Fair Market Value
The fair market value is the theoretical highest price that a buyer would pay, and the lowest price a seller would accept, assuming that both parties were willing -- but not compelled -- to act.
Example: An appraisal of a home indicates that its fair market value is $250,000. The home could sell for the fair market value if it were to stay on the market for a reasonable period of time. However, the seller may decide to give the property to a relative. He may also grow impatient and sell the house for $240,000 -- a lesser price than if he kept the house on the market for a longer period of time. On the other hand, an enthusiastic buyer might be found who would be willing to pay $260,000. The owner might even be able to sell the property for $270,000, if he provides extraordinarily favorable financing.