What aspect of property value does fair market value take into account?

Fair market value is defined as the price that a property would sell for on the open market, taking into consideration the conditions of a willing buyer and a willing seller, both of whom are knowledgeable about the relevant facts and not under any undue pressure to complete the transaction. This means that the negotiated price between a willing buyer and seller reflects what the market believes the property is worth at that time.

This concept is essential in various contexts, such as real estate transactions, insurance evaluations, and taxation, because fair market value provides a realistic perspective on a property's worth as influenced by current market conditions, demand, and other economic factors. It differs from the appraised value, which may not always align with market sentiments and is determined by a professional's assessment of the property. Similarly, personal value is subjective and varies from owner to owner, while original cost focuses solely on expenses without accounting for changes in market conditions or property desirability.