Fair value vs. Realizable value: what's the difference?

CFA Level I
#1

Any thoughts? Thanks!

#2

I believe fair value is the market value of the asset, and the realizable value is the one that you actually get when you sell the asset. But I might be wrong.

#3

It is quite correct. Let me give you an example:

Let’s say I want to sell my house with a fair value (which is the market value of the asset) of $1,000. The realizable value of my house is 99% will be lower than the market value. Why?

Because I need to pay (for example) any cost related to the house sales transaction (e.g brokerage fee, property tax, sales discount). Therefore the realizable value is the market value minus any cost incurred to sell/dispose the asset.