March 09, 2021

What is Fair Market Value and how does it affect your property tax bill?

Fair Market Value or FMV is a common term you might have heard your realtor throw around when you were putting in an offer on the house you wanted to buy. It is also something homeowners consider while selling. So what is Fair Market Value? Is it only applicable when you buy or sell property? What role does it have to play in determining property taxes? Read on to learn.

What is Fair Market Value?

It is the price at which any property would sell in an open market. To simplify it further, it is the price at which an aware customer would buy your property at. It is also the price at which a reasonable homeowner would sell you his property under usual conditions. FMV is the price that property owners and buyers with reasonable knowledge and no undue pressure determine with their own best interests in mind.

Why is Fair Market Valuation important?

Even if you aren't buying or selling your property you must know what your property is worth. Fair Market Valuation often gives the most accurate assessment of your property's worth.

How is FMV determined?

The difference between the purchase price of the home and its fair market value (FMV) can be substantial, depending on how long the owner has owned the home. Professional appraisers utilize standards, guidelines, and government regulations (local and national) to calculate the FMV of a home.

When is Fair Market Value used?

FMV is most commonly used in legal settings. It is widely used in divorce settlements. It is also used to calculate the compensation the government pays to the property owner when his real property is usurped for public use (eminent domain). FMV is also used by the insurance sector and for taxation purposes.

FMV's role in local property tax determination

Municipal property taxes in the United States are assessed based on the FMV of owned property. The assessed valueis a percentage of the Fair Market Value of a property. The exact steps to assessing a property vary by jurisdiction. If your property's assessed value is higher than the FMV,

Your local assessor has most likely over-assessed your property, which you have the right to legally challenge.

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