Fair Market Value - A Moving Target
November 3, 2010
Fair market value has been used for generations when assessing a value of any object, but more often when speaking of the value of real estate. The legal definition under California law is found in the Code of Civil Procedure, Section 1263.320 and reads as follows:
"The fair market value of the property is the highest price on the date of valuation that would be agreed to by a seller, being willing to sell but under no particular or urgent necessity for so doing, nor obliged to sell, and a buyer, being ready, willing and able to buy but under no particular necessity for so doing, each dealing with the other with full knowledge of all the uses and purposes for which the property is reasonably adaptable and available."
There are a number of other types of value designations. There is "assessed" value, "insurance" value, "replacement" value and "market" value. Note that "market" value may not be the same definition as "fair market" value, the latter being defined as "The most probable price which a property should bring in a competitive and open market under all conditions requisite for a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus."
Confused? Comparing sales of similar properties is the most common process used by appraisers to determine "market" value. Location, amenities, condition are all features that will affect the comparison of one property to another. In the end, the "market" value of any piece of property will be based on the comparable data plus the opinion of the appraiser as to the similarity of the subject property to the sales data.
With all these variables, the fair market value is indeed a moving target.
Fair market value has been used for generations when assessing a value of any object, but more often when speaking of the value of real estate. The legal definition under California law is found in the Code of Civil Procedure, Section 1263.320 and reads as follows:
"The fair market value of the property is the highest price on the date of valuation that would be agreed to by a seller, being willing to sell but under no particular or urgent necessity for so doing, nor obliged to sell, and a buyer, being ready, willing and able to buy but under no particular necessity for so doing, each dealing with the other with full knowledge of all the uses and purposes for which the property is reasonably adaptable and available."
There are a number of other types of value designations. There is "assessed" value, "insurance" value, "replacement" value and "market" value. Note that "market" value may not be the same definition as "fair market" value, the latter being defined as "The most probable price which a property should bring in a competitive and open market under all conditions requisite for a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus."
Confused? Comparing sales of similar properties is the most common process used by appraisers to determine "market" value. Location, amenities, condition are all features that will affect the comparison of one property to another. In the end, the "market" value of any piece of property will be based on the comparable data plus the opinion of the appraiser as to the similarity of the subject property to the sales data.
With all these variables, the fair market value is indeed a moving target.
posted by shirley harry at 9:15 AM
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