What does Fair Market Value represent?

Fair Market Value is a crucial concept in real estate appraisal as it denotes the price at which a property would trade between a willing buyer and a willing seller, both of whom are informed and acting in their own best interests. This definition emphasizes that neither party is under any pressure to complete the transaction, ensuring that the price reflects a true market consensus rather than an artificially inflated or deflated value.

This aspect of Fair Market Value takes into account current market conditions, comparable sales, and other relevant factors, allowing for a more accurate assessment of what a property is genuinely worth in an open and competitive marketplace. In this scenario, both parties have a good understanding of the property's value, and there is no undue influence driving the transaction price.

Other options do not encapsulate the essence of Fair Market Value as effectively. For example, merely stating it as the average amount paid for a property fails to consider individual circumstances and nuances of specific transactions, which are typically more variable than a simple average. Similarly, indicating it as the cost of building the property overlooks factors such as depreciation, market demand, and location, which can significantly affect value. Finally, values determined by a tax assessor often seek to reflect a uniform standard for taxation purposes rather than the subjective realities of voluntary