Fair market value is the price a property would sell for on the open market between a willing, knowledgeable buyer and a willing, knowledgeable seller, with neither party under undue pressure to act and both having reasonable time to consider the transaction.
It is a conceptual standard used in appraisals, tax matters, estate settlements, and litigation. Because it assumes ideal conditions, fair market value may differ from a distressed or rushed sale price and from a home's tax assessed value.
In practice, the best evidence of fair market value is what similar properties have recently sold for. Both appraisals and comparative market analyses aim to estimate it.