Fair Market Value is a term in both law and accounting to describe an appraisal based on an estimate of what a buyer would pay a seller for any piece of property. It is a common way of evaluating the value of property when assessing damages to be awarded for the loss of or damage to the property, generally in a claim under tort or a contract of insurance. Lady Justice or Justitia is a personification of the moral force that underlies the legal system (particularly in Western art). ... It has been suggested that Accounting scholarship be merged into this article or section. ... Appraisal is the act of estimating the monetary value of real, personal, or intangible property, usually performed as a service by someone recognized as an expert or certified by an organization. ... Property designates those things that are commonly recognized as being the possessions of a person or group. ... In law, damages refers to the money paid or awarded to a claimant (as it is known in the UK) or plaintiff (in the US) following their successful claim in a civil action. ... Tort is a legal term that means a civil wrong, as opposed to a criminal wrong, that is recognized by law as grounds for a lawsuit. ... Insurance, in law and economics, is a form of risk management primarily used to hedge against the risk of a contingent loss. ...

Please check Market also. Look up Market in Wiktionary, the free dictionary. ...

Relativity of Fair Market Value: It is important to remember that any vision about value is usually subjective to a number of circumstances i.e. place (local habits), time (moment), the existence of comparable precedents, and the evaluation principles of each involved person.

A Fair Market Value (and any Value) is valid if it is applied, and worthless if not (applied). By example: The opinion of 1,000 people about their intention to buy a product has no meaning if nobody buys the product. On the other hand, if there is one single person interested in a product, it is a one-person market. In this case, any price would be a Fair Market Price.

It should not be forgotten that appraising is always guesswork. Opinions are based upon subjective interpretation of checked (or/and unchecked) information. Elements that are considered relevant by one party in a discussion may be considered totally irrelevant by another party.

Fair Market Value vs Imposed Value: In a free market system only a legal office (law, tax regulation, court, etc.) can set an absolute value upon a product or a service, and such decision is at least limited in place (territoriality/jurisdiction). In this case it is not a Fair Market Value but an imposed value.

Definitions

A classic formulation of the definition of "fair market value" is found (in the specific context of U.S. tax law) in the United States Supreme Court decision in the Cartwright case:

The fair market value is the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts.^[1]

There are numerous definitions of fair market value for various purposes and jurisdictions. A highly general definition follows.

• It is the most probable price at which a good or service will exchange, expressed in terms of cash or equivalent, in a free market assuming:
  • A knowledgeable and willing seller unencumbered by undue pressure to sell and acting in his own best interest
  • A knowledgeable and willing buyer unencumbered by undue pressure to buy and acting in his own best interest
  • A reasonable time for exposure in a free and open market.

Under this concept, a real estate sale in lieu of an eminent domain taking would not be considered a fair market transaction since one of the parties (i.e., the seller) was under undue pressure to enter into the transaction. Other examples of sales that would not meet the test of fair market value include a liquidation sale, deed in lieu of foreclosure, distressed sale, and similar types of transactions. Liquidation, or winding up, refers to a business whose assets are converted to money in order to pay off debt. ... A Deed in lieu of foreclosure is a deed instrument in which a mortgagor (i. ...

Fair Market Value is only applicable upon services and goods that are offered in series/quantities. Simply, because FMV is based on comparison with identical or similar past, actual or expected service and goods. Briefly, Fair Market Value is an idealistic and unrealistic idea and depends only upon acceptance.

Proving fair market value

Fair market value is generally proved by expert evidence, although for commonly traded goods (such as new retail goods or securities) a court can take judicial notice of the price. Often, the fair market value is based on a date prior to the hearing that would establish damages, such as the date the property was destroyed, or the date of a separation when assessing the value of matrimonial property that is sold at a later date. For security (collateral), the legal right given to a creditor by a borrower, see security interest A security is a fungible, negotiable interest representing financial value. ... Judicial Notice is a rule of evidence that allows a fact to be introduced into evidence if the truth of that fact is so notorious or well known that it is cannot be refuted. ...

About value estimation in general, it is important to remember that any market is a mix of:

A) Occasional traders (buy things low, and almost any profit is enough). B) Regular amateurs (buy and resell with rather more profit). C) Professional traders (make enough profit to live from it). D) End users (pay almost any price to have a given item).

It is thus clear that Fair Market Value can be something totally different to each of the involved persons.

The appraiser's expertise level is a matter of acceptance by the involved parties. The opinion of an experienced amateur can be just as acceptable as the opinion of newbie professional in the field.

Niche Fair Market Value attempts in the Insurance Industry: For example, if a used car is destroyed in a crash, the insurance policy will generally only pay for the fair market value of the car at the time of the accident. This can generally be determined by looking at Kelley Blue Book values, or the costs of buying similar vehicles being sold by used car dealers in the local area. However, there can be reasons why a higher or lower value is set forth - And then accepted or rejected. Kelley Blue Book (KBB), headquartered in Irvine, California, is the United Statess largest appraiser of automobiles. ...

Fair Market Value in the Insurance Industry is usually the eventually accepted value. People are not obliged to follow the vision of any adviser, but a bargained value is not a Fair Market Value.

Niche Fair Market Value attempts in the Internet Domain Industry: An example relevant to the new economy is that of domain name appraisals. While the market for domain names is relatively small, it has proved lucrative for a handful of domain name sellers. The small number of sellers has spawned an active market in buying and selling domain names. Although domain names are similar to traditional real estate in that domain names have value, they differ in that many domain name transactions do not take place in a public market, making it difficult to track sales to derive a fair market value model. And what's fair? A scientific explanation is given at What is the real value of a domain name?. With the number of appraising services and the increasing number of claims about appraising quality, it should be kept in mind that evaluation remains subjective and suggestive comparison guesswork.

Fair Market Value in the domain industry is just the registration fee, from just a few $ up to a few $$$. Aftermarket prices are usually markups, thus no FMV. Again, people are not obliged to follow the vision of any adviser, but a bargained value is not a fair market value.

Generally, the less liquid and more unique a piece of property is, the harder it is to accurately determine its fair market value. For example, farm land is generally treated as a commodity and its fair market value can be determined with relative ease by comparing the sale prices of neighbouring properties. However, the fair market value of a unique property, such as the Empire State Building, would be difficult to determine as even other New York skyscrapers are rarely if ever sold on the open market. Farms, East of Gorgan, Iran. ... The Empire State Building in New York The Empire State Building is a 102-story Art Deco skyscraper in New York, NY. Its name is derived from the nickname for the state of New York. ...

Typically, FMV will usually be the lowest price, simply because most people just don't accept that profit is made.

Practical applications of the fair market value concept

Property taxation systems such as Market Value Assessment are generally based on the fair market value of the property. Online tools can help anyone estimate the fair market value for property providing informtation such as nearby recently sold residential property, neighborhood, average prices, average price per square foot, property appreciation and display individual property locations on Zillow. Property designates those things that are commonly recognized as being the possessions of a person or group. ... A residential area is a type of land use where the predominant use is residential. ... Property designates those things that are commonly recognized as being the possessions of a person or group. ... A neighbourhood or neighborhood (see spelling differences) is a geographically localised community located within a larger city or suburb. ... In mathematics, an average or central tendency of a set (list) of data refers to a measure of the middle of the data set. ... In mathematics, an average or central tendency of a set (list) of data refers to a measure of the middle of the data set. ... Property designates those things that are commonly recognized as being the possessions of a person or group. ... Appreciation is a term used in accounting relating to the increase in value of an asset. ... Property designates those things that are commonly recognized as being the possessions of a person or group. ... Zillow. ...

Alternative pricing schemes, particularly for commercial properties, are Replacement Value, or what it would cost to re-build the building that exists on the site, or Commercial Value, based on the assumed rental income and the rate of return on capital investment for similar properties. These values can often give wildly different estimates than a fair market value approach.

Internet domains, as mere addresses, cannot be objectively priced because they are just a combination of characters. The selling price for a domain can be influenced by the situation (revenue etc.) of the present web at the specific domain. [More about this on Wikipedia.]

Notes