Market value can be approximated by looking at the comps--the comparable sales. Your agent should provide you with a CMA, showing recent sales. She may have done this, though you only say that she's "told us this is a fair price." She's got to do more than that. Get a CMA.
There's nothing inherently wrong in the owner making a $40,000 profit over his 2003 purchase. However, prices in many areas of Virginia are back down to 2002-2003 levels. So, if the owner paid fair market value in 2003, it's unlikely it's appreciated 50% since then. That's also why you need the CMA. (On the other hand, the owner may have gotten a terrific bargain back in 2003. It's impossible to say.)
What you do say, to your agent, is: "We'd like a CMA on the property." Then you'll have a place to begin.
Hope that helps.