subject: What is the fair market value of a home? [print this page] What is the fair market value of a home? What is the fair market value of a home?
The fair market value of a home is simply a mutually acceptable price for the seller and the buyer. In other words, a seller can come up with an asking price, but it doesn't do any good until someone is willing to pay that price. Likewise, the buyer can make an offer, but this offer has to be accepted. Once the buyer and seller agree on a price, you have a deal and the house will change hands. Why is this simple concept worth discussing?
First of all, the fair market value doesn't have anything to do with the current needs of the seller. The seller may feel that he or she needs a certain amount of money to pay for debts, to pay off the mortgage itself, to pay for medical expenses, or simply to move on to the next phase of life and purchase a more expensive house. However, these needs or desires are not taken into account. The buyer is concerned with the features of the house and how much comparable homes are selling for under the current market conditions.
Also, fair market value assumes that neither the buyer nor the seller is under duress. In this context, duress means that one of the parties is under pressure to complete the transaction quickly for whatever reason. The pressure may come as the result of a relocation due to a new job, a new marriage or sudden divorce, or any number of other issues that would cause someone to purchase or sell a house quickly. These factors obviously influence the selling price in an unusual way.
Many sellers may feel that the market value is unfair given their personal needs, but these needs do not play into the selling price that most people are willing to pay. Also, it doesn't really matter what the original purchase price of the home was. Perhaps the current owner purchased the house during the peak of the real estate boom and now believes that the purchase price was too high. If this is the case, the current owner can definitely lose money or just break even because real estate prices have dropped. Again, most buyers would not be concerned about this and simply offer a price consistent with current market prices.
