Fair market value is the price a property would transact at between a willing buyer and willing seller, neither under duress, with reasonable marketing exposure. The theoretical valuation standard.
FMV is an idealized concept — the price that would emerge in a properly-marketed, unforced transaction. Actual transaction prices can differ from FMV due to specific buyer/seller conditions (1031 pressure, family situations, distressed circumstances).
For LA multifamily estate valuations, tax purposes, and formal appraisals, FMV is the standard. For practical transaction purposes, FMV approximates what the BOV and cap rate analysis produce. Inherited property valuations (for stepped-up basis) require formal FMV determination.
From the Sterman LA Multifamily Glossary — defined the way a broker with $1.41 billion across 254 closed transactions actually uses these terms.
Michael Sterman, Senior Managing Director Investments, Marcus & Millichap.
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