Fair market value is defined as the amount a typical, well-informed purchaser would be willing to pay for a property, under the following conditions:
- The seller and buyer must be unrelated.
- The seller must be willing, but not under undue pressure to sell; the buyer must be willing, but not under any obligation to buy.
- The property must be on the open market for a reasonable length of time.
- The payment must be in cash or its equivalent, and the financing, if required, must be typical for that type of property.
If all these conditions are present, this is considered a market value, or “arm’s length,” sale.