How is "fair market value" of a property defined?

Fair market value is defined as the price a property would sell for on the open market between a willing buyer and a willing seller, both having reasonable knowledge of the relevant facts and neither being under any compulsion to buy or sell. This definition emphasizes the real-world dynamics of supply and demand, along with the voluntary nature of transactions in a free market.

When determining fair market value, factors such as location, property condition, current market conditions, and comparable sales in the area are typically taken into account, ensuring the valuation reflects what buyers are actually willing to pay. This is why the fair market value is an essential concept in various contexts, including insurance claims, real estate transactions, and estate planning.

For the other options, while tax assessments might provide a benchmark for property value, they do not necessarily reflect the actual market conditions. Similarly, values set by insurance companies may take into account various factors, but they are not always synonymous with fair market value as they can be based on internal guidelines rather than open market transactions. Lastly, the cost of repairs indicates the expense required to bring a property to a certain condition but does not directly determine how much that property would sell for in the current market environment.