What Is Fair Market Value (FMV) In Real Estate And How Is It Calculated?

Mar 26, 2024

4-minute read

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Documents spread across a table alongside a coffee mug, portraying an organized or busy setting related to home paperwork or financial documentation.

A home is one of the most expensive purchases people make in their lifetime. As such, buyers, sellers and investors alike are all very concerned with getting an accurate fair market value of a property. But determining the fair market value is a nuanced process that takes multiple factors into consideration.

We’ll discuss what fair market value is, how it can be calculated and where else fair market value applies.

Fair Market Value (FMV) Meaning

Fair market value (FMV) in real estate is the determined price that a property will sell for in an open market. The FMV is agreed upon between a willing buyer and seller, both of whom are reasonably knowledgeable about the property in question.

To determine what fair market value is, it’s better to first look at what FMV isn't. Fair market value isn’t what you (the buyer or the seller) think the value is, it’s not necessarily the appraised price and it also isn’t the tax value.

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