – The Difference Between Fair Market Value Vs Appraised Value
  1. Colorado CHFA
    May 1, 2012 | 11:32 am

    The bank has its own set parameters to appraise a customer. Basically, the bank would consider First Time Home Buyer Colorado, CHFA Colorado, Colorado CHFA, Bank Home Loan, Denver First Time Home Buyer, Mortgage borrowers’ age, financial strength, other obligations, number of earning members in the family etc. to approve the loan. It is must for the borrower to be employed or self-employed with a regular source of income.

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