What does "fair market value" mean?

Fair market value refers to the price at which a property would sell in an open and competitive market, assuming that both the buyer and seller are willing participants and are acting in their own interests. This definition emphasizes that the transaction occurs without any undue pressure or coercion, and both parties have reasonable knowledge of the relevant facts regarding the property. This price is generally reached through negotiation between the buyer and seller.

Other options present alternatives that do not accurately encapsulate the concept of fair market value. For instance, property tax assessments can often be outdated and may not reflect current market conditions or the true present value of a property. The previous selling price of a property does not necessarily indicate its current fair market value, as real estate values can fluctuate significantly over time. Similarly, a real estate agent's opinion, while valuable, can be subjective and may not represent the true market dynamics at the time of the sale. Thus, "fair market value" is best defined by the transaction term between willing buyers and sellers.