In my experience, when I've done estate appraisals, the date of death provided the lower value for the client. If the estate has not been settled, say for more than one year, and the value decreases after DOD, will IRS accept a current value? I've encountered a situation, in which the electricity went off during an ice storm, the oil-fired boiler (which has a reset switch to prevent a buildup of oil in the firebox was not reset by anyone when the power came back on because no one was living in the house. The pipes froze, burst, and did a tremendous amount of damage as a result of water gushing from the baseboard hotwater system. The estate is in its third, going on 4th year. What is the property way to provide an estate appraisal?
Jack Sotack, Waymart PA
The effective date of the appraisal is determined at the scope of work dialogue between the appraiser and the client. There is nothing in the USPAP other than this requirement. Often when the appraisal is made for estate work the date of appraisal is the date of the death of the owner, but not always. Whatever the effective date of the appraisal is date that you use for the condition of the property on that date and the market at that time.
What type of license is needed to do County Assessor work? If we appraisers wanted to help homeowners reduce their property tax burden, by being consultants for them, do we need a license? E & O Insurance? What would be expected of us?
The kind of license that is needed to do assessor work depends upon the state in which you are located. You should check with your Real Estate Appraisal Commission or an attorney who can look up the law for you. The same is true for what license is needed to do tax consulting work and if E & O insurance will be required. What would be expected of you is that you have the education and experience to do a "credible" job.
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.
Dear Mr. Harrison,
I have been asked by an attorney whether there is any difference between "Fair Market Value" (a term he sees in IRS rules and regulations) and "Market Value" as used in appraisals. I have told him that the term "Fair Market Value" has been superceeded by the term "Market Value," but he is still concerned that there could be some value difference attributed to the use of one term rather than the other. Can you help me clear this up for him please? Thank you!
The definition of "Fair Market Value" is contained in the FIRREA Act and is required for all mortgages where the U.S. government is involved. It is the value most often estimated by appraisers. Keep in mind that the USPAP requires that every appraisal state the type of value being estimated and provide a definition of that value. Different IRS publications and regulations seem to include different definitions of the terms Market Value and Fair Market Value. I suspect that if you based your appraisal on one of those definitions, the value you estimated might differ from an appraisal based on one of the IRS definitions. The attorney is going to have to research which of the IRS definitions applies to the matter they are involved in, and if an appraisal is needed in the case, be sure to supply the appraiser with that definition of value.