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Whether you are referring to real estate, stocks or any other products, everything must have a set price. In an open market, the set price is determined by what the consumer is willing to pay, and that price is called the fair market value.
Definition
Fair market value is more thoroughly defined as the middle ground between what the buyer is willing to pay and what the seller is willing to receive for the product or service.
Real Estate
The fair market value of a house is determined by the seller's and buyer's needs. External factors can adjust the final price of a home to comparable houses on the market, the seller or buyer's time frame or the overall health of the housing market.
Stocks
In the stock market, the fair market value of a share of a company is constantly calculated by its trading price on any given day. This is determined by the overall market, earnings estimates and many other factors.
Everyday Items
The fair market value of everyday items such as cereal, laundry detergent and other household goods is a bit trickier to determine because there are so many competing brands. Essentially, whatever the consumer is willing to pay for a specific product or brand is the fair market value.
Considerations
Consumers have the ability to set and adjust the fair market value of any product or service. They decide whether to purchase a product at a certain level.
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