If you’re thinking about selling your home, you’ve likely heard the term “market value.” But what does market value mean exactly and how does it affect you? Let’s unpack it a little.
What is market value?
The definition of fair market value is the price at which something will sell within a reasonable period of time. When applied to houses, the fair market value is the price at which a particular house in its current condition will sell in 30 to 90 days or so.
To break it down even further, fair market value is the estimated opinion of what a property should sell for in a competitive market. This differs from market price, which is what a buyer actually pays for a property.
How is market value determined?
It’s important to understand that there isn’t a universal way to determine the fair market value of a particular property. Instead, the market value is determined by a number of factors, the biggest of which is comparable sales.
Market value is determined by looking at what similar homes have sold for and making an estimate based on the information. You can view the estimated market value of any home using REcolorado’s What is My Home Worth? tool as a starting point.
When all is said and done, the fair market value of your property is truly determined by what buyers are willing to pay given their choices in today’s market, AND what sellers are willing to sell for given their choices and the competition.
Why does fair market value matter?
If you’re trying to sell your home, the market value is what you will likely use to decide the listing price. Your Realtor will complete a Comparative Market Analysis (CMA), which is a compiling of recent sales of the most similar homes in your area, along with home details, days on the market, and final sale price. This information is vital in deciding how to price your home to best reflect the market.
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