How is "fair market value" typically determined in loss assessments?

Fair market value is typically determined by evaluating comparable sales, appraisals, and market conditions. This approach ensures that the value reflects the current market dynamics and the prices at which similar assets have recently sold. A comprehensive evaluation takes into account various factors, such as location, condition, and recent market trends, which provide a more accurate representation of what a willing buyer would pay and a willing seller would accept under normal circumstances.

In contrast to this method, estimating potential future earnings may not accurately depict the current value of an asset since it relies on projections that can be uncertain and speculative. Utilizing only the purchase price ignores any changes in market conditions or property value fluctuations that may have occurred since the asset was acquired. Furthermore, considering only the original cost of the asset fails to account for depreciation, appreciation, or improvements, which can substantially affect current value. Overall, focusing on comparable sales and market conditions is the most accurate and widely accepted method for determining fair market value in loss assessments.