What does the term "fair market value" refer to?

The term "fair market value" refers to the price at which a property would sell under normal market conditions, meaning both the buyer and seller are informed and willing participants in the transaction. This definition highlights that the sale occurs without any undue pressure, motivation, or influence, ensuring that neither party is forced into an agreement. Thus, fair market value is an objective measure reflecting what a buyer would pay and a seller would accept in a typical open market setting.

In contrast, the assessed value by a tax authority, which refers to the valuation for property tax purposes, may not accurately reflect current market conditions and can differ from actual sale prices. The estimated resale price after home improvements focuses on an anticipated value that may not reflect what the market would truly bear, as it is speculative in nature. Meanwhile, the minimum price a seller will accept is subjective and does not necessarily indicate what the market value is; it may not reflect fair conditions or buyer interest. Therefore, the correct choice aligns best with the concept of fair market value being a mutually agreeable price reached in an open market context.