Check out my interview,
The Home Appraisal Process on BayAreaForSale.com, one of the top sites for
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Napa, CA real estate. BayAreaForSale.com also services
Florida real estate and California real estate.
I read an interesting article in today's (Sunday, January 10, 2010) San Francisco Chronicle by Kathleen Pender. It is about the expiration of the Estate Tax that expired at the beginning of this year because of the failure of Congress to act on it by the
end of 2009. It is a temporary suspension because, if Congress fails to do anything, it will reappear in 2011 in a different guise. This failure leaves many people, attorneys and accountants included, in a huge state of confusion.
In 2009 $3.5 million was exempt from the estate tax, and the top rate for taxes above that amount was 45%. In 2010 there is no estate tax for heirs of folks who die this year, and in 2011 the exemption will be only $1 million with a top estate tax rate
Not having to pay any estate tax this year may sound good, but there also will be no tax break based on the step up basis. This means that the heirs could end up paying considerably more in capital gains taxes when the properties they inherit are sold.
In past years, and again next year, capital gains taxes will be based on a property's value
as of the date of death. When the property was sold capital gains would be calculated on the difference between what it sold for and what its value was as of the date of the person's death. This is the "step up" basis.
So, for example, a home that was purchased for $100,000 several years ago, and that is its cost basis, had a value of $1,500,000 as of the date of death, and is later sold for $1,550,000. Capital gains would be $50,000, the difference between the sale price
and the value at the date of death, and capital gains tax would be figured on that amount as a result of the step up basis. In the San Francisco Bay Area of California where I do appraisals, this scenario is
In 2010, however (unless Congress acts to change things), the capital gains would be $1,450,000, the difference between the sale price and
the original cost, and the heirs would be taxed on that amount. That is because as it is now there is no step up basis, and makes tax planning for attorneys and accountants extremely vexing.
To read the complete article by Ms. Pender, you can click onto the following link, and you might also want to make an appointment with your accountant or attorney to try to figure out what, or what not, to do. Good luck.
Link to "Death of Estate Tax Leaves Some Heirs Worse Off:"
The on line Appraisal Institute newsletter of October 21, 2009, that goes out to its members had this article:
The Internal Revenue Service has included the definitions of “qualified appraisal” and “qualified appraiser” in its newly issued final regulations relating to the amount deductible from a decedent’s gross estate for claims against the estate under section
2053(a)(3) of the Internal Revenue Code. According to the IRS’ Estate Tax Rules, the “qualified appraisal” (value) of each claim must be performed by a “qualified appraiser.”
As provided in the latest IRS final regulations, the definitions of “qualified appraisal” and “qualified appraiser” in regard to Estate Tax Rules have been married with the definition the IRS provided for noncash charitable contributions, which the agency
originally issued as Notice 2006-96 in October 2006.
Per Notice 2006-96, the IRS defines “qualified appraisal” as a document that:
· Is made, signed and dated by a qualified appraiser (defined below) in accordance with generally accepted appraisal standards
· Meets the relevant requirements of Regulations section 1.170A-13(c)(3) and Notice 2006-96, 2006-46 I.R.B. 902 (available at
· Relates to an appraisal made not earlier than 60 days before the date of contribution of the appraised property
· Does not involve a prohibited appraisal fee
· Includes certain information, such as a property description, terms of the sale agreement, appraiser identification information, date of valuation and valuation methods employed, among other requirements.
The IRS defined qualified appraiser as an individual who:
To read the final regulations of the IRS Estate Tax Rules, which went into effect Oct. 20, visit
I've finally done it. Joined "LinkedIn," that is. It's all new to me. Haven't got onto Facebook (yet), nor do I "twitter" (can't imagine anyone being interested in all my minutia - I am not interested in anyone else's), but I have taken this next step
in being "connected."
Here's the link to my LinkedIn profile: http://www.linkedin.com/in/danagrover
Check it out - let me know what you think.
By Sue McAllister
Posted: 08/28/2009 06:26:35 PM PDT
Updated: 08/29/2009 04:00:48 AM PDT
Santa Clara County Assessor Larry Stone said about 34,000 homeowners had requested informal reviews of their assessed values, nearly four times the number of requests in 2008. Nearly half of the 29,000 his office was able to process received tax cuts.
And that came after more than 90,000 property owners in the county were notified in late June that they would receive average tax relief of about $2,000 because of reduced home values.
The assessment reductions so far total nearly $19 billion, Stone said, cutting the county's budget by about $40 million.
Despite focusing his entire staff on reviewing those 34,000 assessments, Stone said, there were nearly 5,000 requests that could not be finished before a Monday deadline, when the information needs to be sent to the county tax collector.
For homeowners whose requests weren't finished, the only option is to file a formal appeal, which requires a $30 fee.
"All of these property owners filed their requests by the deadline of August 15 and should not be penalized," Stone argued.
In a special session late Friday afternoon to address the issue, the county board of supervisors voted 4-0 to waive the $30 appeal fee for the 5,000 homeowners caught up in the bureaucratic snarl.
"Although it will cost us some money as a county, we think it's really important to those who have applied and simply got left out because they (the assessor's office) couldn't get to everyone in time," said Liz Kniss, president of
the board of supervisors. "It's really in the interest of fairness and cost to them that we are doing it."
Under a 1978 property tax law known as Proposition 8, if the market value of a property falls below the assessed value assigned by the county, the owner can receive a temporary tax reduction. A home's assessed value is usually the
purchase price plus increases of no more than 2 percent a year. The property tax bill is based on the home's assessed value; tax rates are capped by law at 1 percent, plus any amount to cover voter-approved bond indebtedness, such as school district bonds.
Santa Clara County is one of the few counties in California in which owners are notified of their properties' assessed value before they receive their tax bills. In June, Stone's office sent notices to all residential and commercial
property owners telling them the assessed values of those properties, which is based on their worth as of Jan. 1, 2009.
Stone said many owners mistakenly think they are eligible for a tax reduction because their home value has fallen compared with its peak. But it's not peak value that matters: To qualify, a property's market value as of Jan. 1, 2009,
must be lower than its assessed value.
Those who still feel their properties are assessed too high have until Sept. 15 to file a formal appeal application with the assessment appeals board. By law, those appeals must be decided within two years. While that process takes
place, property owners must continue to pay the taxes they owe based on their existing assessment. If the appeals board later agrees the assessment was too high, the taxpayer will get a refund of the overpaid taxes.
For more information on Proposition 8 assessment reductions and the appeal process, visit ?www.sccassessor.org.
Contact Sue McAllister at 408-920-5833.
Received the following email today that reads in part,
I just got the notice Friday that they accepted the appeal. I am quite a happy customer, so thank you...."
Their home was in one of the county's more expensive neighborhoods, and it was purchased a few years ago. Every year their assessment went up the 2% per year allowed by Proposition 13, including the current year. While the assessor tries to be fair, it
is not possible for the appraisers there to physically appraise every property in the county every year. As a result, many properties, it seems, get the automatic 2% increase each year.
This past year, however, prices did drop in several of the higher priced neighborhoods. The owners of this house felt that their current assessment to be too high, so they made an appeal. They contacted me to do an appraisal for their appeal, and I found
no sales that occurred from July 1, 2008, to March 31, 2009, that would support a value as high as their current assessment. The market value of their home was, in fact, several hundred thousand dollars below the assessed value.
So, it was a good news - bad news situation. The bad news was that their home was worth less than it had been at one time. The good news is that at least their annual property taxes will also be less for the time being. They are planning to stay in their
home, not sell it in the foreseeable future, so eventually the market value of it will regain what it had lost, and once again their assessment will reflect that, and their annual taxes will increase again.
But that is likely to be years from now. Until then, they will be saving several thousand dollars each year in property taxes. Property taxes, by law (Propostion 13) are 1% of the property's assessed value.
If you have reason to believe that your property is assessed too high for the current tax year, you have until September 15 to file for an appeal. Here is a link back to the page on my website that has a link to several of the area's Assessors for their
By clicking on the link to your particular county's Assessor, you should be able to find out what you need to do to get the appeal process moving forward.
Today's San Jose Mercury News (8/11/09)
www.mercurynews.com/ had an article about luxury home values declining in the the Silicon Valley area. This was not news to me as I have been doing appraisals for owners of such homes recently. They've been concerned that the recent assessments they have
received have not reflected the decline in the values of their properties.
It is bad enough to be losing value on your home, but if the assessment does not accurately reflect this loss, then the property taxes are going to be higher than they need be. California's Proposition 13 mandates that the assessed value be no more than
the property's market value as of January 1 of each year. It also sets the maximum amount of taxes to be only 1% of the home's assessed value (plus any other incidental taxes like school bonds, etc., that were approved by voters). So, if a home is assessed
for $3 million, but it's real market value (as of January 1) was only $2 million, than the owners will be paying $10,000 more per year in taxes than they rightfully should be paying (1% of $3 million is $30,000, 1% of $2 million is $20,000 - $30,000-$20,000 =
Although the Assessor attempts to assess all properties accurately, that is not always the case. Fortunately, the assessor does have a free appeals process available to property owners. I have a link to the Assessors' websites for Santa Clara, San Mateo,
Santa Cruz and Alameda counties on my website:
Instructions for filing appeals can be located on each of the websites. It is highly recommended that the appeal be accompanied with evidence to support the appeal for a different value (I suppose you could appeal for a higher value, but why would you?).
An excellent support document is a real estate appraisal prepared by a qualified appraiser. Generally, a designated appraiser from a professional appraisal organization such as the Appraisal Institute or American Society of Appraisers is considered to be
qualified to perform such appraisals for the appeal process. Data from sources like Zillow, or from hearsay (my real estate agent who sold me my house thinks it's is only worth ...., etc.), are not acceptable as evidence.
Recently I did an appraisal for someone who received an assessment they believed to be too high. As part of the appraisal process I did an analysis of luxury home sales in the Los Gatos/Monte Sereno/Saratoga market area where the subject property was located.
For the analysis I used the same parameters the assessor uses - sales of comparable properties that sold in the market area between July 1, 2008 to March 31, 2009.
What I found was that typical prices of such homes in that particular market area dropped from a high of about $650/SF in October, 2008, to about $550/SF as of January 1, 2009, a decline of approximately 15%. Using comparable homes to fully support my opinion
of value as of 1/1/09, I found that the assessed value was over a million dollars higher than I believe the property to actually be worth.
The owners of the subject property bought their home a few years ago when values were higher, paid a fair price for it at that time, and for awhile their home's value went up, just like most everyone else's. Although home values increased considerably during
that period, Proposition 13 also mandates that the assessed value of a property can rise by no more than 2% per year. In their case, it appears that their assessment went up 2% after the first year, 2% the next year, and so on. The assessor continued that
2% increase for 2009, but the market actually declined from the previous year rather than increased.
There is no guarantee that the appeals board will agree with the independent appraiser's opinion of value. They may recommend a different value, perhaps somewhere in between the assessor's opinion and the fee appraiser's opinion. Chances are, however,
that a well supported appraisal will provide a basis for a lowered assessment at, or near, the opinion of value of the qualified independent appraisal expert. Savings on property taxes, not only for the current year, but perhaps for years to come, could be
substantial, maybe thousands of dollars, and be well worth the cost of the appraisal.
Call me at (408) 287-4686, or another appraiser you feel to be competent, for a quick phone consultation. You may end up paying a lot less in property taxes if you have a successful assessment appeal. The deadline to file for an appeal is September 15.
"Up to now, I haven't seen much change in the high end buyers and sellers, but now if their portfolios are in the toilet, how will that change things?"
That quote by me in a bold sidebar was on the front page of the
September 19, 2008, edition of the San Jose Mercury News in an article headlined, "Housing Plunge." A link to the newspaper's on-line version is below (I do not know how long the Mercury News will keep the article active):
In case that link disappears, I have "cut and pasted" the article in its entirety below:
n a season of stunning financial news comes more drama from the local housing front: The median house price in Santa Clara County plunged 26 percent last month compared with a year earlier, the county's steepest decline on record.
And for the first time since 2004, the median house price in the county slid under $600,000, according to real estate information firm MDA DataQuick, whose records go back to 1988. Houses sold in August went for a median price of $592,750, down from a hefty
$805,000 in August 2007.
As bad as that might appear, the worst decrease in any Bay Area county last month was in Contra Costa County, where the median house price dove 48 percent from a year earlier.
The last time Santa Clara County houses sold for a median price less than $600,000 was in September 2004, when the figure was $595,000. The median price marks a halfway point, meaning half the homes sold for less than the median figure, and half for more.
But there's no cause for general panic. In a varied market like Santa Clara County's, median price figures do a poor job of telling individual homeowners how their property values are faring, said Dana Grover, a longtime San Jose
appraiser of residential real estate.
"There are segments of the county that are not declining," he said, citing Saratoga, Los Altos, Cupertino and parts of Los Gatos as some of the pockets where home values have not budged much despite the general housing slump. Other
areas, including Gilroy and parts of South and East San Jose, have been hit hard by foreclosures and have seen their home values fall, he said.
"You have to look at your own particular neighborhood and your own particular price range. You just can't take a blanket approach" to gauging a home's value, he said.
Though most homes in Silicon Valley have lost some value in the past year, the dramatic difference in the median price is also a result of significant changes in the types of homes selling this year compared with last. The August 2007 median price reflects
a period in which primarily expensive homes were selling, because low-money-down loans for first-time buyers were suddenly unavailable. That drove the median price up, even as home values in some parts of the valley were falling.
But by this summer, it was mostly lower-priced homes that were selling. One reason is that interest rates for the large loans typically used to finance Silicon Valley homes had become relatively expensive, at 7 percent or more. Another reason is that prices
for bank-owned foreclosure properties had dropped enough that those homes began to sell quickly.
Last month, nearly 25 percent of resale transactions were homes that
Another example of the changing "market mix": Last year, during a five-week period in September and October, only seven single-family houses sold in the county for less than $450,000, said Richard Calhoun of Creekside Realty in San Jose. This year, in a
five-week period in August and September, 511 houses sold for $450,000 or less.
Whether fueled by bargain hunters trying to buy bank-owned properties or by move-up buyers motivated by this month's low mortgage rates, September home sales are off to a strong start.
According to figures from realty brokerage Coldwell Banker, 367 single-family houses went "into contract" last week, meaning buyers struck deals with sellers. That's the most transactions initiated in any week since June 2004.
But the past week's financial news, including teetering investment banks and wild swings in the stock market, may dampen some buyers' enthusiasm — especially those in expensive neighborhoods, where home purchases are more frequently financed using proceeds
from stock sales.
"Up to now, I haven't seen much change in high-end buyers and sellers, but now if their portfolios are in the toilet, how will that change things?" Grover said.
According to DataQuick, which gathers information from public records, a total of 1,096 previously owned houses changed hands in Santa Clara County last month, down 4.7 percent from August a year earlier. That small percentage change represented an improvement,
as most months this year have seen house sales off by double digits compared with 2007.
Condo sales in the county remained well below their 2007 levels. Last month, 330 condos and townhouses sold in the county, down 25.2 percent from August 2007.
Across the nine-county Bay Area, a total of 7,232 new and resale houses and condos sold last month, down nearly 5 percent from July, and down 0.9 percent from August 2007.
In San Mateo County, the median house price in August was $672,500, down 23 percent from a year earlier. In Alameda County, the median price of single-family houses sold was $463,500, down 29.8 percent.
Contra Costa County's median price for houses fell a staggering 48.4 percent since August 2007, to $315,000. In that county, however, bargain hunters were busy: Sales of houses rose 70 percent from last year, from 788 in August 2007 to 1,339 houses sold
Sales of previous foreclosures made up 36 percent of all Bay Area resales last month. The concentration was highest in Solano and Contra Costa counties, where more than 50 percent of transactions were previous foreclosures.
Contact Sue McAllister at email@example.com or (408) 920-5833.