Fair Market Value, Source(s)

[ZZGAMAZZ]

I might get beat-up for being lazy, but I'm wondering whether a single document is available that lists the "best" Fair Market Value definitions and accompanying sources for each, for the various types of non-lending appraisal assignments, e.g., marital dissolution, estate, bankruptcy, with consideration for my CA certification (although the FMB definition for BK that is federal presumably is the same for all states).

And, does the prevailing definition and source change as case law evolves? (I might be over-thinking...)

 

[Elliott]

"Market value is the cash equivalent price that would be paid for real property rights in an open and competitive market where buyer and seller have adequate information, are not under any compulsion and mutually agree on the price." (Source: I cobbled it up by myself)

 

[sputnam]

There are a number of definitions of market value. Use the one that seems best to you... in your report, include the definition you use and cite its source. In practice, there is little to no difference in the opinion of value from one definition to another. If you are doing work for a Client that specifies a particular definition then, you use that one.

 

[Zephyr999]

IRS Publication 561...https://www.google.com/url?sa=t&source=web&rct=j&url=https://www.irs.gov/pub/irs-prior/p...sQFnoECB0QAQ&usg=AOvVaw11XL9HXl1uJpEDTV1c7VX6

Yellowbook also has a FMV definition

 

[Mark K]

This following is taken from a report completed for a condemnation case for the local Circuit Court. I've also used it for many other appraisals. Brief, easy to understand.

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The definition of Fair Market Value is defined in #8 in the "Instructions to Appraisers" as provided by the Court: "Fair Market Value" means the price that the real estate would bring after fair and reasonable negotiations between a seller willing to sell but not compelled to do so, and a purchaser willing and able to buy but under no compulsion to buy."​

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[Mark K]

And, does the prevailing definition and source change as case law evolves? (I might be over-thinking...)

Yeah, you are.

 

[DWiley]

I might get beat-up for being lazy, but I'm wondering whether a single document is available that lists the "best" Fair Market Value definitions and accompanying sources for each, for the various types of non-lending appraisal assignments, e.g., marital dissolution, estate, bankruptcy, with consideration for my CA certification (although the FMB definition for BK that is federal presumably is the same for all states).

And, does the prevailing definition and source change as case law evolves? (I might be over-thinking...)

The proper definition to cite and use is driven by the intended use of the appraisal. There is no cookie cutter answer, other than "it depends"

Simply helping an owner set an asking price? Then the standard definition used by the GSEs is probably OK
In any sort of court/litigation case, it is common for the required definition to be established by applicable law/regulation. If you are not sure, ask the attorney
Tax appeal work? The definition should be the one used by the taxing authority
etc. etc.

 

[Terrel L. Shields]

A state may have a different definition for state purposes but the IRS definition of FAIR MARKET VALUE is a proper one to use in anything that is remotely related to estate or tax uses. Lenders are fixated on MARKET VALUE - not FAIR MARKET VALUE- and courts for legal purposes prefer the use of FMV.

 

[Marty Boone]

I do a little bit of work for attorneys that need appraisals for gift tax purposes. I include the current IRS definition of value in my engagement letter and in my report. Fair market value (FMV) is the price that property would sell for on the open market. It is the price that would be agreed on between a willing buyer and a willing seller, with neither being required to act, and both having reasonable knowledge of the relevant facts. Jan 19, 2022

 

[Zephyr999]

A state may have a different definition for state purposes but the IRS definition of FAIR MARKET VALUE is a proper one to use in anything that is remotely related to estate or tax uses. Lenders are fixated on MARKET VALUE - not FAIR MARKET VALUE- and courts for legal purposes prefer the use of FMV.

Citing the definition source is necessary as part of the framework...even if @Mark K points out its an assignment condition/instruction by client.