Dear Mr. Harrison,
I have received and read REV since its inception. Thanks very much for the opportunity to use this great resource!
I am writing regarding the recent “Ask Henry” entry entitled: Fair Market Value, Market Value, IRS Value. I wonder if the U.S. Code of Federal Regulations (available online at http://www.access.gpo.gov/nara/cfr/cfr-table-search.html#page1) could be of use in resolving this question. For instance, in appraising real property for estate settlement, I use the definition of “fair market value” found at Section 20.2031–1(b), Part 20, Chapter I, Title 26. (This is under, “Estate Tax, ; estates of decedents dying after August 16, 1954” and “Definition of gross estate; valuation of property”.) The definition found there is, “The fair market value is the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts.” Since USPAP requires that we also cite the source of our definition, I am able to give the appropriate citation as set out above. Would you concur with this methodology?
Thanks again for a great magazine/blog.
James P. Johnston
I looked at the site and I think it is potentially a great resource for an attorney. However, I found it not useful as far as helping an appraiser determine what value to use. I entered each search term: "Market Value", "Fair Market Value" and "IRS Value". In each case, I got 200 references, which is the maximum it will give for one search. This means that I would have to read and understand 600 documents -- and it does not preclude the possibility that there might more. I need to stick to my original advice: for mortgage purposes, the FIREA definition must be used, and it is a useful definition for many other types of mortgages too. I would recommend that appraisers do not try to offer any other definition of value. This should be up to the lender/client, hopefully with the help of their attorney, and should be fully communicated to the appraiser as part of the required scope of work dialogue. The problem is that once the definition of value is changed, it requires selection of comparables that were sold under conditions that meet this atypical definition -- which is a good trick if you can do it.