fair market value

noun
Updated on: 13 Oct 2017

Definition of fair market value

:a price at which buyers and sellers with a reasonable knowledge of pertinent facts and not acting under any compulsion are willing to do business

First Known Use of fair market value

1891


Financial Definition of FAIR MARKET VALUE

fair market value

What It Is

Fair market value is the price at which a willing seller sells a good or service to a willing buyer.

How It Works

Let's assume John Doe wants to sell his house. He lists it for $750,000. Jane Dale wants to buy a house. She sees John's house for sale and offers him $675,000. The two negotiate the price and agree on $700,000. Because it is the price John and Jane agree to, the fair market value of the house is $700,000.

Why It Matters

People often feel that houses, art, stocks, bonds and other items are "worth" a certain amount on the market, but the only true measure of worth -- the fair market value -- is the price at which someone is willing to sell and someone is willing to buy.


Law Dictionary

fair market value

noun

legal Definition of fair market value

:a price at which buyers and sellers both having reasonable knowledge of the property and being under no compulsion are willing to do business

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