Those of us living in Mexico who are from other parts of North America probably take the concept of fair market value for granted. We assume that this measure of value is used in other markets and other countries.
Actually, it is not common outside of the USA or Canada to have reliable sold market data. In order to have information about sales prices and to adjust for differences in properties; data needs to be available.
If we start out with the objective to have fair market value, where do we as consumers, normally go? There are no websites as in Canada and the USA such as Zillow and Trulia offering a large number of properties for sale as well as average sales prices by areas. The sold price can also be seen by the public in city government stats of sold properties.
Until 2010, there was no genuine multiple listing system for AMPI agents as a group to collect data effectively to advise a buyer or seller on fair market value. Now, our database includes resales and pre-construction projects are very much a part of our market at this time.
The classic definition of fair market value is the amount for which real or personal property is sold in a voluntary transaction between a buyer and seller, neither of whom is under any obligation to buyer or sell.
If the buyer and seller are not informed through the open market otherwise, they rely on real estate professionals or appraisals to help determine value based on sales data of similar properties or properties adjusted for differences.
Commerce, as we know it, works efficiently and to the benefit of the whole, if information is shared. Controlling prices comes when a few have information to the detriment of the many. It is unconscionable when a seller or his agent keep market information from a buyer and sell them a property 100-200% over its fair market value.
The issue is control. Knowing the fair market value in a real estate market enables buyer and seller to have control. Knowing FMV can help price a home for sale, negotiate a purchase price of a property for sale, and resolve an estate or divorce settlement.
Factors that help determine fair market value:
- Comparable Solds within a certain time frame help determine the subject property value. Adjustment can be made for differences in size, location and condition of a property. Original list price needs to show the saleable retail value put on the property by the listing agent or developer. Sold price should show exactly what the property sold for and this should be registered in the deed or escritura.
- Market Trends affect FMV. Low demand versus high demand affects price, as well as high inventory versus low inventory
- Particular conditions: If properties have mortgages or there are defaults with the lender taking the properties back, the listed properties may be offered at a much lower price to move inventory. Builders also can compete against an individual seller who wants to re-sell his real estate within their development while he is still actively selling his product.
- Comparative Market Analysis a common way to determine a property FMV. For it to be a valid CMA there must be sufficient information on sold properties and their characteristics in addition to price. (i.e) condition, location, debt, etc.
- Appraisals use measurements and improvements to a property as well as allowable uses through zoning and permits. Appraisals are usually done by engineers or appraisers who also take into account in their reports the comparables or sold prices. Traditional appraisals are to find FMV from 1. Market value, 2. Replacement Cost,
- Income Approach.
*AMPI is continuing to learn and become more proficient with its Flex Multiple Listing System. As AMPI agents become more knowledgeable and proficient, FMV will become more available.
AMPI is very aware of cultural differences and understands they are operating in Mexico. AMPI also understands the individual’s right for privacy.
When information is withheld for the benefit of a few and manipulation of many, the result is harm to all.
Flex MLS used by participating Ampi agents provides sold data which is available to the agents to help you arrive at FMV if you are buying or selling.
Puerto Vallarta Real Estate Blog published every week –
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This article is based upon Flex MLS reporting, legal opinions, current practices and my personal experiences in the Puerto Vallarta-Bahia de Banderas areas. I recommend that each potential buyer or seller of Mexican real estate conduct his own due diligence and review. If you have any other questions, contact me through my website.Harriet Murray