Many sectors, including but not limited to company valuation and appraisals, business brokerage, mergers and acquisitions, venture capital, commercial financing, charity donations, and federal and state laws, utilize the term “fair market value.” While there are various definitions of “fair market value,” when it comes to a corporate entity, most are quite consistent and comparable. The following is a list of some of the most commonly used definitions of “fair market value” in the business appraisal industry:
Fair Market Value Definition #1
The price at which property would change hands between a hypothetical willing and able buyer and a hypothetical willing and able seller operating at arm’s length in an open and unrestricted market when neither is obligated to purchase or sell and both have a reasonable awareness of the relevant facts.
Fair Market Value Definition #2
When neither party is under any pressure to purchase nor sell, and both parties have a reasonable awareness of pertinent information, the sum at which the property would change hands between a willing buyer and a willing seller.
Fair Market Value Definition #3
The price at which an asset might be purchased or sold in a current transaction between interested parties, as opposed to a forced or liquidation sale.
Fair Market Value Definition #4
The price, as of a commodity or service, at which both buyers and sellers agree to do business.
Fair Market Value Definition #5
The price at which a willing seller transfers an item or service to a willing buyer. Both the buyer and the seller are considered to be rational and to have a reasonable understanding of the relevant facts.
Our goal is to uphold the above standards so that fairness in business assessments and associated operations are kept. While fair market value may be seen as a range prior to buy-sell negotiations, plans and synergies on the part of either the seller or the buyer might push the selling price over or below fair market value.