When it comes time to buy a home in Philadelphia, to get your money’s worth, you need to understand the concept of Fair Market Value or FMV. The problem is that FMV can be a difficult concept to pin down. Mostly because the textbook definition relies on “buyers and sellers are reasonably knowledgeable about the asset” which may not be the case. So what should you know to make an accurate FMV assessment?
- Appraisal: The biggest mistake people tend to make is to view the home as an individual unit and not part of a larger system. A value can be assigned to a home simply based on it’s condition, amenities and the like. However where the home is located, demographics and infrastructure all come into play. A well-maintained home in a run-down neighborhood won’t have the same FMV it would if in a nicer area.
- Market Forces: Sellers know the best way to get a better offer is to create competition between buyers. This is a fact of economics: the more committed buyers, the higher the final sale price. Don’t get sucked into bidding wars with other buyers! This factor is why realtors advise you not to get to emotionally attached to any one potential home.
- Research: You can get online these days and find the official, appraised FMV of a home but this is just a starting point. Depending on when the last appraisal was can drastically affect a homes FMV. Also, home appraisals are often based less on actual value and more on what nearby homes sold for recently. So it’s important to work closely with your realtor to learn what price other homes in the area have sold for.