Fair market value (FMV)

Fair market value (FMV),

Definition of Fair market value (FMV):

  1. Probable price at which a willing buyer will buy from a willing seller when (1) both are unrelated, (2) know the relevant facts, (3) neither is under any compulsion to buy or sell, and (4) all rights and benefit inherent in (or attributable to) the item must have been included in the transfer. FMV is generally the basis for tax assessment and court awards. Also called fair value. See also arms length transaction.

  2. In its simplest sense, fair market value (FMV) is the price that an asset would sell for on the open market. Fair market value has come to represent the price of an asset under the following usual set of conditions: prospective buyers and sellers are reasonably knowledgeable about the asset, behaving in their own best interest, free of undue pressure to trade, and given a reasonable time period for completing the transaction. Given these conditions, an asset's fair market value should represent an accurate valuation or assessment of its worth. The term is commonly used in tax law and the real estate market.

  3. The term, fair market value, is intentionally distinct from similar terms such as market value or appraised value because it considers the economic principles of free and open market activity, whereas the term, market value, simply refers to the price of an asset in the marketplace. Therefore, while a home's market value can easily be found on a listing, the fair market value is more difficult to determine. Similarly, the term, appraised value, refers to an asset's value in the opinion of a single appraiser, thus not immediately qualifying the appraisal as fair market value. In cases where a fair market value is needed, however, an appraisal will usually suffice. .

How to use Fair market value (FMV) in a sentence?

  1. The fair market value is the price an asset would sell for on the open market when certain conditions are met.
  2. The conditions are: the parties involved are aware of all the facts, are acting in their own interest, are free of any pressure to buy or sell, and have ample time to make the decision.
  3. Fair market value is different than market value and appraised value.
  4. Tax settings and the real estate market are two areas that commonly use fair market value.
  5. Sometimes you may find out you can buy something for under fair market value and it may be a great investment to make.
  6. The fair market value was the exact and ultimately agreed upon price between the two negotiating parties involved in the transaction.
  7. If you want to get fair market value for your product you must be able to correctly gauge the supply and demand.
  8. Insurance companies use fair market value in determining certain claim payouts.

Meaning of Fair market value (FMV) & Fair market value (FMV) Definition