“Fair Market Value” has a simple definition. It is the price that a buyer is willing to pay and a seller is willing to accept without duress.
“Appraised Value,” “Loan value,” “Tax Value,” and especially “Internet Value” have nothing to do with fair market value, other than the effect that they might have on what a buyer is willing to pay.
Keeping in mind that the fact what the buyer is willing to pay is only one half of the fair market value, the other being what the seller is willing to accept, one must not be oblivious to the fact that there may be other ready, willing, and able buyers for the property,
When a seller calls for “highest and best” in a multiple offer situation, you are likely to uncover the true fair market value of the property.
The same applies to a property that languishes on the market for a long period of time that only garners a single low offer. If there is NO market, there is little value.
It’s not about counting bricks or measuring square feet.
Fair market value depends on a meeting of the minds, and the ability to perform.
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and depending on the method of buying it also depends on the banks appraiser agreeing on the "fair market price" that the two minds have agreed on.
Hi Richard -
I'm working on two highest and best offers right now. I had a home buyer last week that lost their dream home to a highest and best and yes they went well over the top. It will be interesting to see what that one appraises for. On the bright side they've already found another home and indeed their offer was accepted.
Now if you can get appraisers and banks to agree with this we will move forward much faster.
Good morning Richard,
Fair market value and appraisal value...therein lies the rub!
Edward...
Not really .... any buyer may elect to pay the difference in cash. Thanks.
John...
Persistence pays off. Glad to hear that you got them under contract.
Bill...
A buyer can ALWAYS pay more ... regardless of the appraisal. THX.
Lisa...
Only if the buyer wants it too. Thanks.
In the current, crazy, Silicon Valley market, the definition of "fair market value" is even more skewed as buyers bid up properties and put them at risk of not appraising. A good buyer with 20% down has an issue on an overbid home.
What a great way to explain the fair market value concept to buyer sand sellers. In our market, buyers seem to think fair market value should only be what THEY are willing to pay. Forget the seller accepting it.
You are right Richard. I tell folks unless the appraiser, tax collector, or insurance agent is buying your house it does not mean much. Fair market value is the key
Richard, great post (as always). I answer the question, "what is my house worth" with... what someone will pay for it. Now I will add to that response, "and what you are willing to sell it for".
I am reblogging this, I think this is fantastic!
These are confusing concepts for buyers and sellers. This post goes a long way to making it easier to understand. I think you hit it on the head with this "Fair market value depends on a meeting of the minds, and the ability to perform."
What a great post Richard. You have explained perfectly. I too am going to reblog and I suggested as well.
Richard-You provide a simple and direct definition to the often skewed concept of what market value (fair) is. Many try to bring in all sorts of variables, but fair market value is indeed what a buyer is willing to pay and a seller is willng to accept. Suggested!