What constitutes “fair market value” of a property?

Fair market value refers to the price that a property would likely sell for in an open and competitive market, where both the buyer and seller are informed and not under duress. This concept assumes that the property is listed at a reasonable price, allowing potential buyers to consider and negotiate based on their expectations and the property’s characteristics.

The determination of fair market value involves various factors, including recent sales of comparable properties, overall market conditions, and the specific attributes of the property in question. This scenario reflects a situation where both parties (buyer and seller) are motivated but not forced into a sale, leading to a price that accurately represents the property's worth at that given time and place.

Other options, such as the price set by the seller for negotiation, do not inherently reflect the true market dynamics, as the seller's pricing strategy may be influenced by subjective factors. Similarly, an appraisal given by a bank may be a well-informed estimate, but it doesn't encompass broader market activity and sentiment; appraisals can sometimes be slightly outdated or based on specific criteria that may not fully align with current market conditions. Lastly, a discounted price based on condition might not take into account the overall market demand and could skew the perceived value of the property. Hence, the correct