Obtaining a "Date of Death" appraisal of real property after death

Today, we have a guest blog post from my colleague Ben Horowitz who is an appraiser. Recently, Ben and I were discussing the need for complete and accurate "Date of Death" appraisals on real property as part of the handling of post-death matters (probate, trust administration, etc.).  I invited Ben to write an article/blog posting for my website.  He kindly obliged:

The Importance of A Qualified Residential Appraiser for Trust Administration

Being in charge of resolving someone’s estate is often one of the most difficult and upsetting times in your life.  You might be dealing with your mother or father’s passing.  Either way, it can be a very difficult and emotional time.

If you are in charge of resolving the estate, at some point you will have to deal with the financial and legal matters that must be handled when someone dies.  Your attorney may advise you to obtain a “Date of Death” appraisal of your loved one's real estate.  This is because you may need an official appraisal from a residential appraiser who is qualified, in the event that the IRS challenges a valuation.  

The reason you may need an appraisal is to establish a new “cost basis” for the real property.  Therefore, when you sell the property, you will use the “date of death” valuation as your cost basis, not what your loved one paid for the property.   In short, you may end up with a huge tax savings by doing so.

It is advisable to hire a highly skilled residential appraiser who appraises property with independence and objectivity. The appraiser chosen should have no direct, indirect, or prospective interest, financial or otherwise, in the property. The appraisal should be a well-supported, professional appraisal report that is admissible and defensible in court. And it must follow the IRS Real Property Valuation Guidelines. The following outlines a few specific topics to look for when securing the services of a real property appraiser:

1.) Hire a state Certified Residential Appraiser: This designation provides you with the confidence that this individual has undergone an extensive amount of training and is permitted to perform valuations in excess of $1,000,000 as well as small residential income properties up to four units.

2.) Service Area: Very important. Make sure your appraiser understands and specializes in the subject market area. An appraiser from another area might have the technical skills to complete an appraisal, but most likely lack the specific knowledge, insights and nuances the subject area presents.

3.) Retrospective (Historical) Appraisal: This type of appraisal required in when settling an estate. Typically, the question is “What was this real property worth on the date of death?”  In short, all data reviewed by the appraiser is from that particular time period, usually up to six months prior the effective date of the report (the date-of-death) with the comparable selection based upon several factors including the market as of that particular date. Think of it like a “snap-shot” of the market for that particular time period. Current data has no refection upon the final opinion of value. Thus, current pending sales and/or active listings are considered. Additionally, the appraiser will value the property in question based upon the overall condition as of the date-of-death.  Any improvements made subsequently won’t be taken into consideration. Your appraiser should have the knowledge and experience necessary to complete this type of highly detailed assessment/valuation.  Needless to say, every situation is different and depends upon the needs of the estate.

4.) Fee Charged: As the old adage goes “If you think it's expensive to hire a professional, wait unit you hire an amateur”. This is certainly the case when securing an appraiser. Rely upon your attorney as they have vetted their recommended appraiser. Remember, not all types of appraisals are the same, nor are the fees associated with them. Make the fee charged your last requirement.

Ben Horowitz is a Certified Residential Appraiser serving Los Angeles and Ventura counties. He has completed in excess of 10,000 residential valuations for various attorney practices including trust administration, family law, bankruptcy as well as mortgage related purposes.

Telephone: (661) 799-5823
Email: Rhorowitz@socal.rr.com
Website: www.HorowitzAppraisalService.com

When hiring any professional, legal or otherwise, you should always conduct your own due diligence.