Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Fair Market Value

What it is:

Fair market value is the price at which a willing seller sells a good or service to a willing buyer.

How it works (Example):

Let's assume John Doe wants to sell his house. He lists it for $750,000. Jane Dale wants to buy a house. She sees John's house for sale and offers him $675,000. The two negotiate the price and agree on $700,000. Because it is the price John and Jane agree to, the fair market value of the house is $700,000.

Why it Matters:

People often feel that houses, art, stocks, bonds and other items are "worth" a certain amount on the market, but the only true measure of worth -- the fair market value -- is the price at which someone is willing to sell and someone is willing to buy.