How is fair market value best described?

Fair market value is best described as the estimated price agreed upon by sellers and buyers because it reflects the price that both parties would willingly accept in an open and competitive market, without any undue pressure or external influences. This concept is rooted in the idea of a mutually beneficial exchange where the seller feels they are receiving a reasonable return for their goods or property while the buyer feels they are paying a fair price for the value they are receiving.

In a fair market scenario, it's implicit that both parties have adequate information about the market and the item in question, allowing them to negotiate effectively. This description captures the essential characteristics of fair market value, making it a universally recognized benchmark in real estate, auction settings, and various other transactions where value is determined through negotiation between informed parties.

The other potential descriptions do not encompass the full scope of fair market value. For example, stating it as the highest bid in an auction overlooks the fact that an auction's highest bid may not represent fair market value if it is influenced by competitive bidding rather than intrinsic value. Similarly, defining it as the lowest acceptable bid or minimum price fails to reflect the understanding and agreement required from both the buyer and seller.