Drive-By Retrospective Appraisals

[David S]

Got a private client call. The wife passed away in 2021. The husband sold the house a couple of months ago. Now he is preparing the tax documents. Just got a letter from the IRS to request an appraisal report for FMV in 2021 for step up purposes. Since the house was sold to someone already, I can't access inside. So it will be Drive-By Retrospective assignment, right? The question is how can I evaluate interior condition back to 2021? Interviewed husband? They are the original owner, the house was never resale before. Just said average or fair? We have to set the subject's condition as base, then, we can do the comps condition, upgrade/ remodel adjustment, right? Thanks folks!

 

[Terrel L. Shields]

how can I evaluate interior condition back to 2021? Interviewed husband?

Yes, exactly. Find out exactly what they paid for the house when built. Do a reverse cost approach to estimate the quality and effective age. Write down what the client says about the property and have them sign it, better yet record the conversation. Take your time and don't miss as Bat Masterson said.

So if they went through a Realtor, look for the old listing and it might have interior photos. Google the address.

DO NOT USE THE 1004 form, nor use the 'Market Value" definition. Use the IRS definition of "Fair Market Value". Do a 5 year history not 3. Prolly not an issue. But I'd do both the 2021 cost approach and a sales approach both...although sales approach is prolly the preferred method. AND these are AS IS (regardless any issues the owner reports) as of the DATE OF DEATH. Again use a non-lender form.

 

[sputnam]

Agree. Do not use GSE forms to report this appraisal. As for the interior condition of the improvements, you will need ot look at old MLS listings, previous appraisals (if you can get your hands on one), tax records, interview whomever you can, etc. Since this is not for a GSE loan you can use Extraordinary Assumptions. Also, since it isn't for a GSE and is retrospective, you can use comparable sales on either side of the effective date of the appraisal. There is an FAQ or two about it but, I'm too lazy to look it up right now. Main thing is you can use post effective date sales if the market was pretty much the same or if you make appropriate time adjustments.

 

[David S]

Yes, exactly. Find out exactly what they paid for the house when built. Do a reverse cost approach to estimate the quality and effective age. Write down what the client says about the property and have them sign it, better yet record the conversation. Take your time and don't miss as Bat Masterson said.

So if they went through a Realtor, look for the old listing and it might have interior photos. Google the address.

DO NOT USE THE 1004 form, nor use the 'Market Value" definition. Use the IRS definition of "Fair Market Value". Do a 5 year history not 3. Prolly not an issue. But I'd do both the 2021 cost approach and a sales approach both...although sales approach is prolly the preferred method. AND these are AS IS (regardless any issues the owner reports) as of the DATE OF DEATH. Again use a non-lender form.

Thanks! Since they are the original owner. Only time the sale is a couple of months ago. But can't retrospect 2021 condition. Maybe ask realtor to get rough estimate? You mean have to check & disclose past 5 years resale history, right? But even NL form only say 3 years subject history. Just put comment to say appraiser checked past 5 years esale history, right? Comps still 1 years, right? Thanks!

 

[David S]

The guy called me again to say no need to do the appraisal. IRS told him just download a few comps from online and send over. Will IRS so nice? Then, there will be no estate appraisal assignment for us any more?

 

[Fernando]

How did IRS hired you as appraiser in first place to do the appraisal?
Usually, the owner would contact the appraiser.

 

[David S]

IRS didn't call me. The husband's relative who is my friend contact me for appraisal. Then, late on he told me IRS said just a few comps from Redfin or Zillow print out is enough. lol.

 

[Fernando]

IRS didn't call me. The husband's relative who is my friend contact me for appraisal. Then, late on he told me IRS said just a few comps from Redfin or Zillow print out is enough. lol.

If Zillow works in his favor, go for it but don't know how you can use Zillow valuation going back to 2021.

 

[Dublin ohio]

The guy called me again to say no need to do the appraisal. IRS told him just download a few comps from online and send over. Will IRS so nice? Then, there will be no estate appraisal assignment for us any more?

That just doesn't sound right. I just finished 4 estate appraisals and am working on a fifth. As strict as the IRS is on estate appraisals. I find it hard to believe they said "just send a few "comps" from an on line source. As to the interior condition of subject. Was the most recent sale an MLS sale?

 

[Fernando]

I had one estate appraisal in which the husband called me within a week of his wife's death. I thought it was too soon and he would be grieving.
Seeing the property so soon did allow me to see the less than average condition of subject.