Date of Value Premise in Real Estate Appraisal

Instructor: Traci Cull
The date of value in a real estate appraisal is very important and can be current, retrospective, or prospective. This lesson will explain why each of those dates may be used.

Date of Value

When an appraiser is completing a real estate appraisal, the date of value is one of the things that is included. Most of the time, the current date is used. However, there are times when a different date may be needed in the past or future.

The current date and value are used in most appraisals to determine the value. The general guideline is to use comparables from the last six months, but there are instances in which a lender may need an appraisal to value a property at a date in the past or in the future.

Prospective Date

Janice needs to get approval for a loan for her new construction property. Her house will not be finished for a few months, but her lender is requiring an appraisal now. She is not quite sure what to do. She calls Josh, her local appraiser and asks his opinion.

Josh tells Janice that a prospective date appraisal can be done. This type of appraisal looks at the current market but projects the value upon completion. A prospective date appraisal is frequently sought in connection with projects that are proposed, under construction, or under conversion to a new use, or those that have not yet achieved sellout or a stabilized level of long-term occupancy. The value should be effective as of the date of completion.

Josh speaks with Janice's contractor to find out exactly when he thinks the property will be completed. If the prospective value is dependent on improvements being made, then there is a big assumption that those will in fact occur. It is very important when doing a prospective appraisal that it be noted that the fair market value is a date in the future. It is also vital for the appraiser to do their own research, use market comparisons, and determine whether the property will actually be completed as of a certain date. Any adjustment in value due to a market shift after the original inspection date will need to be noted before signing.

Retroactive Date

Josh gets another call from Sarah. She needs an appraisal done for her father's home. He passed away a few months ago. She asks if there is a way to do an appraisal that values the property on the date of death instead of today so that they may proceed with probating and valuing the estate.

Josh explains that sometimes a question may arise as to the value of a property at a specific date in the past, so in that case, a retroactive or historical appraisal will need to be done. Other reasons this may be requested may be that the IRS is trying to determine a specific value at the date of death of the owner, or the value on the date of a dissolution of marriage. It can also be requested if the owner is selling at a loss and needs to show a decline in value.

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