Fair Market Value - FMV

Bubble, bubble, toil and trouble…what is the fair price of this pile of rubble?

So…this term revolves around the notion of "fair." Like...what is fair? And who told you the world was fair anyway?

Financially, fair (or at least fair market) means what the market will fairly and legally pay for an asset. So that means fair...as in not cash from a Somalian warlord’s leather briefcase...but rather fair as in the legitimate selling price of an excellent 2-bedroom, 3-bath shoebox in Palo Alto selling for $3M.

For something to be “of fair market,” the buyer has to be knowledgeable and unpressured, i.e. the Somalian warlord does not, in fact, have a gun aimed at the buyer’s head. Or any other body part.

And, generally speaking, the market itself has to be a legitimate market, like real estate or jewelry, or stocks, or bonds. Or whatever.

If it’s an illegitimate market, it’s uh…probably wondering why it was born out of wedlock.