What is a common method for determining a property's fair market value?

Determining a property's fair market value is primarily about understanding what buyers are willing to pay in a competitive environment. One of the most accepted methods for doing this is by comparing the property to recent sales of similar properties, often referred to as the "comparative market analysis" or CMA. This involves looking at properties that have recently sold in the same area with similar characteristics, such as square footage, number of bedrooms, and overall condition.

By examining these comparable sales, appraisers and real estate professionals can assess the market trends and price points for properties that are similar to the one in question. This approach helps to establish a realistic and market-driven estimate of value based on actual transactions that reflect buyer behavior in the current market.

Other methods mentioned, like evaluating current rental rates or determining the owner's purchase price, may provide some insight, but they do not directly reflect the market dynamics in the same way that comparing recent sales does. Using the property as collateral for loans is more about securing financing rather than determining its market value. Therefore, utilizing recent sales of similar properties as a benchmark is the most reliable and widely accepted method for assessing fair market value.