What does fair market value mean?

• A. The price someone is willing to pay in a constrained market
• B. The listing price
• C. The most probable price a property should bring in an open and competitive market
• D. The price paid by a buyer in a private sale

Answer: (C)

Fair market value is the most probable price a property should bring in an open and competitive market under normal conditions, with both the buyer and seller acting knowledgeably and without undue pressure. This definition captures what a typical buyer would be willing to pay and what a typical seller would accept given current market conditions, assuming the property is exposed to sale for a reasonable period in an arm’s-length transaction. It’s the objective estimate appraisers use to reflect market conditions, rather than a seller’s asking price or the price paid in a private or atypical sale. Listing price is just the seller’s desired amount, and a private sale price can be influenced by unique circumstances. In short, fair market value represents what the market would likely pay under ordinary, competitive circumstances.