What is Fair Market Value in Today’s Economy/Market Space?

Especially for brokers or agents who work in major city centres, it can be really hard to assess what the market value of a property is merely by what a client tells you. In Toronto for example, some areas have seen exponential growth in property value (Willowdale for example), while types of properties and other areas have been black-listed by some lenders because the types of properties or neighbourhoods have led to an instability in value.

The question is then, what is fair market value in today’s market space and how does one assess fair market value? Let’s go back to the definition of market value: according to the International Valuation Standards, market value is “the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm's-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently, and without compulsion.” This is very similar to how anyone in the industry would define market value.

This is one reason why determining the fair market value of an applicant’s property can be so challenging. Here are some tips on how you can validate the fair market value of a client’s property prior to getting an appraisal.

1.      Conduct a thorough interview. At the interview ask questions such as when the applicant bought the house and what they paid for it – if it was recently purchased and there is a massive increase in value, ask more questions. What work have they done to the house? Why do they think the value of the property has increased exponentially?

2.      Ask your client for their MPAC Assessment. This will enable you to see the value according to the Municipal Property and Assessment Corporation.

3.      Run your own automated valuation. If you have access to an application like Purview For Mortgage Brokers, you can run an automated valuation of the property to generate an estimated value.

4.      Review sales comparables in the area. You don’t need an appraiser or a real estate sales professional to do this. There is technology available to mortgage agents and brokers that enables you to look at comparable sales in a particular neighbourhood.

Property value matters a lot because it can mean the difference between having a deal and losing a deal. If technology in your office is lacking, speak to your broker about considering the different tools available to validate property value. Knowledge is power and with the right knowledge you can be more efficient and close more business.

For more information about how you can validate the value of a property please visit www.purview.ca/brokers or call 1-855-787-8439.