Probate can be a complicated process for the personal representative, who likely only handles this type of situation once or twice in a lifetime. For some people, such as the attorney, or the agent who handles many estate related sales, the process makes sense. To the individual tasked with being the representative however, they likely only have a cursory understanding of the process. A proper assessment of the value of the decedent’s real property is particularly difficult for the layperson anyone who is unfamiliar with real estate transactions.
When determining date of death values for the decedent’s assets, the temptation may be to use assessment data in order to arrive at the opinion of value as of the date of death, but is this working in anyone’s best interest? Is the assessment data a good indicator of value? Does having a value that is substantially higher or lower than actual value hurt those involved?
In order to determine whether or not these sources are reliable, I pulled twenty random sales in the area, and compared their sales prices to the assessment data. The TCV is the True Cash Value.
This random sampling of twenty sales that occurred in the area, compared to assessment data, shows assessment information both above and below sales price, and only two instances within a five percent variance (which is the variance that most appraisers consider the tolerance they look for in terms of acceptability). That means that assessment data would only have been useful ten percent of the time, depending on what was considered an acceptable variance.
The most reliable and defensible number will come from a formal appraisal, conducted by a certified real estate appraiser. Throughout the valuation process, the appraiser analyzes and reconciles the collected data to arrive at conclusions regarding the final value opinion. In the final reconciliation, the appraiser considers all the available data and uses knowledge, experience and professional judgment to arrive at a final opinion for the property.
The cost of an appraisal is minimal compared to the potential tax burden of an inappropriately provided basis. Equally important, a report of this caliber may help substantiate your claim that the values within the report are well-founded and accurate.