A couple transferring from Iowa to Virginia accepts $7,900 less than "fair market value" for their home. A small rural church congregation agrees to pay $1,500 per acre more than "fair market value" for five acres of land adjoining the existing church property. What's happening here?

Fair market value is "That price, at which a seller is willing to sell and a buyer is willing to buy, both parties being knowledgeable about the property, and neither party being under any time pressure to act". Prices actually paid and accepted for real estate can and do vary dramatically, however, from the so-called norm of "fair market value".

Consider the couple moving to Virginia. Time pressure affected the final price. A promotion was offered in exchange for a fast move. Accepting the lower offer allowed the family to move quickly. The new job won out, resulting in a final sale price lower than "fair market value".

Why did the church pay a $1,500 per acre premium for the land adjoining their existing property? They wanted it for a picnic and fellowship area for church members. Because land adjoining the church property was in limited supply, they paid the higher price.

While a theoretical "fair market value" exists for all properties, reality dictates that many deviations from that price level may occur. Each sale is governed by different circumstances.