Which of the following best describes fair market value?

Fair market value is best described as the price agreed upon by both the buyer and seller, assuming both parties are acting knowledgeably and willingly in a competitive market. This definition captures the essence of fair market value as it takes into account the voluntary nature of the transaction, where neither party is under undue pressure to sell or buy.

In a fair market transaction, both the buyer and seller have access to relevant information about the property and are engaging with one another in a manner that reflects an understanding of the property's worth in the current market conditions. This mutual agreement indicates that both parties feel satisfied with the transaction, and thus, the price reflects an accurate valuation based on the market dynamics at play.

Other definitions, while they might touch on aspects of market behavior, do not fully encompass the mutual acknowledgment and agreement that defines fair market value.