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Fair Market Value
What Is Fair Market Value?
Fair Market Value (FMV) is the price a property or asset would sell for on the open market, where both buyer and seller are knowledgeable, willing, and under no pressure.
Why It Matters
Fair Market Value is used in real estate transactions, taxation, insurance, and financial planning. It helps determine accurate pricing and prevents overpaying or underselling.
How Fair Market Value Works
FMV is determined by:
- comparable sales (comps)
- market conditions
- property condition and location
- supply and demand
- appraisals
Professionals such as appraisers or agents often estimate FMV.
Example
A home is valued at $400,000 based on similar homes recently sold in the area.
Fair Market Value vs Appraised Value
- Fair market value reflects what buyers will pay.
- Appraised value is an estimate by a professional.
FAQs About Fair Market Value
Is FMV always accurate?
It is an estimate based on available data.
Who determines FMV?
Market activity and professional analysis.
Does FMV change?
Yes, based on market conditions.
Related Terms
