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ARTICLE · 02 DECEMBER 2024

Fair Market Value—What Does It Mean?

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In the world of real estate, it is common to use fair market value (FMV) as a way of describing the value of real estate or rents payable. However, perhaps not often considered is the issue that the term FMV.

CanadaReal Estate and Construction
Jane Helmstadter
Jane Helmstadter
Andrew Jeanrie
Andrew Jeanrie
Meg Tweedlie
Meg Tweedlie
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In the world of real estate, it is common to use fair market value (FMV) as a way of describing the value of real estate or rents payable. However, perhaps not often considered is the issue that the term FMV can mean different things to different people. For some, FMV may be the price that someone would be willing to pay for the land under its current use. For others, FMV may be the price that someone would be willing to pay for that same land under its highest and best use, such as for redevelopment purposes. Alternatively, for certain unique assets, FMV may have other meanings, such as replacement value. For example, if land is to be sold to a neighbour as part of a land assembly and that neighbour may be willing to pay a premium to get the land, is that premium then part of the determination of the FMV and should that premium be calculated with a risk premium or as of the date where the development value is secured?

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