Fair Value vs. Fair Market Value: What’s the Difference (and Why It Matters for Appraisals)
- Keith Jennings
- Apr 7
- 3 min read
A quick and clear explanation of fair value vs. fair market value, tailored for estate, insurance, and donation appraisals.
When you're trying to figure out what something is really worth, whether it’s a piece of art or an entire collection, you might come across a few similar-sounding terms: fair value, market value, and fair market value.
Although they sound interchangeable, these terms serve different purposes depending on the situation. Knowing which one you need can help ensure you're getting the right kind of report, especially if that report is being used for estate planning, divorce, insurance, or donation. However, a good appraiser should be able to guide you to the right type after hearing your needs.
Table of Contents
What Is Fair Market Value?
Fair market value is the most commonly used standard in personal property appraisals. It represents the price a well-informed buyer would pay and a well-informed seller would accept in an open, competitive market, with neither party under pressure.
This type of value is typically used for:
Estate settlement and probate
Equitable distribution (like in a divorce)
Charitable donations (IRS purposes)
Some types of insurance
Appraisers determine fair market value by looking at real-world comparables, recent sales, condition, and demand for the item in question.
What Is Fair Value?
Fair value is usually encountered in legal or financial settings. It’s used in things like shareholder disputes, buyouts, and business valuations, and may be defined differently depending on state law or accounting standards.
Unlike fair market value, fair value often excludes certain discounts; for example, a discount for owning a minority share or for lack of marketability. It may not reflect what an item would sell for in the open market but is instead used to ensure financial fairness between parties in specific legal contexts.
Key Differences at a Glance
Aspect | Fair Market Value | Fair Value |
Based on open market? | Yes | Not necessarily |
Buyer/seller relationship | Assumes an arm’s-length transaction | Often used in internal or legal scenarios |
Discounts applied? | Yes (e.g. lack of marketability) | Often excluded |
Common uses | Estate, divorce, donation, insurance | Business disputes, legal settlements |
Appraisals in Divorce: What Standard Is Used?
In divorce situations, the court typically relies on fair market value to divide personal property fairly between parties. That includes things like artwork, antiques, jewelry, and collectibles.
The goal is to determine what those items would reasonably sell for under current market conditions—not what they were originally purchased for, and not necessarily what it would cost to replace them.
Appraised Value vs. Fair Market Value
The term “appraised value” can be a bit confusing because it simply means the value assigned by an appraiser, but the actual standard of value depends on the purpose of the appraisal.
If you're working with us on an estate or donation appraisal, we’re most likely using fair market value.
If you’re requesting an appraisal for insurance, we may be using replacement cost, which is usually higher than fair market value.
So while fair market value can be the result of an appraisal, not all appraisals are based on fair market value.
Market Value vs. Fair Market Value
These terms are often used interchangeably in everyday language, but there is a distinction. Market value is a broad estimate of what an item might bring in the marketplace, while fair market value is a more precise number grounded in specific assumptions about the buyer and seller.
Fair market value assumes that:
Both parties are reasonably knowledgeable
The sale is voluntary
There’s no unusual pressure to buy or sell
That structure makes fair market value more useful for legal, tax, and insurance purposes.
Fair Market Value vs. Replacement Cost
For insurance purposes, your policy might ask for replacement cost value instead of fair market value. Replacement cost refers to what it would cost to replace the item today with something similar, either new or used depending on the policy.
This value is typically higher than fair market value because it reflects current retail pricing, not resale value.
Which Type of Value Do You Need?
The right valuation depends on the purpose of the appraisal:
Estate planning, divorce, or charitable donation? You’ll typically need a report based on fair market value.
Insurance coverage? That often calls for replacement cost.
Business-related matters? These may involve fair value, usually determined in collaboration with legal or financial professionals.
Our appraisals are grounded in recognized industry standards and tailored to the specific requirements of each client. Whether you're handling an estate, documenting a donation, or reviewing a collection, we deliver valuations you can rely on.
Get started with a personal property appraisal that fits your needs and meets the right standards.
