Fair Market Value (FMV) in the real estate investment industry refers to the estimated price at which a property would change hands between a willing buyer and a willing seller, both of whom are suitably informed about the property and neither of whom are under any pressure to buy or sell.
FMV is an estimate of the market value of a property based on what a knowledgeable, willing, and unpressured buyer would probably pay to a knowledgeable, willing, and unpressured seller in the market.
It’s important to note that the FMV may not necessarily be the price a property is listed for, or what it sells for. Instead, it’s an estimate of what it could potentially sell for, under ideal conditions where both buyer and seller are acting in their own best interests and are aware of all relevant facts.
In determining FMV, various factors can be considered, including the current condition of the property, the location, the recent selling prices of similar properties in the same area, and other aspects that might influence the desirability or price of the property. A professional appraisal is often used to determine the FMV.