Finding the fair market value of a property

8 Replies

what's easiest way to find a property's market value?. As a New Real Estate investor i don't want to end-up buying a bad deal because i don't know what the market value of the property is. Also, i think that everyone buying a property should know in advance what the  market value of the property they are buying is to the determine what kind of profit they can expect to make on any given deal. Please educate me on this. Brandon Turner, Josh Dorkin Help!!.

Well one way you can determine the FMV is by contacting a local appraiser but they might want to charge you a small fee to look it up online to give you a number.

If your buying a home where a Realtor is involved who represents you they can give you an idea of FMV as well.

Otherwise you can also look up homes that are similar in that same area and see what they are selling for or advertised for sale for. 

Good luck

@Victor Mejia  

from my experience working in so many different markets throughout the US ... its really a regional thing.. When your in areas were there are tons of rentals and wholesaling going on its pretty hard to find a TRUE FMV... Its in the eye of the beholder many times. You get into the west coast and its really easy you can just look on MLS since everything basically sells for 1 ro 2% of listed price that gives you a good indication.

what you have to be aware of is the Seller stating you have instant equity... your house has a FMV of 100k but if you buy it from us for 80K your getting instant equity.. This could be true on some cases if you are buying it direct from an owner.. But from my experience the True value is what you pay for it. as investors especially BP trained.. use rental % formulas to back into values and what they will pay for rental properties in markets that are very heavy to rentals in the SFR stock.. IE Mid west deep south etc.

At the end of the day just do what a bank does  Hire an Independent appraiser that you pay for and ask them to give you a conservative value and an aggressive value.. BAnks when they are dealing with OREO or other type assets will set a bulk value  IE cash out to bulk buyer... and a retail value  IE on the market for a certain amount of time to find that one buyer that wants to live in the home.

If you contemplating buying in rental neighborhoods then the value should be looked a like a commercial property and backed into using cap rate or yield you want to achieve.. BEcause again as stated that's what investors in the know are doing./ 

Looks like you've received some great advice already, but I'll add a little bit. I would try to become really good friends with a Real Estate Agent. Attend networking events or ask one out to lunch.  They can provide a lot of help! 

Here's an article I wrote on the subject, a while back: http://www.biggerpockets.com/renewsblog/2012/12/06...

Hope that helps! 

Thank you everyone. i have a better idea now of how find the FMV of a property. it is really important for me to understand it because I'm planning to find properties "Below FMV" and then assign them for a fee. However, that can't be done without proper knowledge of marker value analysis. Thank you good luck to all.

If you plan to sell them to other investors, use a rent multiplier to find out the value.

 Find out what the property would rent for, multiply x 12. That is your gross income of the property before expenses. I would divide that number by .20 to get a ballpark maximum offer not including known repairs. This is not as good as a net income, but it gives you a starting point to then deduct known expenses.

Welcome to BP.

You could talk to the following to figure out the fair market value of the subject property. 

1. Consult an appraiser for valuation of the subject property (will cost you some money)

2. Consult a local competitive real estate broker and ask for a CMA (it's free).

3. Consult a local designated BPO agent (it will cost you less than an appraiser). 

Hope it helps.

Originally posted by @Anthony Dooley:

If you plan to sell them to other investors, use a rent multiplier to find out the value.

 Find out what the property would rent for, multiply x 12. That is your gross income of the property before expenses. I would divide that number by .20 to get a ballpark maximum offer not including known repairs. This is not as good as a net income, but it gives you a starting point to then deduct known expenses.

Why not just multiply by 60 in the first place; it's the same result as the multiply by 12 then divide by 0.20 except you only need one step. 

BTW that is a GRM of 5 for those paying attention. Those can be really tough to find in some markets.

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