Fair Market Value Determination Agreement
A Fair Market Value Determination Agreement is a legal document that establishes the process and terms for determining the fair market value of a particular asset or property. This type of agreement is often utilized in various contexts such as estate planning, business transactions, and divorce settlements, where an accurate valuation is crucial for equitable distribution or sale.
The fair market value (FMV) is defined as the price at which an asset would sell in an open market under normal conditions, where both the buyer and seller are informed, willing, and not under any compulsion to buy or sell. The determination of FMV can be complex and may involve various methods of valuation, such as comparative market analysis, income approaches, or cost approaches.
In a Fair Market Value Determination Agreement, the parties involved agree on the criteria to be used for valuation, identify who will perform the valuation (such as an appraiser or financial expert), and outline the timeline and responsibilities for providing necessary documentation. This agreement helps to ensure transparency and fairness in the valuation process, minimizing disputes and misunderstandings between the parties.
For example, in the context of an estate, the executor may enter into a Fair Market Value Determination Agreement with the heirs to determine the value of real estate or other assets, ensuring that all parties agree on the valuation method and the final assessed value for distribution purposes.
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