Fair market value is the estimated price that a property or asset would sell for on the open market between a willing buyer and a willing seller, both having reasonable knowledge of the asset and acting without pressure.
It reflects what the item is truly worth under normal conditions, without influence from external factors like urgency to sell, limited supply, or inflated demand. Fair market value is commonly used in real estate, taxation, insurance claims, and legal proceedings to determine a property’s true value. It helps ensure fairness in transactions by representing an objective and realistic selling price.