No Dstark
Property appraisal must be valued at the time of death prior to the renovation. In your example, it will be the 500k value. That is IF you do not sell, if you sell, then the valuation will be close to the selling price.
I understand that. Then you have a basis at time of death. If you do $100,000 in capital improvements after the appraisal, you should be able to add the $100,000 to your basis giving you a cost of $600,000. No?
Yes.
Swimcatsmom, thanks.
This discussion brings back memories of FHA rules and dealing with banks for the sale of my projects. When the recession started there were strict FHA guidelines that were in place to try to stop the issue that dstark was talking about that was happening during the peak of the real estate market. There were unscrupulous individuals flipping to each other numerous times to fraudulently build up values on property to get bigger loans . FHA/Fannie Mae had guidelines that were underwritten to all banks that a house that had been purchased and resold within 90 days could not be valued 20% higher than previous sale without proof of capital improvements.
For several years I had to take every single receipt for remodels and copy them on a Xerox machine and submit them to the Buyer’s bank as proof of improvements. It was a huge pain in the butt and took hours standing at a Xerox machine. Can you imagine the hundreds of Home Depot receipts involved for every nail and screw? Then I would have a spreadsheet detailing every labor payment (thank God the FHA doesn’t transfer this data to the IRS or I might have to 1099 some poor laborer who received $20 over the $600 limit). So, if I paid $400,000 for a property and can provide detailed proof of $70,000 of improvements, the base for the calculation would be $470,000. I am allowed to sell it 20% higher than the $470,000. Unfortunately they wouldn’t let me include carrying costs or transaction costs. Transaction costs are a huge chunk of money (that the Flip shows do not include when they show you profit). So, I would be ’ allowed’ to sell the house for about $564,000 without too many questions being asked.
But this all changed during the bottom of the recession when Fannie Mae/FHA underwriting guidelines finally changed to encourage investment in all the foreclosures and REOs. I think the ‘waiver’ expired 12/31/2014 although I don’t have a problem on this project because it has been longer than 90 days. But, in the future I will probably have to hold properties at least 90 days before I can put them up for sale. I don’t seem to have a problem with that because I am always way behind schedule all the time and can never seem to finish a major remodel in less than 90 days:)
All the guys on TV seem to finish their projects in 6 weeks or something. I know there is a little fudging going on with their ‘schedules’ they are showing on TV. I believe that they spend about 3 or 4 weeks doing planning, design, permits (if they get them) and material purchases after their purchase and then just blast through the actual construction work in the 6 weeks they are showing on television. So their ‘holding’ of the property is about the same as mine but they don’t reveal that on television.
Specifically I researched every one of the Flipping San Diego shows that were on television. In several cases those guys were bidding or offering on properties that I also bid on so I was familiar with the properties. They held those properties for a long time before they even started construction and two of the properties did not sell for a long time although they didn’t really reveal that failure of the ‘flip’.
Yes and No. Yes if you do not sell and did the 100K improvement then the basis is 600K(500k appraised value+ 100K improvement), but if you sell the property. say for 800K, the appraiser will appraise the property to some thing close to 800K, like 780K for at the time of death, so your gain is only 20K, not 200K.
In my case, if the intent from day one after the death is to sell the property, then basically I won’t spend the money to do an appraisal as of date of death one month after death. I would wait until I am in contract and before closing to have the appraisal as of date of death, then I won’t have any gain problem. In actuality, my appraisal as date of death came only 20K less then the sale price, but I spent $30K improvements, I actually had a capital loss.
Artloversplus, Ok…
Post 2257 is wrong…
You don’t have to get an appraisal at time of death if you are going to sell.
That is really good to know. I would prefer to get an appraisal at time of sale and have the appraiser back date it to actual date of death. Lots of us are in a situation with elderly parents and it’s a piece of data to keep in the back of our minds.
Coralbrook, I would talk to your cpa to confirm.
According to artloversplus, It looks like you get an appraisal at time of death and get another one if you sell. Then you throw the first appraisal in the garbage. 
http://www.inman.com/2011/06/01/calculate-homes-value-upon-inheritance/
OK…I am going to stop soon.
http://www.executorscorner.com/resources/estimating-the-value-of-inherited-real-estate.html
I would imagine the rules on appraisal of estate property vary by state. I was able to use sales appraisal in VA.
I’m happy you received a good offer on the house and envious of the buyers. I can truly imagine moving right into the place. It’s perfect.
Coralbrook, thanks for the link to the nautical bath light.
When I first checked, it was out of stock. I dragged a son to Lowes at the beach early Saturday morning but they didn’t have it. I thought to check the link again and it was in stock again! A boat from China must have arrived. I ordered it and found a free shipping code on the net. I’ve received it and it looks fantastic. I can’t wait to put it in my little beach house’s bathroom this weekend!
I believe when my dad passed away we had to list the value of the house for the estate, but I dont remember getting 2 appraisals-- I think they just put the sales price in (and it sold almost a year after his death).
Yes in my case I had three appraisals, I just took the highest one and discard the lower ones. The first one was done because an intent not to sell, but my brother changed his mind to own the property thus the sale.
You can have as many appraisal as you want until it’s satisfactory.
When my mother passed away, the trust attorney told me I didn’t need an appraisal at all, if I sold her property in the same calendar year that she died: the IRS would accept the selling price as the “appraisal” price. If I waited until the next calendar year, I would need to get the property appraised.
I think the rule is six months, if it is sold after six months you may need an appraisal.
The calendar year rule does not make sense, what if some one died on December 31?
Please forgive us hijacking the tread, this is way off the topic. CB
Why don’t you start a new thread?
I still have not received the official Request for Repairs from the Buyers. I think it is a combination of the buyers flying back to Chicago and then spending the next day focusing on getting their deposit wired into escrow and starting up their loan application. I’m OK as long as they are spending their efforts focusing on getting their loan moving through fast. They are using Quicken Loans (who are not prevelant in our market here) and my agent is leery. However, he had his Quicken Loan representative on the phone with my agent both Saturday and Sunday guaranteeing that they can close a loan in 21 days. We were very impressed that a mortgage loan officer would be communicating over a weekend.
My agent is meeting with them via phone today at 9am to finalize the list for repairs. The outstanding issue was those dang foundation piers. Buyers left the table after inspection saying they needed to ‘research’ the issue. Well, I sent quite a lot of research to them, including copies of the blueprints and specifications, so I’m hoping it’s a non issue at this point.
Osprey, so happy that you love the lights. I first put regular frosted bulbs into the light but found that I liked the clear Reveal bulbs in it better. They have a slight blue tint when the bulbs are not lit.
P.S. California energy regulations are so crazy here that regular incandescent bulbs were supposed to be discontinued last year. Not allowed to be sold. But consumers went crazy and they extended the deadlines. Since the construction rules allow people to put in an occupancy sensor (instead of horrid fluorescent lighting in the bathroom), they should be able to sell incandescent bulbs. Soon there will be a black market in incandescent bulbs!
We’ve now got about 75% of our bulbs switched out for LED lights, so I don’t worry so much about H’s habit of leaving lights on like a trail of breadcrumbs throughout the house. We do have a string of some beautiful yellow round bulb incandescent lights on our back porch – they look really magical on a summer evening. I’ve got several replacement boxes of them set aside.