The fair market value can be defined as the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arms length transaction after proper marketing, wherein the parties have each acted knowledgeably, prudently and without compulsion.

Market value is a market supported estimate. In fair market value the market forces play a predominant role. In a market there are alternative options available to both buyers or sellers.

In such a situation, if there are no overriding reasons to force any decision for a buyer to buy (from particular seller) or for a seller to sale (to a specific buyer at a given price) where buying / selling both acts are not influenced by any uncommon market conditions such as hyper inflation or undue, uncommon depression, then the value at which an exchange takes place is termed to be the 'Fair Market Value'.