Fair vs Market Value

Two Types of Markets and Values

Before identifying the type of personal property appraisal required, an appraiser must first determine the client’s objective. Appraisal terminology can be confusing so its best to identify what the client’s end-result will be for the appraisal. Especially when determining Fair Market Value vs Market Value.

If client says, “I want to sell my artwork” then the appraisal report will need to identify the Market Value. Or “I want to donate my artwork for a tax deduction” the appraisal will need to determine the Fair Market Value.

Differences between Fair Market vs Market Value

What is the difference between Market Value and Fair Market Value? Although they sound similar, they have different meanings for a personal property appraisal.

According to the International Society of Appraisers Core Studies, Market Value is defined as follows..

“The most probable price that a buyer will have to pay and that a seller is most likely to receive, for an item of property within the defined marketplace at a particular point in time.”

Fair Market Value is defined by the IRS as follows..

“The price at which property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of relevant facts.”

Market value is similar to fair market value with the exception that, in market value, there can be a compulsion to buy or sell. In addition, market value assumes property will be sold within a given period of time.

To further clarify, Market Value allows for a broader scope to select comparable sales from including:

  • Retail Market
  • Wholesale
  • Orderly Liquidation Market
  • Forced Liquidation Market

Do you have questions about Fair Market Value vs Market Value? Contact Us.

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