In its’ most basic sense, Fair Market Value (FMV) is the price that a property will sell for on an open market.
FMV represents the price of an asset when the following set of market conditions, have been met:
- Prospective buyers and vendors are reasonably knowledgeable about the property
- They are behaving in their own best interests
- Both parties are free of any undue pressure to sell/buy
- Both are given a reasonable time period for completing the transaction
If all of these conditions exist, a property’s FMV, should represent an accurate valuation/assessment of its worth.
FMV is distinct from terms such as Market Value or Appraised Value, as it considers the economic principles of free and open market activity.
Market Value refers to the price of a property in the market place and Appraised Value, refers to the opinion of a Valuer.
Fair Market Value is often used in legal contexts ie divorce, taxation matters and in the insurance industry.
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