What are the three components that define Fair Market Value?

The definition of Fair Market Value is centered around the principle that it reflects what a property or asset would sell for in an open and competitive market. The correct answer emphasizes three critical components: a willing buyer, a willing seller, and the specific timing of the transaction.

A willing buyer indicates that the buyer is ready to purchase the asset at a mutually agreeable price without any pressure to buy, while a willing seller is one who is ready to sell at a price that reflects the true market value without any coercion. The inclusion of "at time of transaction" is particularly important, as fair market value can fluctuate over time due to changes in market conditions, economic factors, or asset-specific variables. This aspect highlights the importance of considering the market dynamics on the particular date of the sale, ensuring that the valuation reflects the most accurate snapshot of the asset's worth at that moment.

The other options do not capture the complete essence of Fair Market Value. For instance, while market conditions are important, they don't address the necessity of evaluating the willingness of both parties involved in the transaction. Similarly, market value and assessed value pertain to property and tax evaluations rather than the true value agreed upon between a buyer and seller. Price elasticity and investment return relate to economic theory