Standards defines market value 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 arm’s-length transaction after proper
marketing wherein the parties had each acted knowledgeably, prudently,
and without compulsion."
Market value is a concept distinct from market price, which is “the
price at which one can transact”, while market value is “the true
underlying value” according to theoretical standards. The concept is
most commonly invoked in inefficient markets or disequilibrium
situations where prevailing market prices are not reflective of true
underlying market value. For market price to equal market value, the
market must be informational efficient and rational expectations must
prevail. Market value is also distinct from fair value in that fair
value depends on the parties involved, while market value does not.
For example, IVS
currently notes fair value "requires the assessment of the price that is
fair between two specific parties taking into account the respective
advantages or disadvantages that each will gain from the transaction.
Although market value may meet these criteria, this is not necessarily
always the case. Fair value is frequently used when undertaking due
diligence in corporate transactions, where particular synergies between
the two parties may mean that the price that is fair between them is
higher than the price that might be obtainable in the wider market. In
other words "special value" may be generated. market value requires this
element of "special value" to be disregarded, but it forms part of the
assessment of fair value.