Fair Market Value

tl;drThe price an asset would sell for in an open market between willing parties who are knowledgeable and acting in their own best interests.

This valuation concept assumes no undue pressure to buy or sell and represents the true economic value of an asset under normal market conditions.

Imagine an appraiser determining the fair market value of a commercial building at $5 million based on recent comparable sales, income potential, and market conditions. This valuation might be used for insurance purposes, tax assessment, or potential sale negotiations, providing an objective basis for decision-making.

Determining fair market value requires considering market conditions, asset characteristics, and relevant comparable transactions. Whether valuing business assets, investments, or real estate, proper valuation methodology is crucial.

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