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.