What is the critical factor in determining Fair Market Value?

The concept of Fair Market Value (FMV) is primarily determined by what a willing buyer would pay a willing seller in an open market transaction, without any undue pressure on either party. The most critical factor in assessing this value is typically based on recent similar property sales. These sales provide concrete data on what properties in similar locations and with comparable characteristics have sold for, which reflects current market conditions and buyer preferences.

While local government regulations, sales between related parties, and property classification can influence property values, they do not directly represent what the market is willing to recognize as the fair market value. Local government regulations can impact property use and, indirectly, its value, but they do not establish an actual transaction price. Sales between related parties may not accurately reflect market conditions due to potential familial or friendly influences on pricing, thus creating a situation that could skew the perceived market value. Provisions based on property classification might describe how the property can be used but again do not provide a direct measure of market willingness to pay.

In summary, the emphasis on recent similar property sales is crucial for determining FMV, as it is grounded in actual transactions, offering a reliable basis for valuation within a specific market context.