Fair Market Value
Real estateGlossary term
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
- AppraisalA 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 RateCapitalization 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.
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