Every property has several numbers attached to it, and they are not the same number. The asking price, the appraised value, the assessed value for tax purposes and the eventual sale price can all differ. Knowing which one answers your question keeps you from arguing about the wrong figure.
Fair Market Value
Fair market value is the price a willing buyer will pay and a willing seller will accept, with neither under pressure and both reasonably informed. The “neither under pressure” part carries the weight. A seller who must relocate in three weeks, or a buyer who has already lost two bidding wars, may agree a price that does not reflect fair market value at all.
It is also not a permanent figure. Fair market value moves with the local market, and with the age and condition of the property. A valuation from two years ago is history, not a current answer.
The Comparative Market Analysis
A comparative market analysis, or CMA, is how agents estimate what a property should sell for. It is not an appraisal and carries no official standing, but it is the most practical tool for setting an asking price or deciding what to offer. A CMA looks at four categories of local data:
- Sold and closed properties — the most reliable evidence, because someone actually paid that amount.
- Pending sales — agreed but not yet closed. Close to as useful, and more current.
- Active listings — not evidence of value, but evidence of what you are competing against.
- Expired listings — properties that did not sell. Often the most instructive category, because they mark the price the market refused.
Good comparables are recent, nearby, and genuinely similar in size, age, condition, style and lot. Where they differ, the value of the difference is adjusted for. A finished basement, an extra bathroom or a new roof are not worth what they cost to build, and a CMA that ignores condition is close to useless.
Doing Your Own Research
Sold prices used to be genuinely hard for consumers to reach. They are not now. The major listing portals publish recent sold data, and county records show recorded sale prices, though they lag by weeks. An agent can pull the fullest picture from the local Multiple Listing Service.
Automated online valuations are a reasonable starting point and a poor finishing point. They are statistical estimates built from public data and cannot see that a kitchen was gutted, that the house backs onto a highway, or that the roof is failing. Treat them as a range to test, not a figure to negotiate from.
Appraised Value and Assessed Value
An appraisal is a licensed appraiser’s independent opinion of value, ordered by your lender to confirm the property is worth what it is lending against. It is the number that can stop a sale: if it comes in below the agreed price, the lender lends against the lower figure. See home appraisals explained.
The assessed value is what your local taxing authority uses to calculate property tax. It is often well below market value, is updated on the assessor’s own schedule, and is not a measure of what a buyer would pay. Do not use it to price a house — but if it looks too high relative to comparable homes, that is worth challenging. See how to lower your property tax bill.