When it comes to real estate transactions, whether you’re buying a home, navigating a divorce, or planning an estate, understanding property values is important. Two key terms that come up in this context are “appraised value” and “fair market value.” While they may seem similar, they serve different purposes and are calculated differently. A real estate agent can determine “fair market value” whereas a certified appraiser determines the “appraised value.”
What Is the Fair Market Value?
Fair market value is the price a property will sell for in an open market, where both the buyer and seller are willing participants. It reflects the current conditions of the market, the property’s condition, and its location. Unlike an appraisal, fair market value can be subjective and fluctuates based on the buyer’s perceptions, market trends, and even local events. It’s often used in negotiations between buyers and sellers and can be influenced by emotional factors like how badly someone wants a property. The fair market value can be determined by either unlicensed individuals, such as the buyer or seller, or a licensed one, such as the buyer’s agent or seller’s real estate agent.
What Is the Appraised Value?
Appraised value, on the other hand, is a professional estimate of a property’s worth, conducted by a licensed appraiser. This value is based on hard facts, such as the property’s size, condition, and comparable sales in the area. The appraised value plays a crucial role in determining how much a bank is willing to lend to a buyer and can influence the outcome of a real estate transaction. Since it is based on data, the appraised value is more objective and precise than fair market value.
Why Do These Values Matter?
Understanding the difference between fair market value and appraised value is important, especially when making significant financial decisions, such as purchasing a home, settling an estate, or dividing assets in a divorce. For example, if you’re buying a home, the appraised value will often dictate how much a lender is willing to loan you, while the fair market value will guide your negotiation with the seller and may be affected by what you feel the property is worth for your needs.
Whether you’re in the process of buying a home, handling a divorce, or managing an estate, knowing the right property value is essential. A professional appraisal ensures that you make informed, fair decisions based on accurate and impartial data. If you need assistance determining your property’s value, contact us for a trusted, expert appraisal service.