Today let’s focus on some basic terms of real estate appraisal, after all an investor must know more than just real estate comps in order to make deals happen. To be able to fully understand the concepts of residential appraisals, you must have a comprehensive knowledge of the terms involved.
Fair Market Value
It is the median price between the highest price acceptable to buyer and lowest price acceptable to seller.
It is the most likely price at which the property would sell. The property must sell at a right price in which the price is not too high and low. Thus, an overprice property will take a little longer to sell. In most cases, an overprice property sells when the market value catches up with the selling price.
It is often confused with Market Value. Price differs from Market Value. Although the Market Value gives the seller an idea how much to sell the property, the price may be higher or lower than the Market Value. For example, a buyer may be willing to pay $20,000 more than the Market Value to live in the same neighborhood as family members or when there are many potential buyers for the property.
In my post tomorrow, I will have a few more RE appraisal terms that you should be familiar with in order to be successful in the real estate investment field.