Difference Between Fair Market Value and Appraised Value
March 1, 2023
March 1, 2023
Appraised value and fair market value both have the role of determining how much a property is worth. An appraised value is an expert’s objective opinion on what a house is worth, while the fair market value is what it should sell for in an open market. In theory, the values should be in the same ballpark. But this isn’t always the case.
Let’s learn more about appraised value vs fair market value so that you can understand the differences. This will help you determine if you should list your home for sale, or if you should wait a little longer.
What is Fair Market Value? How is it Determined?
Fair market value (FMV) is an estimate of what a home will cost if it sells on the open market. This value helps determine a listing price for your home. FMV is driven by market conditions in addition to your home’s value. This means that your FMV can change significantly in a short amount of time based on your local housing market.
Typically, the FMV for a home is determined by a real estate agent when they do a comparative market analysis (CMA). A CMA looks at homes in your area that are similar to yours and located in similar neighborhoods. CMAs provide an accurate estimate because they are based on real-time data.
That being said, CMAs are only as accurate as your comps. If you’re selling a home in Washington DC where there are lots of homes similar to yours, you have a lot of data to work with. On the other hand, if you have a home in a rural area or with unique features, your CMA may not be as specific.
What is the Appraised Value?
The appraised value of a home is determined by a licensed, third-party appraiser. This expert assesses the home and looks at comparable properties. They then provide a more personalized, objective estimate of what your home is worth.
An appraised home value is generally used during escrow by the buyer’s lender to make sure the home is worth the price. This ensures that lenders don’t give out loans that are worth more than the home itself. If the appraisal comes out lower than what the buyer is financing, they may not get financing, or they’ll have to make up the difference.
Sellers may also choose to have an appraisal done before listing their home to get an idea of how much it’s worth. Some of the things a home appraiser will look at are:
- Overall condition
- Square footage
- Layout and functionality
- Garage and driveway
- Plumbing, electrical and HVAC systems
- Walls, floors and appliances
- Energy efficiency
- Home’s exterior
- Foundation and basement
Which Number is Most Important?
As you can see, the fair market value and appraised value of your home should be similar. FMV is based on comparisons and used by sellers and agents to set a listing price, while an appraised value is more personalized and used by lenders to underwrite financing.
No value is more important than the other. It all depends on whether you’re the buyer or the seller. If you plan to sell your Washington DC house, you’ll be more interested in your home’s FMV. If you plan to buy a house, the appraised value is more important.
Find Out How Much We’ll Pay for Your Home!
4 Brothers Buy Houses is a house buying company that buys properties in Washington DC. We’d love to make you an offer on your property. Our offers are always fair, and we don’t require inspections or appraisals. If you do choose to sell your house to our cash buyers, the transaction is direct – between you and us! Contact our cash buyers today to find out what we’ll pay for your DC house!