Fair Market Value (FMV) in real estate is the price a property would change hands between a willing buyer and a willing seller, both informed and acting without compulsion, in an arm's-length transaction. It is the price benchmark used by appraisers, the Canada Revenue Agency, divorce courts, estate executors, and lenders. It is not the same as the list price, the assessed value, or what your neighbour told you they got for a similar house.
In this guide, we cross-reference Capital Gains Tax, How Fast Will My House Sell?, and What Is APS in Real Estate? — click through whenever you want to go deeper on a related concept.
The Standard Definition
Most Canadian appraisal standards and CRA guidance define FMV as: "the highest price, expressed in dollars, that a property would bring in an open and unrestricted market between a willing buyer and a willing seller, both knowledgeable, informed, and prudent, and acting independently of each other."
How Appraisers Calculate FMV
- Direct comparison approach — look at recent sales of comparable properties (the dominant method for residential).
- Income approach — capitalize the net operating income (used for income properties).
- Cost approach — replacement cost minus depreciation plus land value (used for unique or special-use property).
FMV vs List Price vs Assessed Value
| Concept | Source | Purpose |
|---|---|---|
| Fair Market Value | Appraiser / market evidence | True transactional value |
| List Price | Seller / agent strategy | Marketing tool — may be above or below FMV |
| MPAC Assessed Value | Municipal Property Assessment Corporation | Property tax basis (often lags market by years) |
When FMV Matters
- Lender appraisals — the bank confirms FMV before funding the mortgage.
- Capital gains tax — CRA uses FMV at deemed disposition events (death, change in use, gifting).
- Estate planning and probate — executors must value real property at FMV.
- Divorce / separation agreements.
- Insurance — for rebuild calculations (replacement cost, distinct from FMV).
Getting an FMV in Toronto
Three common ways:
- AACI- or CRA-designated appraiser (most defensible — $400–$700 for residential).
- Realtor Comparative Market Analysis using TRREB sold data (free, market-tested).
- MPAC assessment (cheapest, often least accurate for current FMV).
Frequently Asked Questions
Is the list price the same as fair market value?+
No. List price is a marketing decision. FMV is what the property is actually worth based on willing buyer / willing seller principles. Strategic listings often price below FMV to drive competition.
Why is my MPAC assessment different from market value?+
MPAC uses base years and re-assessment cycles, so values lag the actual market by months or years. MPAC assessment drives property taxes, not market price.
Does CRA use FMV?+
Yes — CRA uses FMV at deemed dispositions (death of owner, change of use from principal residence to rental, gifts, non-arm's-length transfers). Document the FMV with an appraisal at those events.
How do I get an unbiased FMV?+
Hire an AACI or CRA-designated appraiser. They are independent and produce a defensible written report. Realtor CMAs are useful but not appraisals.
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