Fair market value (FMV) is the price that a property would sell for on the open market under normal circumstances, assuming that both the buyer and seller are acting willingly and are fully informed about the property and the market conditions. It is the price that a property would fetch in an arm’s length transaction, where both parties are acting in their own self-interest and are not under any pressure to buy or sell.
The fair market value of a property is typically determined by considering a variety of factors, including:
- The property’s location and physical characteristics
- The condition of the property
- The demand for properties like it in the local market
- Comparable sales of similar properties in the area
Fair market value is often used as a benchmark for valuing real estate and other assets, such as businesses or securities. It is also used in determining the value of charitable donations for tax purposes, as well as in estate planning and other financial transactions.
Overall, fair market value is a measure of the value of a property or asset based on what it would sell for in an open and competitive market.