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What is 'fair market value'? And who determines this amt?
What is 'assessed value'? And who determines this amt?
And how are they different from taxable value?
Please be specific...I'm a lil slow here.
What is 'fair market value'? And who determines this amt?
What is 'assessed value'? And who determines this amt?
And how are they different from taxable value?
Please be specific...I'm a lil slow here.
Fair market value is what a willing buyer will pay to a willing seller for something that has been exposed for sale to the market of qualified prospects. It's deterrmined by the buyer & seller in that arms length transaction.
Assessed value is the number assigned by the tax department of a municipality for the purpose of calculating the tax bill. It's determined by a person with the title "Tax Assessor". This position, in some places, may be a part time position. Some municipalities may attempt to have the assessed value match, as closely as possible, the realistic selling price, or true market value, of the property.
The taxable value is the result of a calculation that usually starts with the assessed value. An equalization factor is applied to the assessed value. This taxable value, however exactly it's arrived at, is multiplied by the tax rate for the municipality to determine the annual tax bill.
FWIW, "Fair" has been officially dropped from "Fair Market Value" in appraising. It is now "Market Value " and is defined as:
Quote:
DEFINITION OF MARKET VALUE: The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: (1) buyer and seller are typically motivated; (2) both parties are well informed or well advised, and each acting in what he or she considers his or her own best interest; (3) a reasonable time is allowed for exposure in the open market; (4) payment is made in terms of cash in U. S. dollars or in terms of financial arrangements comparable thereto; and (5) the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions* granted by anyone associated with the sale.
*Adjustments to the comparables must be made for special or creative financing or sales concessions. No adjustments are necessary for those costs which are normally paid by sellers as a result of tradition or law in a market area; these costs are readily identifiable since the seller pays these costs in virtually all sales transactions. Special or creative financing adjustments can be made to the comparable property by comparisons to financing terms offered by a third party institutional lender that is not already involved in the property or transaction. Any adjustment should not be calculated on a mechanical dollar for dollar cost of the financing or concession but the dollar amount of any adjustment should approximate the market's reaction to the financing or concessions based on the appraiser's judgment.
That would be Fannie, Freddie, FHA, VA and the Appraisal Foundation.
Don't forget the Appraisal Subcommittee made up of the Board of Governors of the Federal Reserve System, Office of the Comptroller of the Currency, Office of Thrift Supervision, Federal Deposit Insurance Corporation, National Credit Union Administration, and the Department of Housing and Urban Development. That would be FRB, OCC, OTS, FDIC, NCUA, and HUD...........oh yeah, I forgot FASB (Financial Accounting Standards Board)..........
Mr Keegan, if you have an opportunity, you might care to read the definition of market value on the next appraisal you see. The change came about in January of 2006.
From USPAP FAQ's:
Quote:
Advisory Opinion 8, Market Value vs. Fair Value in Real Property Appraisals, was retired. Since this Advisory Opinion was created and revised, the Financial Accounting Standards Board (FASB) has issued additional Statements of Financial Accounting Standards that require use of the “fair value” type of value. Additionally, FASB has proposed clarification of its definition of fair value. For these reasons, the ASB retired AO-8 with the possibility of issuing a revision after FASB finalizes its Statement of Financial Accounting Standards addressing the definition of fair value.
Don't forget the Appraisal Subcommittee made up of the Board of Governors of the Federal Reserve System, Office of the Comptroller of the Currency, Office of Thrift Supervision, Federal Deposit Insurance Corporation, National Credit Union Administration, and the Department of Housing and Urban Development. That would be FRB, OCC, OTS, FDIC, NCUA, and HUD...........oh yeah, I forgot FASB (Financial Accounting Standards Board)..........
Mr Keegan, if you have an opportunity, you might care to read the definition of market value on the next appraisal you see. The change came about in January of 2006.
From USPAP FAQ's:
Thank you.
And for the record, I wasn't questioning the definition at all. I just wanted to know, because there are so many organizations out there that are, or can be, involved with real estate valuations, who had published this definition.
Not a problem. If I came across short, I apologize. I've read your stuff before and you always seem to be on top of things.
but I am teaching a principles book now that was printed three weeks ago and am having to make changes to meet the current definitions.............it is frustrating that the basics are not so basic any more.
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