What Is The Fair Market Value Of A Home?

Real Estate Agent with Keller Williams Realty - DTC

What is the fair market value of a home?

For anyone selling a home, as well as anyone buying a home, it is important to understand what the fair market value of a home is.

Mike Miguelez sells homes in Superior, Colorado

Consider the fair market value to be the price that a property will fetch in a free marketplace, with a couple of stipulations:

  • Both the buyer and seller are knowledgeable about the property.
  • Neither the buyer nor the seller is being forced to buy or sell (neither is under duress).
  • The transaction (and its negotiated value) are time-framed, meaning that a decision needs to be made or the transaction is voided past a specific deadline.

It's not an exact science, but if you carefully monitor the market and watch which way it's trending, educated estimates are possible.

A CMA (Comparative Market Analysis), performed by an experienced real estate agent, will help in determining market value. A good, experienced real estate agent will be able to provide a list price that ends up being fairly close to the sales price of a home. In order to do that the agent needs to be familiar with the local housing market. Are prices trending up or down? What's the average days on market before a house sells? How much inventory is in the market? How much higher priced are the expired listings compared to similar homes that sold? How does the condition of the home compare to similar homes for sale in the area?

The hard part for real estate agents (particularly in markets high in default scenarios: short sales, foreclosures, and REO's) is communicating to home sellers what we assess their home to be worth in the current market.

We are basing our estimate on an analysis of the area and what is happening in this market. If defaults are high, home values will be dropping. That's a hard truth. The answer for someone selling their home that is unwilling to accept the fact that home values have dropped might be to not sell and wait for the market to improve.

Comments (6)

Ken's Home Team LLC. | 360.609.0226 | Portland, OR & Vancouver, WA Real Estate Team
Ken's Home Team LLC. - Vancouver, WA

nice post, than you for sharing this,  Pricing a home is not exact., its an opinion of price.

Sep 18, 2010 08:50 AM
Richard Wilson
Cherry Creek Properties, LLC - Colorado Springs, CO
Town or Country, in Colorado, we do it all.

How did the inspection go on that listing? :-)  Good Post!

Sep 18, 2010 08:51 AM
Mike Miguelez
Keller Williams Realty - DTC - Superior, CO

@Ken - it's not exact. I think it falls in that nebulous area of part art, part science. It's also where it becomes important for buyers and sellers to work with someone local that's very aware of that market.

@Richard - there was foundation damage discovered, but the sale went through anyway because of the vein of gold running through the property. ;-)

Sep 18, 2010 10:45 AM
Mary Macy
Top Agents Atlanta Metro - Roswell, GA
Top Agents Atlanta Metro

What a great house picture and I thought I had a tough market!!!!!

Sep 18, 2010 03:05 PM
Mike Miguelez
Keller Williams Realty - DTC - Superior, CO

@Mary - Instead of a tough market, let's think of it as the Denver - Boulder, Colorado real estate market as having something for everyone. ;-)

Sep 19, 2010 02:57 AM
Charles Edwards Bentonville
Coldwell Banker Harris McHaney & Faucette 479-253-3796 - Bentonville, AR
AR REALTOR, Bentonville Real Estate Agent and Broker

Mike, What is the fair market value of a home? The fair market value is what a ready willing and able buyer will pay for it is the text book answer.

Now about the listing in the picture.....

Dec 16, 2010 06:37 AM