Legal Definitions - actual market value

Actual Market Value refers to the most probable price that a property, asset, or service would bring in a competitive and open market. This is the price that a willing buyer and a willing seller would agree upon, neither being under any compulsion to buy or to sell, and both having reasonable knowledge of relevant facts.

It represents the true economic worth of an item at a specific point in time, assuming a normal transaction without unusual pressures or circumstances.

• Example 1: Residential Real Estate Sale

  Imagine a homeowner decides to sell their house. After consulting with real estate agents and reviewing comparable sales in the neighborhood, they list the house for $450,000. Several potential buyers view the property, and after some negotiation, a buyer offers $445,000, which the seller accepts. This $445,000 represents the actual market value of the house at that time, as it's the price a willing buyer and a willing seller, both informed and not under duress, agreed upon in an open market.

• Example 2: Insurance Claim for a Damaged Vehicle

  Suppose a car owner's five-year-old sedan is totaled in an accident. When the insurance company assesses the claim, they determine the car's actual market value just before the accident. They do this by researching prices for similar make, model, year, mileage, and condition vehicles sold recently in the local area. If comparable cars were selling for around $18,000, the insurance payout would likely be based on this figure, as it reflects what the car was truly worth in the market.

• Example 3: Valuation of a Small Business for Acquisition

  A small, independent coffee shop owner decides to sell their business. A potential buyer, interested in expanding their own chain, conducts due diligence, reviewing the coffee shop's financial records, customer base, and assets (like equipment and leasehold improvements). After negotiations, they agree on a purchase price of $200,000. This amount reflects the actual market value of the coffee shop as a going concern, representing what a knowledgeable buyer was willing to pay and a knowledgeable seller was willing to accept for the business in its current state.