Real Estate Glossary

Fair Market Value

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Term Main definition
Fair Market Value

A term usually found in appraisals that attempts to determine the cash price that would likely be negotiated between a willing seller and willing buyer in a reasonable amount of time. For a sale to be considered a reflection of "Fair Market Value," it must meet all the conditions of a fair sale whereby: (i) both buyer and seller act prudently, knowledgeably and under no necessity to buy or sell, i.e. other than in a forced or liquidation sale; (ii) the property must be offered on the open market for a reasonable amount of time, taking into consideration the property type and local market; and (iii) payment is made in cash or terms equivalent to cash. When a sale is unlikely, i.e., when it is unlikely to be completed within 12 months, the appraiser must discount all cash flows generated by the property to ascertain the estimate of Fair Value.

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