As you plan to sell your home, one of your biggest questions might be, “What is the value of my home?”. Many factors determine fair market value and every property is different. But what is fair market value and how is it determined?
What is fair market value?
The definition of fair market value by the Internal Revenue Service is:
Section 1.170A-1(c)(2) states that fair market value is the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell, and both having reasonable knowledge of relevant facts.
Fair market value represents the estimated amount of money that a buyer and seller would likely agree upon through negotiations and under normal market conditions.
How to determine your home’s fair market value:
Get a comparative market analysis (CMA)
Ask your real estate agent for a comparative market analysis. In this report, they will compare your home to similar homes in the nearby area that have sold recently. Recently sold properties are a great indicator of value because they show how much current buyers are paying for comparable homes.
Get a home appraisal
If you want a deeper look into the value of your property, a pre-listing appraisal could offer all of the details you’re looking for. A typical appraisal will include:
- A tour of the property
- Reviewing the condition of the property
- Noting any maintenance issues that affect the value
- Accounting for any improvements that have been made
An appraiser will compile their report based on their findings along with any data from comparable properties.
Get an inspection
A pre-listing inspection can uncover any unseen issues or any issues that need to be taken care of before you list your home. This helps you stay ahead in the selling process because if a buyer’s inspector discovers issues, the time it takes to repair them will lengthen the sale (or scare away the buyer altogether).
What’s the difference between fair market value, market value, and appraised value?
Market value, fair market value, and appraised value may seem like relatives, but they are all completely different. All three can be used in determining the worth of a property, but fair market value is what it should sell for.
- Fair market value: Buyers and sellers are not overly eager to buy or sell a home, the value of the home is based on normal market conditions, and both parties have the same information.
- Market value: The home’s value is based more on the supply & demand of the market.
- Appraisal value: The home’s value is reviewed independently by an appraiser who considers all aspects of the home and other properties that are comparable to it.
Discover your home’s fair market value
As you move forward with plans to sell your home, remember that fair market value is determined by many factors. The best way to explore fair market value is with the help of an experienced agent.
Team Melton has over 50 combined years of real estate experience to assist you through every step of the process. Contact us today to get started on selling your home!