Fair market value is a term confuses many people who are trying to sell their home. What is fair market value? Simply put, it is the price your home will sell for. There are conditions to the fair market value. First, it assumes that buyers and sellers are reasonably knowledgeable about the home's value and they are acting without undue pressure to buy or sell. Second, a reasonable amount of time has passed for the transaction to be completed. If these two conditions are met, then the home's fair market value should be accurate.

So, you have decided it is time to sell your home. One of the first things people typically do is to set the price of the home. This is not easy to do because it requires the ability to find a perfect balance between getting top dollar for your property and attracting real offers to buy the property.

When you work with a REALTOR®, or other industry professional, you may hear them talk about fair market value, which is generally not the same as the asking price. Agents begin by conducting a competitive market analysis for the home and then they will determine the fair market value. This will give you a range of prices that homes in your neighborhood are selling for.

The value of your home doesn't always depend on how much you have invested in it. People are tempted to set the price higher especially if they have made improvements to the property. More than likely, you will not recoup 100% of the amount you put into the improvements. Also, the more personal the improvement-swimming pool, a multi-layer deck, lavender floor tiles-the less likely it is to be viewed favorably by a potential buyer.

Sellers try to price the home higher for a number of reasons besides recouping money spent on improvements.

• The need for extra money
• Moving to a higher priced neighborhood
• Not having comparable sales information
• Thinking they will have additional bargaining power
• An unnecessary move

There is no set formula for determining the fair market value of a home. It is influenced by an area's real estate trends at any given point in time. Fair market value may or may not equal the home's appraised value. It is basically whatever the market will bear at the time.