Fair Market Value
Financial term in the Real Estate category
Definition
The price a property would sell for on the open market between a willing buyer and seller, both having reasonable knowledge of relevant facts. Determined by comparable sales, appraisals, and market conditions. Used for tax assessments and insurance claims.
Related Terms
Appraisal
A professional evaluation of a property's market value, typically required by lenders before approving a mortgage. Based on factors like location, condition, and comparable sales.
Cap Rate
Capitalization rate measures a rental property's potential return, calculated by dividing net operating income by the property's market value. A property generating $12,000 annually valued at $200,000 has a 6% cap rate. Used to compare investment properties.
Frequently Asked Questions
What is Fair Market Value?
The price a property would sell for on the open market between a willing buyer and seller, both having reasonable knowledge of relevant facts. Determined by comparable sales, appraisals, and market conditions. Used for tax assessments and insurance claims.
Why is Fair Market Value important in personal finance?
Fair Market Value is an important real estate concept that helps individuals make better financial decisions. Understanding Fair Market Value can improve your financial planning and help you achieve your money goals.
How does Fair Market Value relate to Appraisal?
Fair Market Value and Appraisal are related financial concepts. A professional evaluation of a property's market value, typically required by lenders before approving a mortgage. Based on factors like location, condition, and comparable sales.
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