Fair Market Value (FMV)
The term fair market value (FMV) is used in the real estate industry and is an important aspect in the valuation and sale of properties. The fair market value refers to the estimated amount for which a property could be sold at the time of valuation. The market value is based on the combination of supply and demand in the market and considers the specific characteristics of the property as well as the current market conditions.
Put simply, market value is the price a buyer is willing to pay for a property and the price a seller is willing to accept. This depends on various factors such as the location of the property, its size and facilities, and the market situation.
The fair market value of a property also plays a critical role when applying for a mortgage. Lenders use the market value to determine the maximum amount they will grant a borrower. Usually, up to 80% of the market value of a property can be borrowed. The percentage financed with a loan is called the loan-to-value ratio.