Fair market value

Fair market value: An estimate of the market value of a property.

Fair market value: An estimate of the market value of a property, based on what an informed and willing buyer would probably pay to a willing seller in the market.

Assessing the Fair Market Value of Property

The fair market value of property is based on the answer to the question, “What would a willing and able buyer pay a willing and able seller for that particular piece of property?”

Though seemingly straightforward, determining the fair market value of property is actually a complex process. Most judges will take three things into account when deciding the fair market value of property: witness testimony, comparable sales and lease agreements, which show when the lease was drafted and what the monthly rent is.

According to Colorado attorney I. Thomas Bieging, “Experts have stated that it is a customary practice within the banking industry to determine the reasonable costs and expenses of the holding, marketing and selling of property to range in the area of 20% to 30% of the fair market value. These costs of holding, marketing and selling the property may be appropriate deductions from the good faith estimate of fair market value in arriving at the written bid.”

Homeowners who believe the bank has not acted in good faith are free to challenge the market value assigned to the property.

“The consequences of not bidding the good faith estimate of fair market value is that the bank may be denied a deficiency judgment or subject itself to a claim for damages from the owner of the foreclosed property. Both these factors provide reason to carefully consider and document the manner in which the bank arrives at its bid,” Bieging says.

When it comes to deficiency judgements, the homeowner can request that the court contrast the fair market value and the foreclosure sale price.

“If the court determines the fair market value is greater than the sale price, the borrower is entitled to an offset against the deficiency. The offset is equal to the difference between the fair market value and the foreclosure sale price. The foreclosure sale price is not subject to interpretation,” says Dallas attorney Alison J. Cross.

Fair market value

Fair market value: An estimate of the market value of a property.

Fair market value: An estimate of the market value of a property, based on what an informed and willing buyer would probably pay to a willing seller in the market.

Assessing the Fair Market Value of Property

The fair market value of property is based on the answer to the question, “What would a willing and able buyer pay a willing and able seller for that particular piece of property?”

Though seemingly straightforward, determining the fair market value of property is actually a complex process. Most judges will take three things into account when deciding the fair market value of property: witness testimony, comparable sales and lease agreements, which show when the lease was drafted and what the monthly rent is.

According to Colorado attorney I. Thomas Bieging, “Experts have stated that it is a customary practice within the banking industry to determine the reasonable costs and expenses of the holding, marketing and selling of property to range in the area of 20% to 30% of the fair market value. These costs of holding, marketing and selling the property may be appropriate deductions from the good faith estimate of fair market value in arriving at the written bid.”

Homeowners who believe the bank has not acted in good faith are free to challenge the market value assigned to the property.

“The consequences of not bidding the good faith estimate of fair market value is that the bank may be denied a deficiency judgment or subject itself to a claim for damages from the owner of the foreclosed property. Both these factors provide reason to carefully consider and document the manner in which the bank arrives at its bid,” Bieging says.

When it comes to deficiency judgements, the homeowner can request that the court contrast the fair market value and the foreclosure sale price.

“If the court determines the fair market value is greater than the sale price, the borrower is entitled to an offset against the deficiency. The offset is equal to the difference between the fair market value and the foreclosure sale price. The foreclosure sale price is not subject to interpretation,” says Dallas attorney Alison J. Cross.

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