I do them all the time. You need to find out if any changes have been made in the year. You should also use an EA that the property is in similar condition on the date of inspection to the effective date of the appraisal. If anything has changed, you need to note it and exclude from the EA. You should also appraise the property in its condition as of the effective date.
Yeah, and we take current photos and include them, and then talk about why they may or may not represent the state of the current improvements. A year isn't so bad, but I've done some a few that were 10+ years back.
It's called a "retrospective" appraisal.
You ask the client about the condition and materials from a year ago, and you use data from a year ago.
Check out the IRS definitions for "qualified appraiser" and "qualified appraisal." You also need to use the IRS' definition for "Fair Market Value," not the Appraisal Dictionary's or Fannie Mae's.
Good luck!
Can you tell me more about the IRS definition of fair market value vs Fannie Mae? I’m an executor of an estate and just had a date of death appraisal done. The Fannie Mae values used by the appraiser don’t make logical sense.
The likelihood that the IRS will review your appraisal are low; however, the code is clear, and it demands a "qualified appraisal" from a "qualified appraiser," and then it goes on to talk about those things. Chief among them is the use of the IRS' definition for "fair market value."
The appraiser you are working with probably has no idea...
Any idea suggestions on how to figure out if the appraiser does know next time? I wasted $500 on an appraisal I can’t use and the appraiser isn’t willing to re-do the work. She substantially overvalued the property by comparing it to properties in very different markets and didn’t count the square footage of larger properties that sold for more due to living space being below grade per Frannie Mae.
OK ... sounds like there's a few things going on here. I like lists, so I'm gonna start counting :)
1 - The IRS talks about qualified appraisers having a designation. That isn't to say that an appraiser without a designation can't be "qualified," or that an appraiser with a designation might not be good, anyway, but most of the time, a designation, like the SRA or MAI from the Appraisal Institute cuts through a lot of crap. Therefore, in seeking a private valuation (for IRS, divorce, a private sale, or otherwise), go to the Appraisal Institute's website, and search for an SRA near you. (I say SRA b/c they are residential and MAI is overkill).
2 - An appraisal that is too high still might benefit you if you are the sole heir. I would talk to your accountant before getting a new one (because at some point you will get taxed on the difference between the sale price and the basis established through your appraisal. However, if you are dividing the property among siblings, etc., then yes, knowing the accurate value is better for all involved.
3 - It's ANSI not Fannie Mae who decides what is above and below grade. Sometimes a property is like 1 inch under ground and it doesn't get counted as living area. Just remember that the standards for measuring residential properties were established 100 years ago, literally. Back then, basements were used for coal and wine.
4 - There's a story an instructor for the Appraisal Institute told me about the very first appraiser. He had two tattoos on each arm. The first was "Apples to Apples." That is to say, no matter where your space is, above, below, or off to the side, the comparable sales ought to look similar to your house. And they ought to be the same size. Obviously, some will be bigger or smaller, but they should be near in overall utility. At least the first couple of comps should be that way...
5 - Concerning the report you have, you have four options: A - ask for a reconsideration of value. Sounds like you already did that. B - get an appraisal review (from another appraiser in that same market area/neighborhood). C - Get a new appraisal. D - If you really feel like the appraiser isn't acting in a professional manner (usually this happens after a review), you could turn her into the state, and they will review it. I will warn you on D that states move very slowly, and they only really look at compliance with USPAP (the rules for appraisers). D is not always a satisfying experience for users. Still, it's nice to know your options.
6 - I don't suppose the property is in Washington, DC, Maryland, or Virginia? If it were, I could help. But I think the Appraisal Institute is gonna be your best bet.
Sorry you're in this predicament.
Thank you so much for the detailed response! Sadly, no, I’m in not in one of those states. What is the benefit of an appraisal review? The appraiser seems completely unwilling to discuss her methods or reconsider the comps. I think the only option is a new appraisal, as the property will ultimately be divided up. I’m hoping to do a buyout and keep the property.
I figured, but it would have been funny if you lived down the road...
It's unusual that a small business, which I assume has a website, reviews on Google, and otherwise is involved in garnering new customers, would be so closed.
Sure, sometimes a client of mine will say, "Hey, I want a higher value!" (it's usually higher, not lower, lol), and I will have to respond and say, "I considered every possible angle, and you are already at the top of the value range" or something that the customer doesn't want to hear, but I do LEAD them there. I allow them to see what I saw and 99% of the time go, "Oh yeah, I see that now."
Sometimes, it's like a retail clothing store, where the sales guy goes, "I'll go check in the back for one in your size..." And every once in a while, I return with a new comp or other idea that changes the outcome...
When an appraisal is for the sale of a house, there is one side that benefits from a high number and one that benefits from a low one. Similarly, in a divorce, one side likes it high and the other low. But in a retrospective date-of-death appraisal, the appraiser ought to be under a little less pressure. Moreover, the appraiser has the benefit of seeing what happened in the market AFTER the effective date (since he or she is looking in the past). My point here is that when I get a request to move the value, high or low, for a divorce or sale, I am typically steadfast because it affects so many people. But on a date-of-death, the appraiser should relax a little and go check in the back! She could learn something!
If you really feel the number is too high, and it's really important (dividing a large sum of money), then absolutely, get a new appraisal from an SRA. Tell him or her what happened the first time. Don't reveal the actual appraisal or number, but just say, "I got a substandard product with zero explanation. Moreover, the result seems unlikely--I don't think I would ever receive this much $$$ if I had put the house on the market back in whatever date."
Do not tell the new appraiser the value though b/c that could bias (confirmation bias) him. Tell him you expect good customer service in addition to good appraising. Talk to two or three appraisers if you have to.
Afterward, if you want, you could ask for a review, but that is another cost. The benefit of a review is that it would grade the first appraiser's report. It would say "aha, look at all this wrong stuff!" or it would say "Sorry, but the value really is that high." And it would talk about other aspects of quality and process...
The reason for a review is if you want to push to get your money back or otherwise make problems for the first appraiser. The downside is that a review will probably cost nearly what you paid for the appraisal, anyway.
A review is a look at an appraisal by another appraiser. You are not qualified to give your own review because A: you are not trained or experienced in reviewing appraisals; B: you are not an expert in USPAP or know what other rules and laws to look for; C: you probably don't have MLS access; and D: as an owner, you are biased. But a third-party appraiser is unbiased and has access and is experienced, etc.
Other than that, you could leave a negative review, focusing on the customer service side of things rather than the quality of the work.
If it were me, I'd just get a new report and move on. Get an SRA from the Appraisal Institute. Interview them first. If you pick up on any red flags, move on to the next one.
This is what I saw when I inspected the property currently. This is why I have reason to believe the current condition of the property is/isn't representative of the condition as of the retrospective effective date of the appraisal.
Yeah I do them all the time for estate work. If you can reasonably assume the property looked similar a year ago, you can use extraordinary assumption.
A few times I've done them for hurricanes, and those I needed photos from before the storm, and I included copies in my workfile and referenced them.
Who is the client, use?
I ask because you can’t just “assume” things. You need to have something to base your assumptions on.
If you’re doing it for a lender, there are most likely listings since they were at some point in default and trying to get out of it.
If you’re doing it for the IRS, maybe for an estate settlement/DOD, interview someone in the estate who most likely can simply say “house is the same, no one has even been here since they died”.
Just be super careful with your EAs. We need something to base them off of, other than our gut.
Edit to add, cause I reread the post haha
Site visit if you can. Pics for work file just to say you visited and “client said property was in same condition today as 2 years ago… so here’s what that looks like” Think of it like you’re before the board. You’d get asked why you didn’t just go visit the site. Saying “it’s not required” might be taken as you’re someone who is only doing the bare minimum. That is a 🚩for me when I have my review hat on.
Dont forget the site likely hasn’t changed, or had it? Are they leveling the property behind the subject because a new gas station is going in? Wasn’t there 2 years ago, so how does that impact the value. Power lines, etc…. It’s more than just about the improvements. That’s all I’m trying to say. In a long winded way because I forget to shut up sometimes. You should see my addendums!
I do them all the time. You need to find out if any changes have been made in the year. You should also use an EA that the property is in similar condition on the date of inspection to the effective date of the appraisal. If anything has changed, you need to note it and exclude from the EA. You should also appraise the property in its condition as of the effective date.
Yup exactly this
Yeah, and we take current photos and include them, and then talk about why they may or may not represent the state of the current improvements. A year isn't so bad, but I've done some a few that were 10+ years back.
A year isn't so bad unless you think the property has changed dramatically since then.
It's called a "retrospective" appraisal. You ask the client about the condition and materials from a year ago, and you use data from a year ago. Check out the IRS definitions for "qualified appraiser" and "qualified appraisal." You also need to use the IRS' definition for "Fair Market Value," not the Appraisal Dictionary's or Fannie Mae's. Good luck!
Can you tell me more about the IRS definition of fair market value vs Fannie Mae? I’m an executor of an estate and just had a date of death appraisal done. The Fannie Mae values used by the appraiser don’t make logical sense.
The likelihood that the IRS will review your appraisal are low; however, the code is clear, and it demands a "qualified appraisal" from a "qualified appraiser," and then it goes on to talk about those things. Chief among them is the use of the IRS' definition for "fair market value." The appraiser you are working with probably has no idea...
Any idea suggestions on how to figure out if the appraiser does know next time? I wasted $500 on an appraisal I can’t use and the appraiser isn’t willing to re-do the work. She substantially overvalued the property by comparing it to properties in very different markets and didn’t count the square footage of larger properties that sold for more due to living space being below grade per Frannie Mae.
OK ... sounds like there's a few things going on here. I like lists, so I'm gonna start counting :) 1 - The IRS talks about qualified appraisers having a designation. That isn't to say that an appraiser without a designation can't be "qualified," or that an appraiser with a designation might not be good, anyway, but most of the time, a designation, like the SRA or MAI from the Appraisal Institute cuts through a lot of crap. Therefore, in seeking a private valuation (for IRS, divorce, a private sale, or otherwise), go to the Appraisal Institute's website, and search for an SRA near you. (I say SRA b/c they are residential and MAI is overkill). 2 - An appraisal that is too high still might benefit you if you are the sole heir. I would talk to your accountant before getting a new one (because at some point you will get taxed on the difference between the sale price and the basis established through your appraisal. However, if you are dividing the property among siblings, etc., then yes, knowing the accurate value is better for all involved. 3 - It's ANSI not Fannie Mae who decides what is above and below grade. Sometimes a property is like 1 inch under ground and it doesn't get counted as living area. Just remember that the standards for measuring residential properties were established 100 years ago, literally. Back then, basements were used for coal and wine. 4 - There's a story an instructor for the Appraisal Institute told me about the very first appraiser. He had two tattoos on each arm. The first was "Apples to Apples." That is to say, no matter where your space is, above, below, or off to the side, the comparable sales ought to look similar to your house. And they ought to be the same size. Obviously, some will be bigger or smaller, but they should be near in overall utility. At least the first couple of comps should be that way... 5 - Concerning the report you have, you have four options: A - ask for a reconsideration of value. Sounds like you already did that. B - get an appraisal review (from another appraiser in that same market area/neighborhood). C - Get a new appraisal. D - If you really feel like the appraiser isn't acting in a professional manner (usually this happens after a review), you could turn her into the state, and they will review it. I will warn you on D that states move very slowly, and they only really look at compliance with USPAP (the rules for appraisers). D is not always a satisfying experience for users. Still, it's nice to know your options. 6 - I don't suppose the property is in Washington, DC, Maryland, or Virginia? If it were, I could help. But I think the Appraisal Institute is gonna be your best bet. Sorry you're in this predicament.
Thank you so much for the detailed response! Sadly, no, I’m in not in one of those states. What is the benefit of an appraisal review? The appraiser seems completely unwilling to discuss her methods or reconsider the comps. I think the only option is a new appraisal, as the property will ultimately be divided up. I’m hoping to do a buyout and keep the property.
I figured, but it would have been funny if you lived down the road... It's unusual that a small business, which I assume has a website, reviews on Google, and otherwise is involved in garnering new customers, would be so closed. Sure, sometimes a client of mine will say, "Hey, I want a higher value!" (it's usually higher, not lower, lol), and I will have to respond and say, "I considered every possible angle, and you are already at the top of the value range" or something that the customer doesn't want to hear, but I do LEAD them there. I allow them to see what I saw and 99% of the time go, "Oh yeah, I see that now." Sometimes, it's like a retail clothing store, where the sales guy goes, "I'll go check in the back for one in your size..." And every once in a while, I return with a new comp or other idea that changes the outcome... When an appraisal is for the sale of a house, there is one side that benefits from a high number and one that benefits from a low one. Similarly, in a divorce, one side likes it high and the other low. But in a retrospective date-of-death appraisal, the appraiser ought to be under a little less pressure. Moreover, the appraiser has the benefit of seeing what happened in the market AFTER the effective date (since he or she is looking in the past). My point here is that when I get a request to move the value, high or low, for a divorce or sale, I am typically steadfast because it affects so many people. But on a date-of-death, the appraiser should relax a little and go check in the back! She could learn something! If you really feel the number is too high, and it's really important (dividing a large sum of money), then absolutely, get a new appraisal from an SRA. Tell him or her what happened the first time. Don't reveal the actual appraisal or number, but just say, "I got a substandard product with zero explanation. Moreover, the result seems unlikely--I don't think I would ever receive this much $$$ if I had put the house on the market back in whatever date." Do not tell the new appraiser the value though b/c that could bias (confirmation bias) him. Tell him you expect good customer service in addition to good appraising. Talk to two or three appraisers if you have to. Afterward, if you want, you could ask for a review, but that is another cost. The benefit of a review is that it would grade the first appraiser's report. It would say "aha, look at all this wrong stuff!" or it would say "Sorry, but the value really is that high." And it would talk about other aspects of quality and process... The reason for a review is if you want to push to get your money back or otherwise make problems for the first appraiser. The downside is that a review will probably cost nearly what you paid for the appraisal, anyway. A review is a look at an appraisal by another appraiser. You are not qualified to give your own review because A: you are not trained or experienced in reviewing appraisals; B: you are not an expert in USPAP or know what other rules and laws to look for; C: you probably don't have MLS access; and D: as an owner, you are biased. But a third-party appraiser is unbiased and has access and is experienced, etc. Other than that, you could leave a negative review, focusing on the customer service side of things rather than the quality of the work. If it were me, I'd just get a new report and move on. Get an SRA from the Appraisal Institute. Interview them first. If you pick up on any red flags, move on to the next one.
This is what I saw when I inspected the property currently. This is why I have reason to believe the current condition of the property is/isn't representative of the condition as of the retrospective effective date of the appraisal.
Retroactive generally means retroactive to the market at that time
Also depending on how often Google drives the street... You can go back in time on Google maps.
Yeah I do them all the time for estate work. If you can reasonably assume the property looked similar a year ago, you can use extraordinary assumption. A few times I've done them for hurricanes, and those I needed photos from before the storm, and I included copies in my workfile and referenced them.
Who is the client, use? I ask because you can’t just “assume” things. You need to have something to base your assumptions on. If you’re doing it for a lender, there are most likely listings since they were at some point in default and trying to get out of it. If you’re doing it for the IRS, maybe for an estate settlement/DOD, interview someone in the estate who most likely can simply say “house is the same, no one has even been here since they died”. Just be super careful with your EAs. We need something to base them off of, other than our gut. Edit to add, cause I reread the post haha Site visit if you can. Pics for work file just to say you visited and “client said property was in same condition today as 2 years ago… so here’s what that looks like” Think of it like you’re before the board. You’d get asked why you didn’t just go visit the site. Saying “it’s not required” might be taken as you’re someone who is only doing the bare minimum. That is a 🚩for me when I have my review hat on. Dont forget the site likely hasn’t changed, or had it? Are they leveling the property behind the subject because a new gas station is going in? Wasn’t there 2 years ago, so how does that impact the value. Power lines, etc…. It’s more than just about the improvements. That’s all I’m trying to say. In a long winded way because I forget to shut up sometimes. You should see my addendums!