What does fair market value refer to?

Fair market value refers to the price that a property would sell for in an open and competitive market, where both the buyer and seller are well-informed, and neither is under any undue pressure to complete the transaction. This definition establishes that the price is not just a fixed amount but is the result of negotiation and willingness to buy and sell in a fair market environment.

This concept assumes that the property has been exposed to the market for a reasonable period, allowing sufficient opportunities for potential buyers to act upon it. It reflects the price at which an informed buyer and an informed seller would agree upon a sale after negotiations, ensuring that the transaction represents a fair exchange of value. Thus, it embodies the essence of voluntary transactions without coercion, leading to a price that accurately indicates the property's worth based on current market conditions.