Real Estate Appraisals Required?

[REAppr]

I am a real estate appraiser practicing in Idaho and Washington states. On occasion, I am contacted by heirs or executors to appraise properties for estate settlement. Generally, these are retrospective appraisal assignments with valuations as of the date of death.

On two recent occasions, I have been contacted and hired by individuals to appraise properties for estate purposes, only to have them call back and cancel. The most recent was yesterday. In both instances, I was told that their attorney said an appraisal by a certified appraiser was unnecessary, and that an "evaluation" by a real estate agent would be less expensive.

My questions to the legal professionals on this site are:

Is an appraisal by a certified real estate appraiser NOT required in certain instances when settling an estate? If so, under what circumstance IS an appraisal required?

Is it common practice to suggest real estate agent "evaluations" for estate purposes?

Thanks for your help!

 

[anteater]

I believe that there are some states (such as California) that may require an appraisal from an independent certified professional. But, in general, I would say, "No, it isn't required."

Otherwise, I would say that it is a matter of what the appraisal is being used for. A couple situations where an appraisal from a certified appraiser would be preferred:

1) Where there are possible estate/inheritance taxes to be considered.

2) Where the distribution of the estate assets would depend upon the value of the real estate (and, I guess I would add, that there is, or there is likely to be, some dispute about the value.)

But, even in those situations, often an a less rigorous "evaluation" may not be a problem.

 

[TrustUser]

hi ant,

i hope california does not require an appraisal from a certified professional. i had not planned on having one, when the time came.

my thought is that the biggest reason for a price evaluation at time of death is to get the new basis for the property.

if a property is sold somewhat quickly, it is gonna be hard to argue with the "sales price" as what it is truly worth.

a price evaluation, in my opinion, is only needed if you are gonna hang onto the property.

for those properties, a new basis is always established. few people have to pay inheritance taxes.

i guess i will eventually know for sure if i am required to do an appraisal, or whether a realtor price evaluation will suffice.

i think realtors have more accurate opinions of worth than does an appraiser. before making a loan, i always ask a local broker about the property in question. even though i have a full appraisal in front of me, they can often be wrong. and in these days, they are commonly fraudulent. realtors work the streets every day, in their local area. they simply are more knowledgeable than an appraiser as to what that property will actually sell for, on the open market.

 

[tranquility]

my thought is that the biggest reason for a price evaluation at time of death is to get the new basis for the property.

Smart. Not complete, but smart. (Complete is for a journal article and not this forum.)

If a property is sold somewhat quickly, it is gonna be hard to argue with the "sales price" as what it is truly worth.

Brilliant, legally correct and well supported.

a price evaluation, in my opinion, is only needed if you are gonna hang onto the property.

Ohh, that's got to hurt. What if one sells to a related party? Besides, how does one distribute an estate? I suspect this is more a lack of experience than knowledge.

for those properties, a new basis is always established. few people have to pay inheritance taxes.

I'm thinking we have a way different experience.

i guess i will eventually know for sure if i am required to do an appraisal, or whether a realtor price evaluation will suffice.

Here's a tip, if you have to PROVE something to the IRS, a Realtor price will not suffice. Otherwise, go for the qualified appraisal. (Realtor price may be worthwhile to determine if an estate return is required at all.)

i think realtors have more accurate opinions of worth than does an appraiser.

The IRS has a *way* different opinion.

and in these days, they are commonly fraudulent.

Huh? How does one get a "fraudulent" appraisal? Most I see have extreme documentation as to how they came to their wild assed guess. Wrong? OK. Fraudulent? Not in the many I see.

 

[DAD10]

I am a real estate appraiser practicing in Idaho and Washington states. On occasion, I am contacted by heirs or executors to appraise properties for estate settlement. Generally, these are retrospective appraisal assignments with valuations as of the date of death.

On two recent occasions, I have been contacted and hired by individuals to appraise properties for estate purposes, only to have them call back and cancel. The most recent was yesterday. In both instances, I was told that their attorney said an appraisal by a certified appraiser was unnecessary, and that an "evaluation" by a real estate agent would be less expensive.

My questions to the legal professionals on this site are:

Is an appraisal by a certified real estate appraiser NOT required in certain instances when settling an estate? If so, under what circumstance IS an appraisal required?

When it involves a federally insured/related transaction OR at the clients request.

Is it common practice to suggest real estate agent "evaluations" for estate purposes?

It depends as most often estate sales can involve several various types of real estate AND PERSONAL PROPERTY in one assignment-these are typically
narratives-and depending on the complexity- may vary on whom is competent to execute the assignment.

Thanks for your help!

Your welcome.
Good Luck and Goodnight.

 

[TrustUser]

tranquility,

you sure must like arguing with me. it is hard to comprehend what you meant by each of your quips back.

so let me address some things, in general.

if you are not aware that there are fraudulent appraisals, you are simply naive about that topic. since lending on properties is how i make my income, i am very much aware of it. you might want to stick to lawyering - cuz you certainly made a fool out of yourself on that one. not because you did not know, but because you acted like an arrogant jerk with your answer. the next time you choose to use that much sarcasm, at least be correct about it.

i never said anything about what the irs said. i simply said that local realtors have a better knowledge of what properties will sell for, than does an appraiser. that is because they are in the business of selling properties. remember i have told you in the past that if you want to know something about any topic, go to the person who does this for a living.

you dont like this, because lawyers dont do much for a living, other than they are paid to be the best liars, and intimidators for their clients. they dont know as much about trusts as a firm who manages trusts for a living. they dont know as much about tax accounting for trusts as an accountant who does this for a living.

the value of anything is what it will sell for. so when i sell a property for x-dollars, that is the value of it. that is how much i could get for it. if i get $100 for something, it makes no difference that i have an appraisal stating it is worth $200. this is basic supply and demand of a capitalistic system.

i stick to my statement about evaluations. if you are gonna sell the property, then you are not distributing that property. you will be distributing the proceeds. it makes no difference what sort of appraisal i have on the property. it is what i can sell it for. selling to a relative is a very specific situation, which may require specific actions.

so, once again, if you are selling the property, there is usually not much need for a separate price evaluation. the market will tell you what it is worth. however, you will want to establish a basis for it, whether you keep it or sell it. because you will eventually sell it, and then you will want to use the new established basis, as opposed to an older basis, before you inherited it.

you may want to update your experience, or simply do some research. most estates do not pay inheritance tax. i wont use you for inheritance purposes, if you are unaware of that basic fact.

the one thing i have no argument with is your statement about proving to the irs. if they require an appraisal, then i guess you would be smart to get one. which is why i told ant that i "hoped" i would not need to get one. since i was not giving any sort of definitive answer about it. so if the irs requires that a professional appraisal is needed for your basis when selling the property, then i guess you need to get one.

that being said, do you have a link that you can give us all that says that the irs only accepts professional appraisals for real estate evaluations ?

everywhere i read, it talks about fair market value. a price evaluation from a realtor with backup comparables, and a sales history seems like a fairly detailed synopsis of the worth of a property. i suspect that you are wrong about your statement, regarding the irs requiring professional appraisals, only. but if you can provide a link, stating such, i am more than willing to say that my suspicion was wrong. i have already stated, from the very beginning, that i was not positive about it.

if you are not aware, a BPO in the lending industry, is called a broker price opinion. a lender will usually require this, along with the appraisal. it requires the broker to do his own evaluation, based upon sales, etc. this helps to certify the correctness of the professional appraisal, and to help prevent the lender from using fraudulent appraisals.

it is likely that i have made more mistakes regarding lending than your total knowledge about lending. but it is by mistakes that we all learn.

one thing i have learned is that once i get the loan package, which has a credit report and a professional appraisal - i find a property management firm in that area who can tell me about that area. he can tell me what that property is really worth, and what sorts of problems there may be in managing or selling that property. that was learned at a bit of a price, so it is not a lesson i will ever forget. that is after i have viewed a professional appraisal, and the bpo. if both of those 2 evaluations seem to match, then i take the time to find a local guy. local realtors know the local area better than anyone else. i am working with property managers now, who tell me all sorts of intricacies that arent in an appraisal, and things that i hadnt thought about before.

if you could step down from your high horse of that arrogant lawyer attitude that you possess, you would benefit.

i dont usually make comments about stuff that i have not personally done. you oughta know that, by now. you wouldnt look so ridiculous. and you know that there is nothing worse for a lawyer to be made to look ridiculous by a non-lawyer.

 

[anteater]

Boys, boys, boys.... Can't we all get along?

If this goes on, I'm going to set up a Steel Cage Match and make some money off this!

-------------------

What I was vaguely recalling about California were these people that are called Probate Referees.

http://probatereferees.org/

 

[tranquility]

if you are not aware that there are fraudulent appraisals, you are simply naive about that topic. since lending on properties is how i make my income, i am very much aware of it. you might want to stick to lawyering - cuz you certainly made a fool out of yourself on that one. not because you did not know, but because you acted like an arrogant jerk with your answer. the next time you choose to use that much sarcasm, at least be correct about it.

Since the topic is wills, trust and estate planning and the question had to do with heirs and executors, you might want to deal with a "qualified appraisal" rather than your experience on lending on properties. How much do your appraisals cost? I bet I pay a lot more for mine. You see, they're different. Please don't argue a completely different subject. Besides, even if you didn't so misunderstand the legal topic being discussed as to make your opinion suspect, it is very different to say there are fraudulent appraisals and saying they are "commonly" fraudulent.

i never said anything about what the irs said. i simply said that local realtors have a better knowledge of what properties will sell for, than does an appraiser. that is because they are in the business of selling properties. remember i have told you in the past that if you want to know something about any topic, go to the person who does this for a living.

And, what's your point when dealing with the question on the table? You see, when you answer things which are not asked without distinguishing it, others might think the rambling refers to the question. (Perhaps you could say something like, "Even though this has nothing to do with the question, I just want to say apples are yummy." That way, fools such as myself know that your opinion on how yummy apples are is not meant to answer when a qualified appraisal is required.) Look at the way I did it. I distinguished when a Realtor comp would be used by people covered by the question in the parenthesis.

you dont like this, because lawyers dont do much for a living, other than they are paid to be the best liars, and intimidators for their clients. they dont know as much about trusts as a firm who manages trusts for a living. they dont know as much about tax accounting for trusts as an accountant who does this for a living.

Since I both prepare taxes as my core business and am a fiduciary for numerous trusts, I assume this is another irrelevant "apple" comment.

the value of anything is what it will sell for. so when i sell a property for x-dollars, that is the value of it. that is how much i could get for it. if i get $100 for something, it makes no difference that i have an appraisal stating it is worth $200. this is basic supply and demand of a capitalistic system.

Goodness. Almost. There is a long discussion regarding Fair Market Value regarding a lottery ticket and a prize car in the tax forum, look it up and learn the law. In the world of simple things your definition is fine. In the real world where people do hard things with varying motivations, we might further define what value means by using the Supreme Court's definition. That way we avoid the problem as to if we sell under duress or to a person we're doing a favor for. (Let alone the problem of having to value something at a time different from the sale.)

you may want to update your experience, or simply do some research. most estates do not pay inheritance tax. i wont use you for inheritance purposes, if you are unaware of that basic fact.

You may want to learn how to read. I believe I wrote our experiences differ. I agree most estates do not pay inheritance tax. However, most I deal with do. See how that works? Your opinion on the matter is checked by people who don't really know. Mine is often checked by the IRS, lawyers who oppose the determination and the courts.

As to the rest, I like oranges. Apples are great though.

 

[curb1]

tranquility,

One key answer to the question that "TrustUser" asked would serve this forum well. He asked, "do you have a link that you can give us all that says that the IRS only accepts professional appraisals for real estate evaluations ?".


If nothing comes from this discussion but your answer to that question, it would be beneficial. Since you "both prepare taxes as my core business and am a fiduciary for numerous trusts ....", this should be a very easy question and quite relevant.

Thank you

 

[tranquility]

The problem is, the question does not have a "link". There are many issues implicated by the question. The answer requires determination about which part of the law and which circumstance is implicated. As a simplistic answer, it's not required. When the facts are more developed and the goals defined, it is required. I bet Social Science Research Network (SSRN) Home Page has a paper on the topic. If not, I don't really care. It's not my job to educate those with little understanding of the complexities of the situation.

Give me specific facts and I'll point out the issue and the IRS requirement.

That some feel it is a "key" answer, points more to a lack of understanding of all the things which can affect the reply than a reasonable discussion.

Give me the facts, I'll give you the cite.

 

[curb1]

Well, let's go back to the original questions by the OP that you might try to answer:

"Is an appraisal by a certified real estate appraiser NOT required in certain instances when settling an estate? If so, under what circumstance IS an appraisal required"?

"Is it common practice to suggest real estate agent "evaluations" for estate purposes"?

A specific situation: A 90 year old man dies. He is/was the remaining trustee/settlor in a revocable trust. At death the trust becomes irrevocable. The trust has five properties/houses. The successor trustee sells the five houses within two years. The basis of the property at time of death needs to be determined to calculate the gain (or loss) at the time of sale.

Question: Does the IRS require the property be appraised by a "certified real estate appraiser"?

Below applies when there is an understatement of value when reported. But, when the value is not substantially undervalued, does the IRS require a "certified real estate appraiser"?

I can understand you using a "certified real estate appraiser" because you are dealing with other people's money and you probably don't care the cost.



Internal Revenue Bulletin - November 13, 2006 - Notice 2006-96

SECTION 3. TRANSITIONAL GUIDANCE
.01 In general

The Service and the Treasury Department expect to issue regulations under § 170(f)(11), as amended by the PPA. The terms in section 3 of this notice apply to contributions of property (other than readily valued property within the meaning of § 170(f)(11)(A)(ii)(I)) by individuals, partnerships, or corporations for which a deduction of more than $5,000 is claimed on returns filed after August 17, 2006, and before the effective date of the regulations that the Service and the Treasury Department expect to issue. Until regulations are effective under § 170(f)(11), as amended by the PPA, an appraisal that meets the requirements of this notice shall be treated as a qualified appraisal for purposes of § 170(f)(11). The determination of whether an appraiser is qualified under section 3.03 of this notice must be based on the appraiser’s qualifications as of the date the appraisal is made.

.02 Transitional terms-qualified appraisal

(1) Qualified appraisal. An appraisal will be treated as a qualified appraisal within the meaning of § 170(f)(11)(E) if the appraisal complies with all of the requirements of § 1.170A-13(c) of the existing regulations (except to the extent the regulations are inconsistent with § 170(f)(11)), and is conducted by a qualified appraiser in accordance with generally accepted appraisal standards. See sections 3.02(2) and 3.03 of this notice.

(2) Generally accepted appraisal standards. An appraisal will be treated as having been conducted in accordance with generally accepted appraisal standards within the meaning of § 170(f)(11)(E)(i)(II) if, for example, the appraisal is consistent with the substance and principles of the Uniform Standards of Professional Appraisal Practice (“USPAP”), as developed by the Appraisal Standards Board of the Appraisal Foundation. Additional information is available at http://www.appraisalfoundation.org.

.03 Transitional terms-qualified appraiser

(1) Appraisal designation. An appraiser will be treated as having earned an appraisal designation from a recognized professional appraiser organization within the meaning of § 170(f)(11)(E)(ii)(I) if the appraisal designation is awarded on the basis of demonstrated competency in valuing the type of property for which the appraisal is performed.

(2) Education and experience in valuing the type of property. An appraiser will be treated as having demonstrated verifiable education and experience in valuing the type of property subject to the appraisal within the meaning of § 170(f)(11)(E)(iii)(I) if the appraiser makes a declaration in the appraisal that, because of the appraiser’s background, experience, education, and membership in professional associations, the appraiser is qualified to make appraisals of the type of property being valued. See also § 1.170A-13(c)(5).

(3) Minimum education and experience. An appraiser will be treated as having met minimum education and experience requirements within the meaning of § 170(f)(11)(E)(ii)(I) if —

(a) For real property

(i) For returns filed on or before October 19, 2006, the appraiser is qualified as a “qualified appraiser” within the meaning of § 1.170A-13(c)(5) to make appraisals of the type of property being valued.

(ii) For returns filed after October 19, 2006, the appraiser is licensed or certified for the type of property being appraised in the state in which the appraised real property is located.

 

[tranquility]

While I think your citation comports with what I wrote, does that really answer the question?

How about to charity? What if there was a sale? What are we trying to protect? Tax? Fiduciary responsibility? What is the requirement?

 

[latigo]

Is an appraisal by a certified real estate appraiser NOT required in certain instances when settling an estate? If so, under what circumstance IS an appraisal required?

Neither the probate laws of Washington nor Idaho mandate that the personal representative employ the services of a certified real estate appraiser.

Idaho Code Section 15-3-708” Employment of Appraisers” (in part):

"The personal representative may employ a qualified and disinterested appraiser to assist him in ascertaining the fair market value of as of the date of the decedent's death of any asset the value of which may be subject to reasonable doubt."

Revised Code of Washington 11.44.015

“ . . . The personal representative shall determine the fair net value, as of the date of the decent death … “

Is it common practice to suggest real estate agent "evaluations" for estate purposes?

It cannot be truthfully said that it is a “common practice” for the attorney for the estate to suggest that the PR employ a certified real estate appraiser. Specific circumstances would govern that decision.

 

[TrustUser]

i made a simple and friendly post to ant.

you decided to make a federal case out of it.

supply us with the link about the irs. i think you are wrong.

i have looked up several irs pubs, and they all talk about fair market value.

the fact that you work on a specific minor percentage of estates, does not change the fact of my statement. most estates do not pay inheritance taxes. see how that works ?

many appraisals are fraudulent. it has been one of several reasons for our whole real estate collapse. every lender i know has had to foreclose on properties. MOST OF THEM are finding from our current managers/brokers have been highly inaccurate, i.e. fraudulent.

it is not out of the norm at all to say that they are commonly fraudulent. with regards to appraisals for estates, someone can easily slip the appraiser a little extra, and have numbers on his appraisal that is more to his liking.

the appraisal industry, which i used to think was highly honest, has taken a huge downturn. it is not a trustworthy industry at all. i now look at them as pieces of information that need extra backing.

most estate appraisals are cheaper for real property than is an appraisal that is being used when the property goes up for sale. if your specific situation is different, then once again you are in the extreme minority, such that you should understand not to use your experience to tell someone else that they are wrong. see how that works ?

once again, i will tell you that to get accurate information, go to the person who does that topic for a living. local real estate people know more about the value of those local properties than anyone else. that includes appraisers, whose job is done from analyzing numbers. that is not nearly the same as the experience of actually selling the properties.

but what can i expect from a lawyer, whose advice is go see a lawyer ?

i see your remarks to everyone. you talk down to just about every op who posts. you immediately start out again with me in your arrogant manner.

it is impossible to have a traditional discourse with you.

curb again asked to you to provide a link, and you make up some ridiculous excuse. either you have proof that the irs requires only a professional appraisal, or it doesnt. quit beating around the bush, like you lawyers like to do. you get caught in your own trap, and then make some ridiculous answers.

i realize that arrogant attitudes like yours is a sign of a major inferiority complex, such that you need to constantly try to make everyone think that you are smarter than all of us. and i have tried to be patient with you. but i lost that a long time ago.

there is at least one person on this site who is not gonna put up with your crap.

most of the rest of us can disagree with one another and have an actual friendly exchange of information. you, on the other hand, need to have sarcastic remarks, talk down to everyone, and then be unable to provide links regarding comments that you say. but you are the first one to tell us to provide links.

you should know by now that you are not gonna intimidate me. i consider you just to be a typical lawyer, who likes to toot his own horn.

hey ant, get out that referee book. i would love to get tranquility in a ring. i could then beat him senseless. on second thought, i could not do that, since he already has no sense.

 

[anteater]

Aw, Lat, quit spoiling the fun!

I noticed the OP viewing this thread a few minutes ago. He/she probably thinks that all of us are freakin' nuts.

You know, Washington is one of the loosest states regarding probate filing requirements that I have seen. Subsection 2 of 11.44.015:

(2) The inventory and appraisement may, but need not be, filed in the probate cause, but upon receipt of a written request for a copy of the inventory and appraisement from any heir, legatee, devisee, unpaid creditor who has filed a claim, or beneficiary of a nonprobate asset from whom contribution is sought under RCW 11.18.200, or from the department of revenue, the personal representative shall furnish to the person, within ten days of receipt of a request, a true and correct copy of the inventory and appraisement.