An Overview Of The Different Values Of A Property
If you want to know the value of a property, you should specify which value you are interested in. This is because there are different values of properties, and they can yield different figures. Below are some of the three major categories of property values.
Fair Market Value
The fair market value of a property is the price the property can fetch in a free market. The seller, either the owner or owner's agent, prepares the initial asking price and then negotiates with potential buyers until a fair market value is reached.
The fair market value of a property is the primary value that most buyers are interested in. Some of the factors that determine the fair market value of a property include the property's size, location, construction, age, comparable properties, and even prevailing market trends. The fair market value can vary widely; for example, high demand for properties in an area can drive up a property's fair market value.
The assessed value of a property is a yearly estimation of the worth of a property. The assessed value of a property is mainly a tool for the government, specifically the Internal Revenue Service (IRS), to determine the value of property for tax purposes. Thus, the municipal tax assessor of the local government is responsible for determining assessed values of properties in the municipality.
Some of the factors that determined the assessed value of a property include its use, age, location, and size. The exact determination varies by jurisdiction.
As a prospective home buyer, you may not be interested in the assessed value of a property other than for tax purposes. Moreover, the assessed value of a home is typically lower than its fair market value. This is even more likely to be the case for residential properties.
The appraised value of a property is the value of the property as determined by a real estate professional. The appraiser considers the same factors when determining the fair market value of a property. In addition, the appraiser must conduct a visual inspection of the property being appraised.
The appraised value is of a home is essential to the mortgage application process. The lenders use it to determine if the property is correct to safeguard their investment (the loan).
As a home buyer, you have an interest in all the above values. The fair market value is the price at which you will buy the real estate, the assessed value will help you approximate tax rates, and the appraised value will help you with the mortgage processing.