What Is Fair Market Value in Real Estate?

The classic FMV definition (CUSPAP and CRA)

Canadian appraisal practice (CUSPAP) and CRA both use a four-part test: (1) a willing buyer and willing seller, (2) both informed of relevant facts, (3) neither acting under compulsion, and (4) trading in an open and unrestricted market. Strip any one of those four conditions away — a forced sale (estate liquidation under deadline pressure), a private off-market deal between related parties, a buyer who didn’t see the inspection — and the resulting price is not FMV. It might be a reasonable price, but it is not the benchmark CRA, MPAC, or a court will accept without scrutiny.

How FMV is established in practice

• Comparable sales (CMA): a REALTOR® pulls 3–6 truly comparable recent sales and adjusts. Fast, free, well-suited to listing decisions and informal valuations.
• Formal appraisal (sales-comparison approach): an AACI or CRA-designated appraiser produces a written report under CUSPAP. Required by lenders, courts, and CRA on contested filings.
• Income approach: capitalises net operating income at a market cap rate. Used for purpose-built rentals, multi-unit, and commercial property.
• Cost approach: land value plus depreciated replacement cost. Used for new construction, special-purpose properties, and insurance valuations where market comps are scarce.

Where FMV gets contested in Ontario

• Capital gains reporting on a property that wasn’t your principal residence the entire time you owned it. See our capital gains guide for how PRE works.
• MPAC reconsideration and assessment appeals — you argue MPAC’s assessed value exceeds current FMV.
• Family law equalization at the date of separation — the matrimonial home and any other real estate are valued for net family property.
• Estate administration — FMV at the date of death drives the deemed disposition by the deceased and the heir’s adjusted cost base.
• Expropriation by a municipality or province — the Expropriations Act requires FMV plus disturbance damages and injurious affection.
• Lender financing — the bank-ordered appraisal at refinance or purchase establishes the lending-purpose FMV, which can differ from listing-purpose FMV.

FMV vs. assessed value vs. asking price

Ontario MPAC assessments are based on a 2016 valuation date and are explicitly not current FMV — they are a tax base. Asking price is what a seller hopes the market will pay; FMV is what the market actually would pay. A serious CMA dated more than 60 days ago is stale in a moving market. For high-stakes uses (CRA, court, lender), get a fresh formal appraisal effective on the relevant date.

A common confusion: a property listed at $1.2M that closes at $1.0M after 90 days on market has an FMV closer to $1.0M, not $1.2M. The asking price is irrelevant; what informed buyers actually paid is the evidence.

When two appraisers disagree

Reasonable, qualified appraisers can land 5–10% apart on the same property using the same methodology. The differences come from comp selection, adjustment magnitudes, and judgment calls about condition. For contested matters (separation, expropriation, large estate), it is common to commission two appraisals and let the parties or court reconcile them. Don’t treat any single FMV number as a hard ceiling or floor — it is an estimate, and the documented reasoning behind the number matters as much as the number itself.

If you’re facing a contested FMV matter (CRA reassessment, family-law equalization dispute, MPAC appeal), engage an appraiser who has experience writing reports for that specific use case. Lender appraisers, family-law-court appraisers, and tax-court appraisers all produce slightly different documentation and your chosen specialist matters.

Frequently Asked Questions

Is FMV the same as my MPAC assessed value?

No. MPAC values use a 2016 base date and are a property tax base. They routinely diverge from current FMV by 10–20% or more. If MPAC’s value seems too high, you can file a Request for Reconsideration with supporting evidence of current FMV.

Will the CRA accept a REALTOR®’s CMA as FMV?

Sometimes for low-stakes filings, but a formal AACI/CRA-designated appraisal is the safer evidence on capital gains, deemed dispositions, change-in-use elections, or any audited matter.

Do online estimates (Zillow-style AVMs) count as FMV?

AVMs are useful sanity checks but should not be relied on for tax, legal, or transactional decisions. They miss 5–10% in either direction and don’t see condition or property-specific features.

Does a recent listing price prove FMV?

No. The listing price is what the seller asked for. FMV is established by what informed buyers actually paid for comparable properties, not by what sellers hoped to receive.