When it comes to understanding fair market value in real estate, it’s not the easiest thing to do because it can be quite confusing, for many reasons. A quick definition of fair market value is that it’s an estimated price for which real estate would cost during a transaction that’s voluntary between a buyer and a seller. The reason why those factors are important to point out is that real estate transactions are not always voluntary and they are not always between a buyer and a seller. Sometimes there are financial institutions involved.
Another aspect of what fair market value represents is an assessment of how much it’s worth, regardless of what the seller is willing to pay or what the buyer wants to receive. For instance, sometimes a house sells for a higher amount because the buyer is attached to buying that property for personal reasons that have nothing to do with the actual value of the property. Similarly, sometimes a seller is highly motivated to unload the property for reasons that have nothing to do with the value. For instance, a seller might slash the price of a home in half because they needed to leave the country for professional reasons within a short amount of time and has no plans to return. In this situation, they are motivated to tie up all loose ends so they would sell their house for cheap.
If you are in the market for a property or land for sale, upcoming auctions Raleigh, NC has to offer are great places to start because you can find properties that are priced closer to their actual value than what you would find elsewhere. To see a good selection of homes priced at fair market value, you can search, “estate sales near me” and see what comes up. As in the previous example, there is often a desire to sell a home quickly. It’s actually why estate sales are so popular.
There are many different reasons why the fair market value is important in real estate when you are selling or buying. When you are transferring ownership, it’s imperative that you know the actual value of the property because not knowing can cause you to lose out on monetary gain simply due to lack of knowledge. You cannot assume that the other party in the transaction will represent what is accurate about a property. Knowing the market value enables you to engage in the negotiation process effectively.
Some of the most important situations in which you’ll need to know the fair market value are during an assessment for tax purposes and during a divorce settlement. There are other scenarios, but these are two that arise quite frequently. During the process of getting a divorce, the goal is often to split assets equally or in accordance with what’s required by law. In order to do this, it’s imperative that you know how much the property is actually worth. The same applies to issues that involve the Internal Revenue Service.
Another reason why it’s important to understand the value of a property is for insurance purposes. As you can imagine, losing a home to a fire would be devastating. There’s a possibility that you could lose everything you own. If that happens and the market value on file with the insurance company is inaccurate, there’s a chance that you would not be able to rebuild the home after being reimbursed for your losses. This is actually a situation that has happened many times before when the value of the home was not accurately assessed.
Fair market value is calculated through comparative analysis, a professional appraisal, selling price, replacement cost, and valuation by a third party. As you can see, there are many different factors that go into determining the market value. While this might seem like a lot of effort, it’s worth the time and money given the potential outcomes of not having an accurate valuation.
A licensed real estate appraiser is often the person who is able to perform a comparative analysis. As a certified professional, a real estate appraiser is able to determine the value of a property using approved methods. They also risk losing their license if integrity is not maintained during the process. Insurance companies have proven methods for determining the replacement cost of a property, which should align with the outcome of the appraisal.
