How to Determine Fair Market Value of Real Estate

There are three common ways to determine a home's value.

There are three common ways to determine a home's value.

Real estate is worth only what the highest bidder is willing to pay for it. That is, essentially, its fair market value. Fair market value becomes important when a property is involved in a divorce settlement, being priced to be sold or involved in an estate, or when eminent domain is being exercised by the government. The fair market value is a critical number to know because it allows a homeowner to fully understand the value of his property and helps him avoid being taken advantage of.


Do a comparative market analysis. Find out how much properties comparable to yours have sold for recently, and check the price of comparable homes currently on the market. Check sales prices through websites like and Domania, or ask a real estate agent to do a market analysis for you.


Have an appraisal done. A licensed appraiser will perform a physical inspection of your property, looking for how well the home was constructed, its general condition, maintenance issues and any upgrades that have been added. In addition, he will perform a comparative market analysis, measuring the condition and amenities of your home against those of homes in the area that have recently sold as well as homes that are currently on the market. He will likely also measure the income potential of your home, or how much it could bring in if it were rented. An appraiser's impartial opinion of your home's worth is generally very close to its actual market value.


Figure out how much it would cost to replace your property. Determine the cost of materials, tools, technology and manpower to rebuild your home from the ground up. The replacement cost technique is commonly used in situations in which a comparative market analysis is difficult because there are few properties similar to yours in the area. Figuring replacement cost involves estimating the value of the land and adding how much it would take to replace the structure. This number should be very near the market value you would arrive at through a comparative analysis or a professional home appraisal.

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