A property’s fair market value (or FMV) is what you could receive if you sell it privately on the open market. This number is important for sale purposes and when calculating your home’s equity and investment strength. If you are thinking of selling or borrowing against your home’s equity to finance another purchase or pay off debt—or if you’re just curious about how much your property might be worth right now—you’ll need to determine its fair market value. Alternatively, if you plan to buy a home soon and want to know what something is worth before committing to purchase it, calculating its fair market value can help.
Utilize Online Tools
Use an online real estate calculator to estimate the fair market value of your property. Provide honest information so that you get accurate results. When you sell your home, buyers will want to know about any improvements or remodeling work done since you bought the house. Such upgrades could positively affect its value. Some online tools will ask you to enter information about the neighborhood where your house is. It can help you determine if the fair market value of your property is higher or lower than what’s typical for similar homes in the area.
Run a CMA
Run a comparative market study (CMA) on the property. A CMA will match your property to comparable properties so you can get a sense of what similar nearby homes would sell for—and how that might affect your listing price. Other properties in a neighborhood largely determine fair market value, much like the blue book values of cars are based on other cars’ features.
Order a Home Appraisal
Hire an appraiser to conduct a home inspection. The average cost of hiring an appraiser is $200-$600; it will be more expensive for larger, more luxurious homes. Ask the appraiser to provide a copy of their report when they inspect your home. For a more stable value, hire two or three appraisers to conduct separate appraisals and then choose an overall average appraisal.
Check Current Sales Prices
Another way to specify the fair market weight of your home is to compare it with newly sold properties in your area that are similar in size, square footage, condition, and age. Add up the absolute sale price of each property, then divide by the number of belongings to find the mean sale price. Analyze again for square footage. Divide the average sale price of homes in your area by their square footage to determine how much they’re worth per square foot. Multiply this amount times the number of feet your house has, and voila! You’ve got a very accurate estimate of what it’s worth in today’s market.
Review Recent Property Tax Assessments
Contact your local tax authority and order a copy of the property assessment for your home. Alternatively, calculate the assessment by determining how much you pay in taxes each year and dividing that by the percentage used as a rate when calculating assessments (typically between 0.25%–0.80%). For example, if the property tax rate is 4 percent, and you pay $10,000 in annual taxes on your home—splitting that figure by 0.04 gives you a rough estimate of how much the local government thinks your house is worth.
A home’s fair market value is the sum you could sell your property to an informed buyer willing to purchase it without undue haste, knowing that she could resell it within a reasonable amount of time. Using all of the above methods to determine your home’s fair market value is best.