Defining Market Value

Value can be defined many ways, understanding how it is defined for the purpose of an appraisal is important. Many appraisals are for loan purposes and the appraiser will define market value with consideration of the Fannie Mae definition. Below are a few ways the market value is defined.

Fannie Mae Definition: Market value is 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 considers his 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.

IRS Definition: Fair market value (FMV) is the price that property would sell for on the open market. It is the price that would be agreed on between a willing buyer and a willing seller, with neither being required to act, and both having reasonable knowledge of the relevant facts. IRS Publication 561

Other definitions: For appraisal purposes there are a few other ways market value can be defined. Some examples of this is a “quick sale” or a “retrospective value”. Some properties sell quickly, for instance a client may want to know the value of a home that sold in only 45 days and they want to know what the value is today. This is a “quick sale” and will help them sell their foreclosure properties. The “retrospective value” also referred to, as “date of death appraisal” is when a client wants to know the value of a property based on a previous date, this is often used for estate settlement purposes. Depending on you client’s needs the definition of market value can change based on their specific needs.

The way that market value is defined can affect the appraised value. A normal marketing period is 60 or 90 days but there are many cases in which the client needs an appraisal based on the future, past, or just a specific situation where the time frame varies from the norm. It is important that the client and appraiser have the same understanding of what market value is defined as for their specific situation.

For most loan purpose appraisals the appraiser will use the Fannie Mae definition, but for private appraisals the definition may vary. The borrower should not be worry too much about the definition because any competent appraiser will know how to define market value for your situation after asking just a few questions.

Please contact our office with any questions you may have or to schedule your appraisal appointment at 760-741-7699, or use our contact page on our website.

Brandlin Appraisals Inc. specialize in helping people who need appraisals for estate purposes, divorce, date of death, bankruptcy, FSBO’s and more throughout San Diego county. For more information please contact us at (760)741-7699, or visit our website at, or email us at

Mike Brandlin
San Diego, CA // Real Estate Appraiser
(760) 741-7699

San Diego Real Estate Appraisal Services For:
Divorce Appraisals / Marriage Dissolution
Bankruptcy Appraisals
Bail Bonds Appraisals
Estate / Date of Death / Retrospective Appraisals
Financial Planning & Trusts
PMI Removal Appraisals
Pre-Foreclosure & Short Sales
Tax Assessment Appeals
Pre-Listing, Pre-Purchase, FSBO’s
Probate Appraisals


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