At Raleigh Cary Realty, this is a question that we get asked often when working with homeowners on pricing a home: What’s the difference between fair market value and appraised value? In this article, we’ll go over the similarities and differences of both.
Let’s start with what they have in common. Fair market value and appraised value both attempt to determine the worth of a property on the free market. Theoretically, they should be the same relative amount, but, as many people know, that often doesn’t end up the case.
By definition, an appraised value is an expert’s best estimate of what the property is worth. The appraiser is an unbiased, trained professional who assesses a home based on multiple factors such as the home’s condition, features, recent improvements, lot size, location, etc. It’s important to both sellers and buyers because lenders will most likely not approve a loan on a property that’s appraised less than the asking price.
Fair market value, on the other hand, is usually determined by a comparative market analysis performed by a realtor or broker. Though, even homeowners can determine a FMV if they want to. It often factors in recent sales of comparable properties in the market and where the market is trending at the time.
One major difference is that an appraiser has to be licensed to do their job. That’s not necessarily the case for someone determining a fair market value. (But, we do suggest you trust a licensed agency like us.)
FMV can also include supply and demand. When the number of buyers exceeds the number of homes for sale, the market price will go up.
While appraised values are important for financing homes, fair market values are equally important for selling them. The best way to look at fair market value is this: What will buyers pay right now for a home in order to live in it at that location?
So, we hope these details answers your question. For more answers and advice on what price to list your home, contact us at Raleigh Cary Realty today. No one knows the Triangle market better than we do!