Fair Market Value: Why It Matters

by Marianna E Perez 08/28/2022

There are many variables that make up the fair market value of a property. Because this value depends heavily on the environment and the property itself, it’s crucial in making sure you get the best buying or selling price. Here are some of the biggest things that fair market value affects:

Insurance

Homeowner’s insurance always uses the fair market value of your home to calculate the price of a policy, which helps the insurance company determine the cost of replacing your home if needed. The cost to replace your home will not always equal the amount you paid for it. This is where fair market value makes a difference. Your homeowner’s insurance policy will provide coverage based on what it will cost them in the current market regardless of the purchase price.

Taxes

Property taxes are another major reason fair market value matters. Your municipality charges you an amount based on its individual tax rate and the appraised fair market value of the property. This means you’ll be charged a percentage of that value rather than a percentage of the purchase price. Fair market value can also affect other taxes, like estate taxes, inheritance taxes and gift taxes. Even if you get a property as a “gift” or through inheritance, you’ll have to pay taxes based on the fair market value as long as you’re the owner.

Legal Issues

There are several legal situations where fair market value can make a big difference. Some of the most important examples would be divorce settlements, which divide assets between two parties. Fair market value also affects issues related to property damage and inheritance. In these cases, the fair market value helps keep everyone discussing the same number for the value of the asset so they can come to the fairest agreement.

Buyers, sellers and investors should know the fair market value of a property to prevent confusion and make the transaction as fair as possible. Knowing these additional reasons fair market value matters will help you understand its importance beyond the actual buying and selling.

About the Author

Marianna E Perez

Marianna E. Perez is a Real Estate professional with over 20 years of experience. A lifelong resident of South Florida, she keeps her finger on the pulse of the latest trends and movements in the real estate market. She offers clients top-notch guidance from start to finish, ensuring the entire process is seamless, efficient and rewarding. Prior to entering real estate, Marianna was Senior Vice President of Commercial Real Estate Banking at City National Bank of Florida. She provided strategic leadership facilitating profitable and efficient origination of real estate loans. Marianna was a trusted advisor to clients and to the bank growing a real estate portfolio to over $300 million. She is firmly committed to the philosophy “not quantity, but quality,” which she practices in both her personal and professional life. Marianna is a graduate of FIU where she earned a bachelor’s degree in business management. She is a member of the Miami Association of Realtors, a lifetime board member of the BASF (Builders Association of South Florida), a member of CREW (Commercial Real Estate Women), and ICSC (International Council of Shopping Centers). She is also involved with the Women’s Leadership Council (United Way TNC). In addition, Marianna has received these special industry accolades: Housing Hall of Fame inductee 2017 Builders Association of South Florida, Associate of the Year 2017 Builders Association of South Florida, Florida’s Best Awards Chair 2016 and 2004 Builders Association of South Florida, Vice President 2008 Builders Association of South Florida, President’s Award 2008 and 2003