Fair Market Value

AAA

DEFINITION of 'Fair Market Value'

The price that a given property or asset would fetch in the marketplace, subject to the following conditions:

1. Prospective buyers and sellers are reasonably knowledgeable about the asset; they are behaving in their own best interests and are free of undue pressure to trade.

2. A reasonable time period is given for the transaction to be completed.

Given these conditions, an asset's fair market value should represent an accurate valuation or assessment of its worth.

INVESTOPEDIA EXPLAINS 'Fair Market Value'

Fair market values are widely used across many areas of commerce. For example, municipal property taxes are often assessed based on the fair market value of the owner's property. Depending upon how many years the owner has owned the home, the difference between the purchase price and the residence's fair market value can be substantial.

Fair market values are often used in the insurance industry as well. For example, when an insurance claim is made as a result of a car accident, the insurance company covering the damage to the owner's vehicle will usually cover damages up to the fair market value of the automobile.

RELATED TERMS
  1. Market Value

    The price an asset would fetch in the marketplace. Market value ...
  2. Property Tax Deduction

    State and local property taxes that are generally deductible ...
  3. Blue Book

    A guidebook that compiles and quotes prices for new and used ...
  4. Valuation

    The process of determining the current worth of an asset or company. ...
  5. Investment Real Estate

    Real estate that generates income or is otherwise intended for ...
  6. Paper Millionaire

    An individual who has achieved a high net worth as a result of ...
Related Articles
  1. Insurance

    What are some examples of unexpected exclusions in a home insurance policy?

    Learn about commonly excluded perils with different standard insurance policies. Explore events that homeowners should consider when purchasing insurance.
  2. Taxes

    Changes In Tax Legislation And Regulation

    Keeping on top of these amendments can help you avoid penalties and take advantage of benefits.
  3. Taxes

    Deducting Your Donations

    Generosity may be its own reward, but some charitable giving also provides personal tax benefits.
  4. Entrepreneurship

    Valuing Startup Ventures

    Valuing a company is a difficult task, regardless of the size of the business - but these methods can help.
  5. Taxes

    Avoid Capital Gains Tax On Your Home Sale

    If you have property to sell and want to avoid capital gains tax, a Section 1031 exchange may be the answer.
  6. Taxes

    Cut Employee Stock Option Taxes With AMT Credit

    Learn how refundable AMT credits can help you save on taxes, AMT bills and more.
  7. Bonds & Fixed Income

    Mark-To-Market: Tool Or Trouble?

    Mark-to-market accounting can be a valuable practice, but all bets are off when the market fluctuates wildly.
  8. Home & Auto

    Best Types of Remodels For A Smart Sale Strategy

    Consider these improvements to your home if you want to increase its resale price.
  9. Insurance

    Who are the best-rated home insurance companies in the US?

    Learn about the top rated home insurance companies in the United States based on customer satisfaction surveys. See how customers rank the top insurers.
  10. Home & Auto

    Universal Design Improvements That Increase Your Home's Value

    Universal design improvements yield great returns for homeowners, either through increased future comfort, or broader market appeal for their home.

You May Also Like

Hot Definitions
  1. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  2. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
  3. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
  4. Break-Even Analysis

    An analysis to determine the point at which revenue received equals the costs associated with receiving the revenue. Break-even ...
  5. Key Performance Indicators - KPI

    A set of quantifiable measures that a company or industry uses to gauge or compare performance in terms of meeting their ...
  6. Bank Guarantee

    A guarantee from a lending institution ensuring that the liabilities of a debtor will be met. In other words, if the debtor ...
Trading Center