Understanding the Fair Market Value is an everlasting tussle and key balancing act. The reason is that buyers need a house to appraise on the low side—to keep the buying price down. While sellers, on the other hand, need the same house to appraise on the high side—to make the sale price go higher. And then you’ve got the house owners —who likewise need the appraisal to be on the low side, so as to keep the estate taxes down.

So with these different goals and viewpoints, how is the fair market value of an estate property really determined?

Once every year, your district sends all area homeowners official notifications that put a dollar worth on their property. And estate property taxes are based on those dollar values. But before those notifications are sent out, a long, detailed procedure usually happens. First, the land is valued as if it’s empty—that is to say, a vacant lot. Then any maintenance is defined and measured. Maintenances consist of the house and any other edifices, sheds, pools, garages, and etc. secondly, most districts check the Marshall Valuation Service Cost Guide. It’s a standardized nationwide guide for defining the price of the cost per square foot to erect a building that fits the description of the maintained property. Next, in case the house isn’t brand new, the replacement cost is measured, and also the depreciation; the year the house was built and the condition of the property are elements here. Appraisers then must take the serious step of matching the value of the house with the latest selling prices of comparable homes in the area. Then, the appraisal might stand “as is”—or it might be reviewed downward or upward.

Market Value is a theory that is to say— not an unchanging fact.

In a seamless world, you have to have a buyer willing to buy and a seller willing to sell. None is under pressure. Both are in a position to capitalize on profit and are trying to do this. However, in the real world, things are hardly that simple and equally balanced. This is why people feel differently about the appraisal value of a house. It actually depends on how strong their position is as a buyer or seller.

Does the local economy come into it at all? You bet it does.

Ask a successful Realtor about that! He or she will inform you that they’ve seen that the Rio Grande Valley’s fast-growing economy is drawing people from other neighborhoods who consider real estate here a deal. That assists fuel rises in property values.

So—now you know where that Grand Total originates from.

You’re armed with the information you need to make a better house-buying decision. For example, you can know how two almost identical houses that are in two different areas could be very far apart in price and appraised value. And the reason your choice of the right house in the right neighborhood could be value a not-so-small fortune to you right now—and years down the road.