You want to keep the inherited house, while another heir would rather receive cash. The estate already has a date-of-death appraisal. Can the family use that number to discuss a buyout months later?
The earlier report answers what the home was worth on its historical effective date. A later buyout may call for a value at a different date. Before anyone commissions another report, the family and its advisers should decide what question they need answered and who needs to use the answer. The date-of-death figure is not automatically the buyout figure, but a new appraisal is not automatically required either.
What does the estate's appraisal actually answer?
A date-of-death appraisal develops an opinion of value as of the date the owner died, using the property's condition and market evidence at that time. An executor may need that historical opinion for estate administration. Each appraisal is prepared for a stated purpose and for named intended users; having a copy of the estate's report does not mean it was prepared for a later buyout discussion.
For a later buyout, the family might need the home's value as of the negotiation date, or as of a different date agreed upon with the executor and advisers. The effective date is the specific date the value opinion addresses. If the family needs a new opinion for that purpose, the appraiser defines a separate assignment with the appropriate users, property interest and date rather than treating an old number as today's answer.
For the earlier estate question, see Jaffe Appraisal Group's explanation of appraisals during probate and trust administration.
What should the family settle before asking for a report?
You can begin an inquiry before every detail is settled. To scope an appraisal that will answer the right question, discuss these points with the executor and, as appropriate, the estate attorney or tax adviser:
- What decision needs a property value: estate administration, a private buyout discussion, or something else?
- Who is commissioning the appraisal, and who needs to use the report? The old report's named users and purpose do not automatically carry over.
- Is the question about the whole property or a specific share of ownership in it? Ask the appropriate adviser to clarify; the appraiser needs to know exactly what interest to value.
- Which effective date answers that decision? Tell the appraiser whether the home has been repaired, renovated or left in a different condition since the date of death, and what records are available for the relevant period.
The appraiser develops and reports an opinion of value for the defined real estate or interest and effective date. That opinion does not calculate inheritance shares, decide who has authority to sell, or set the price relatives must accept. Those decisions belong to the parties and their advisers.
Why might a Denver-metro home have a different value later?
Consider a Denver-metro house that needed repairs when the owner died and was renovated before the family discussed a buyout. A retrospective opinion uses the home's condition and market evidence as of the earlier date; a current opinion uses its condition and comparable sales as of today. The renovation does not guarantee a particular increase in value. The appraiser has to examine which sales are genuinely comparable, including differences in condition, location and the buyer pool. In the Denver metro, a renovated property and an unchanged one nearby do not necessarily draw the same buyers or the same comparable sales.
The two opinions could differ because the date, property condition or market evidence changed. A difference alone does not show that either report was wrong. Even if the house has not changed, an earlier appraisal cannot simply be relabeled with a new date.
If financing is part of the buyout
If you plan to borrow to buy out another heir, ask the lender about its own appraisal requirements before assuming a privately commissioned report will meet them. A lender may require an appraisal ordered through its process. A family appraisal also does not determine loan approval or the financial terms of the buyout.
A useful first conversation
You do not need to settle the buyout before asking about an appraisal. Bring the earlier report if you have it, the address, the proposed decision and date, and any available information about changes to the home. Jaffe Appraisal Group can discuss whether a residential assignment fits the question and what information it would need to define the work. Its estate appraisal service describes the full service. For this heir-buyout question, contact Jaffe or call (720) 314-4401.
About Jaffe Appraisal Group
Jaffe Appraisal Group provides residential appraisal services in the Denver metro area. Scott holds an active Certified Residential Appraiser credential.