What is fair market value?
Fair market value (FMV) refers to the price that an arms-length buyer would pay in the open market for an asset or subject property. The value of a property or asset is often used by government organisations and financial institutions to value assets to be used as collateral and taxed.
There are plenty of factors and stakeholders that contribute towards the market value of a property or asset. The conditions of the market will ultimately play a crucial role in the final selling price of a subject property.
Knowing who determines fair market value in Queensland can help owners, investors and sellers make informed property-related decisions going forward.
Who can determine fair market value?
For insight into market value, your best bet is to reach out to a trusted valuation firm who have registered CPVs as team members.
A CPV is a qualified expert who has been trained and educated in the art of determining the existing worth. A CPV is a valuation professional who is registered with the Australian Property Institute (API).
Valuers will consider hundreds of internal and external factors to find a subject property’s worth. With specialised insight into real estate and extensive valuation training, CPVs can prepare reports that accurately reflect the value of a property.
A valuation report from a CPV serves as official proof of FMV. The legally accepted nature of the report makes it useful in all sorts of legal, business or private circumstances. Valuers can look at residential, commercial and industrial property types.
How is fair market value determined?
Valuers are real estate experts and always pay close attention to the market. By applying a combination of trusted methods and carefully considering every relevant factor, valuers can reach the exact final figures.
A range of different factors will impact the fair market worth of a property or asset. Considerations such as location, size and space, building age and condition, street appeal, parking, surrounding infrastructure, and environmental risks all directly impact value.
The process that a valuer follows depends on the type of property and the purpose of the valuation. A physical inspection usually takes place where the valuer will review factors, take measurements and even capture photographs if necessary.
The three most commonly applied valuation methods are:
- The direct comparison approach (valuers review the sales of comparable properties)
- The income capitalisation approach (valuers divide the net operating income by the cap rate)
- The summation approach (valuers assign a monetary value to each separate component of the property)
By using trusted methods and carefully considering every relevant factor, valuers can prepare precise and trusted valuation reports.
What benefits are there to knowing fair market value?
So what do you stand to gain from knowing market value? The benefits are plenty for owners, sellers, investors and managers alike.
A few of the main advantages of understanding fair market value are:
Clarity on property-related tax obligations
The unavoidable nature of tax means that anyone who owns, buys or sells a property will have to pay tax. A valuation report outlining market value will provide clarity on tax obligations.
Improved strategic planning and portfolio management
Keeping track of changes in market value is key to effective portfolio management and strategic planning; giving you the tools to ensure your investment is a worthy one.
Valuable pre-sale/pre-purchase guidance
A decision to buy or sell a property is a massive one and should never be rushed. Understanding the fair market value of the subject property will allow you to make an informed decision.
Fair compensation in cases of compulsory acquisition
If the Government has forcibly acquired your property, you are entitled to compensation for the loss suffered. With a clear understanding of market value, you can make sure you receive the appropriate amount of compensation.
Choosing an appropriate insurance package
If you have clarity on the market value of your property, you can guarantee that you will purchase an appropriate insurance package to protect you in case of loss or damage.
Swifter legal and settlement negotiations
With clarity on market value, parties in a legal or settlement process do not have to waste time debating a property’s worth. This can save both time and money.
Summary
The fair market value (FMV) of a property or an asset is the amount for which it can be expected to be sold in an open market in an arms-length transaction. A number of factors and market participants impact the FMV of a property.
To determine the FMV of a subject property, your best bet is to hire the services of a qualified CPV who is registered with the Australian Property Institute (API). CPVs are experienced and trained in the art of calculating the precise market value of real estate and assets.
A qualified valuer will carefully go through hundreds of internal and external factors to prepare accurate valuation figures that fairly represent the value of the property. Remember, only trust valuers who have the appropriate credentials and qualifications.
There is a range of advantages to understanding the value of a property is plenty. All in all, it gives those with a vested interest in a property the insight to make an informed decision.
For more information on who determines fair market value in Queensland, feel free to give us a call. One of our highly qualified experts would be happy to assist.