If you’re gifting a house to a family member, an appraisal can document its market value as of the relevant date. I’ll explain why these requests reach me, how the value date affects the assignment, and what to clarify with your adviser before ordering.
By Joseph T. Ellington Jr., Virginia Licensed Residential Appraiser · Capital Valuations
How family-gift appraisal requests usually reach me
I frequently appraise homes that are being given to family members. Usually, an attorney has told the homeowner to get an appraisal, and the homeowner or someone in the family contacts me. The attorney’s recommendation may start the process, but that does not mean the attorney is the person who hires me.
The assignments I’m describing generally involve the entire home. That is the experience behind this article. A request involving only part of the ownership needs a separate discussion; my experience with whole-home gifts should not be read as a claim about valuing every kind of ownership interest.
Share the adviser’s instructions, the property address, who needs the report, and any deadline. A whole-property value cannot simply be divided to resolve every fractional-interest valuation.
The value date may differ from the inspection date
I have completed both current and retrospective appraisals for family gifts. The date requested varies with the assignment. There isn’t one date that I use for every family who calls about giving a home to a relative.
The effective date is the date the value opinion applies to. A retrospective appraisal addresses a date in the past, even though the report is prepared later. My retrospective appraisal page explains that process.
For federal gift-tax reporting, the IRS Form 709 instructions call for fair market value on the gift date. Ask your adviser to identify the date needed for your circumstances. The day I visit the house is not automatically the right valuation date.
What if the home changed after the gift?
If the appraisal addresses a past gift date, explain any remodeling, damage, or other changes that happened afterward. Dated photographs, repair records, and descriptions of the earlier condition can help distinguish the home on that date from the home available to inspect today. A recently remodeled kitchen, for example, should not silently become part of the description of a home before that remodeling occurred.
Give the appraiser the complete timeline and let the assignment identify which information can be supported. The purpose is to document the property and market for the relevant date, rather than assume today’s condition and prices answer a historical gift question.
What stays the same about my appraisal
I look at this as a normal residential market-value appraisal with a different intended use. The reason someone needs the report is the family gift. The valuation question is still what the home is worth. Giving the property to a relative does not create a different kind of market value.
I’m the appraiser, not the attorney handling the transfer. I do not decide how you should give the home away. My part is the value opinion; your advisers handle the legal and tax decisions that go with the gift.
Why an adviser may want the value documented
A possible reason is gift-tax reporting. The IRS instructions require support for the reported value and describe adequate disclosure through a qualified appraisal or specified valuation information. They also address attaching an appraisal used to value real estate. This does not mean every family gift automatically requires an appraisal.
An appraisal also does not automatically reset the recipient’s tax basis to today’s value. The IRS explains that gifted-property basis depends on information including the donor’s adjusted basis and gift-date value. Your tax adviser applies those rules to the actual transfer.
| Question | Where it belongs |
|---|---|
| What is the home’s supported value as of the specified date? | The appraisal assignment. |
| How should ownership be transferred? | Your attorney’s advice. |
| Is a return required, and what is the recipient’s tax basis? | Your tax adviser’s analysis. |
If the arrangement is a sale or an inheritance
This article concerns giving a home to a family member. If you are negotiating a purchase price with a relative, read selling a house to a family member. If the valuation concerns someone who has died, see the estate and date-of-death appraisal guide.
For a home in Virginia Beach or elsewhere in Hampton Roads, contact me about the proposed gift appraisal. Include the address and any adviser’s instructions so we can discuss the date, purpose and scope before you order.
About the author
I’m Joseph T. Ellington Jr., a Virginia Licensed Residential Appraiser and the owner of Capital Valuations in Virginia Beach. I have 20+ years of appraisal experience serving Hampton Roads homeowners.
Sources
- IRS — Instructions for Form 709: adequate disclosure, gift-date valuation and supporting documents.
- IRS — Basis of property received as a gift.