Explained: What Is The Difference Between Fair And Market Value

When you are planning to buy or sell, the question most concerning is about the home value. If I am selling my home, how do I know it is valued right? When buying a home, how do I know this is the “right price”.

I have a couple terms I think can help understand this better.

Fair Market Home Value

This question will probably not come with a exact answer(sorry). But the best place to start is the fair market price. Under this logic, this is what someone is willing to pay for your home. They are acting out without other forces getting in the way. For example,you get a new job and your kids start school in two months. I am willing to bet you might stretch the budget a little to make sure you are moved in before your new job starts.

From Wikipedia:

Is an estimate of the market value of a property, based on what a knowledgeable, willing, and unpressured buyer would probably pay to a knowledgeable, willing, and unpressured seller in the market

Assuming all market forces equal, the fair market value is what a buyer and seller agree upon during any type of negotiation.If you want to get more simple, It is the most competitive price a buyer is willing to pay and the lowest price a seller would be willing to accept in the open market. This is how professionals in the industry determine the home value of the property being sold.

How Do I Get This Price?

No one is claiming the real estate market is a fair place to do business. But if you think something is off about the price of the house, just ask and see if they have evidence for the number they are presenting.

There is no formula for the fair market price. The best place to start is with a licensed appraiser. They will go over every aspect of the house and give you a number that is educated and usually pretty accurate. This will probably be as close as you can get to the fair market price. Or at the very least, a solid foundation on a home value.


This term exists because it is trying to make things fair, in a market that can be hard to find good honest help. If you think the seller is trying to overprice their home, get the number you think is fair and challenge them. Who knows, you might get them to come down.

What About Market Value?

From reading this blog, you can probably guess where the fair and market value will change. For example, a property in a desirable location will bring a higher fair market price than what the market price would be JUST for the home itself.

A real estate agent will pull information to inform you of their “market value”. An agent has access to lots of information about the real estate market and previously sold homes. Between their local knowledge, database,and brokerage, they will give you a very honest evaluation. They will look at things like: active property listings, pending property sales, sold properties in the last 12 months and expired listings.

Sometimes the fair market and the market value are considered the same number. However you see it, it is important to have professional advice when dealing with your property.

By |2017-06-06T11:13:46+00:00August 30th, 2016|Buyers, Finance, Sellers|0 Comments

Leave a Reply