market value” using general pricing methodologies, such as Comps, and Rules of Thumb?
Fair market value is not indicative of a real world sale price because it is based upon a theoretical buyer and seller operating with full knowledge, not under compulsion to make a deal, and negotiating for their own best self-interest to arrive at a cash (cash equivalent) price. Sellers know the true value of the cash flow, which may not be disclosed on financial statements or tax returns, and almost always add a “going concern” premium to their price expectations. Also, if the seller does not receive all cash, then the actual selling price tends to be higher to reward the added risk for the seller by holding a note. Finally, a seller always asks for more than is expected to provide room for negotiation, since the seller knows the buyer is unlikely to make a best offer first.
Related Questions
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