Mortgage Glossary

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Fair Market Value

Fair Market Value (FMV) is a term in both law and accounting to 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.

A Fair Market Value is valid if it is applied, and worthless if not (applied). For 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, the price offered by the one person would be a Fair Market Price.

Fair Market Value is usually subjective due to the circumstances of its valuation, including place, time, the existence of comparable precedents, and the evaluation principles of each involved person. Opinions on value are always based upon subjective interpretation of available information at the time of assessment. This is in contrast to an imposed value, in which a legal authority (law, tax regulation, court, etc.) sets an absolute value upon a product or a service.

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