What Is Fair Market Value?
Fair market value (FMV) is the price a property would command in an open market transaction between a willing buyer and a willing seller, where both parties have access to relevant information and neither is under compulsion to act. It is the standard measure of property value used in appraisals, eminent domain proceedings, estate valuations, and property tax assessments.
How Fair Market Value Is Determined
Appraisers use three approaches to estimate FMV:
- Sales comparison — Analyzing recent sales of comparable properties and adjusting for differences. Most reliable for residential property.
- Cost approach — Estimating the cost to reproduce the improvements minus depreciation, plus land value. Best for new or unique properties.
- Income approach — Capitalizing the property's net operating income into a value estimate. Used for rental and commercial investment properties.
Fair Market Value in Florida Contexts
- Property taxes — The assessed value for tax purposes starts at fair market value but may be lower due to the Save Our Homes cap and homestead exemption. The county property appraiser determines the "just value" (Florida's term for FMV) annually.
- Eminent domain — Under Chapter 73, Florida Statutes, the property owner is entitled to compensation based on fair market value when the government takes private property.
- Estate and gift tax — Property transferred at death is valued at FMV for federal estate tax purposes (the "stepped-up basis").
- Divorce — Marital property is valued at FMV for equitable distribution.
- Lending — Lenders require an appraisal of FMV to determine the maximum loan amount.
FMV vs. Other Measures of Value
- FMV vs. assessed value — Assessed value is the tax authority's estimate, often lower than FMV due to caps and exemptions.
- FMV vs. listing price — The listing price is the seller's asking price, which may be above or below FMV.
- FMV vs. purchase price — The actual sale price may differ from FMV due to negotiation, market conditions, or seller concessions.
Related Terms
- Appraisal — Professional estimate of FMV
- Assessed Value — Tax-based value derived from FMV
- Condemnation — Compensation based on FMV
Barnes Walker FMV Analysis
Barnes Walker's attorneys use fair market value analysis in eminent domain cases, estate settlements, and commercial transactions. Request a legal inquiry for assistance.
Reviewed by the attorneys at Barnes Walker, Goethe, Shea & Robinson, PLLC