What is the "fair market value" of a property?

Fair market value is defined as the price at which a willing buyer and a willing seller would transact a property, assuming both parties are fully informed and not under any undue pressure to complete the sale. This concept relies on a transaction occurring in an open and competitive market, where buyers and sellers have reasonable knowledge of the property and its value.

This definition emphasizes the voluntary nature of the transaction, capturing the essence of supply and demand dynamics that determine how much buyers are willing to pay and how much sellers are willing to accept. Fair market value takes into account the property’s condition, location, and other relevant factors, making it a more accurate representation of value than other metrics, such as assessed value determined by tax authorities or arbitrary prices set by current owners.