Blogsberger's Box

A writer to the Castro Valley Press asked about the need for, and cost of an appraisal of inherited property.  The columnist (a broker) opined that a BPO (broker price opinion) was sufficient, and less expensive.

This looks like a case of the least costly service not being the most cost efficient - especially if the BPO is not allowed, and the inheritor later has to order a retrospective appraisal several years later -- a more expensive service than the contemporaneous appraisal would have been initially.

I wrote:

"Phil,

As an appraiser, I certainly have a vested interest, but I would point you and the writer to the recent notice of change in IRS requirements for substantiating donated property - and believe similar requirements will be imposed on inherited property.

Refer to the IRS posting on the matter from last October:
  http://www.irs.gov/irb/2008-40_IRB/ar13.html#d0e6724

Which explicitly requires a USPAP compliant appraisal - something a broker price opinion does not provide.

As you know, BPOs can be looked to as 'loss-leaders' to open a door to future business for the broker, making impartiality more difficult.

Also, if the IRS requirements do call for a USPAP compliant appraisal when the property is ultimately sold, and the inheritor didn't get the appraisal at the time of inheritance, a 'retrospective appraisal' can be much more costly.

As you point out, if the cost of the appraisal is only a few percent of the property's value, it can more than pay for itself in tax benefits at the time of sale."

Best Regards,

Matt Boxberger
www.boxbergerappraisals.com