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How is Fair Market Determined?




Whether buying or selling, what the seller paid for the property is irrelevant.

It's true that a seller needs to know what he or she still owes. That determines whether there's equity or whether a short sale will be necessary.


But neither the purchase price nor the balance owed has a bearing on what the property will sell for in the current market. That market is determined by what buyers are willing to pay, and nothing more.


Sellers who insist that their properties should sell for a higher price because they paid more will be sadly disappointed. Potential buyers will simply move on to a similar property that's priced correctly for the market.


On the other side of that question are the buyers who think they should pay less because the seller paid less when he or she purchased the property. They have an idea that only so much profit is acceptable. They too will be disappointed, because another buyer will come along and pay fair market value.


How is fair market value determined?


By comparing the property to similar properties in similar neighborhoods which have sold recently.


What is a similar property? One that:

·       Is approximately the same size and age

·       Has the same number of bedrooms and baths

·       Has the same quality of doors and windows, floor coverings, fixtures, counter tops, and cabinets

·       Offers the same amenities

·       Has been similarly maintained


What's a similar neighborhood/zone? One which:

·       Is in the same school district

·       Is similar in location with regard to shopping, medical care, recreation, jobs, airports, power transmission lines, freeways, and anything else that might affect value

·       Is similar with regard to maintenance – or pride of ownership


What does "recently" mean?

In today's rapidly changing market, it can mean within the past month or two. When the market is steadier, it can mean within 6 months, or even a year.

 

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