What a Fair Market Value Is—and Isn’t

Assessed values. Market values. Market assessments. If you need to determine the value of your land for estate planning purposes, you may come across these terms and wonder what they mean. After all, isn’t a value a value?

The fact is that every one of these terms refers to something different. The fair market value of your land is how much your property would command from a knowledgeable and willing buyer under ordinary, pressure-free conditions. It is based on the qualities and desirability of your land. The fair market value is the value your appraisal provides, and it’s the number you’ll need for your estate planning.

The assessed value of your property is the value your county or municipality places on it for tax purposes. Different municipalities calculate this value in different ways, and in many areas it represents only a percentage of your property’s fair market value. Assessed values are based on a county’s financial need, not the current demand for that property, and will not meet the requirements for your tax or estate planning.

A realtor’s market assessment or analysis is geared toward pricing a property for sale. It doesn’t include all the factors that a professional appraiser considers, and it is not objective—as an appraiser’s assessment is—because the realtor has a vested interest in getting a good price for your property. Like the assessed value of your land, the realtor’s assessment will not meet the requirement for your tax or estate planning.

Estimating the fair market value of your land is the goal of your appraisal, but it isn’t the only information you’ll need for your tax and estate planning purposes. To give you the best chance at a reduced tax burden and other advantages of planning for your estate, your appraisal must meet some very specific standards.

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