What is "fair market value"?

Fair market value refers to the price that a property would reasonably sell for when both the buyer and seller have the knowledge of the relevant facts and are acting in their own self-interest, without any undue pressure or constraints. This concept is grounded in the idea of an open and competitive market where buyers and sellers can freely negotiate.

The definition emphasizes the importance of the market dynamics that influence property values. In this context, the open market reflects a scenario where properties are exposed to potential buyers, leading to a value derived from actual buyer behavior and interest.

Understanding fair market value is crucial, as it is often used in various real estate contexts, including property sales, taxation, and appraisals. When real estate professionals assess values, they typically reference fair market value to ensure the transaction reflects realistic expectations based on current market conditions.