What is the Fair Value and How is it Calculated?

One of the concepts we frequently encounter in the real estate sector is “fair market value”. However, many people may not know exactly what this term means or how it is calculated. In this article, I would like to share with you what the fair market value is, for what purposes it is used and how it is determined.

What is Fair Value?

Fair value refers to the minimum value of an immovable property under current market conditions. In other words, it can also be defined as the lowest price a real estate can fetch if it is sold. This value is taken as a basis especially in real estate purchase and sale, tax calculations and fee transactions.

How is the Fair Value Calculated?

The following factors are taken into account when calculating the fair value:

Location of the Property: Prices may vary at the district, neighborhood and even street level where the real estate is located. Properties in central areas are usually worth more.

Size and Features: The square meter of the property, its intended use (residential, commercial, land, etc.) and additional features (such as balconies, parking lots, views, etc.) are important factors.

Environmental Factors: Environmental factors such as proximity to amenities such as educational institutions, hospitals, shopping centers, and transportation facilities also determine the price.

Market Research: An average value is calculated by analyzing the current sales prices of similar properties.

Municipality Records: Each municipality determines the market value of real estate within its borders. These records are referenced in legal proceedings.

Importance of Fair Value

Fair value plays a critical role in ensuring transparency and fairness in real estate transactions. During sales transactions, title deed fees and taxes are calculated based on the fair value. It is also a guide for investors who want to learn the real value of real estate.