What does "fair market value" represent?

"Fair market value" refers specifically to the price at which a property would sell in a competitive and open market, where the buyer and seller are both acting in their own best interests and are well-informed about the property in question. This concept relies on the principles of supply and demand, where the property is exposed to the market for a reasonable period of time, allowing buyers to assess its value and make informed decisions.

This definition emphasizes the conditions necessary for establishing fair market value, such as voluntary participation in the transaction, a reasonable opportunity for both parties to negotiate, and the absence of any external pressures that might distort the price. Thus, the fair market value reflects what a willing buyer is prepared to pay and what a willing seller is prepared to accept under normal circumstances.

In contrast, the other choices do not accurately encapsulate this definition. The assessed value for tax purposes focuses on value determined by local government assessors, which may not reflect current market conditions. The historical selling price of a property does not account for changes over time or current market dynamics, while a price set by a seller without negotiation lacks the competitive aspect that is essential to determining fair market value.