How to Determine FMV of Inherited Property
Determining the fair market value (FMV) of inherited property is an essential step for many individuals, as it impacts estate taxes, financial planning, and potential sales of the property. The FMV is the price that the property would sell for on the open market between a willing buyer and a willing seller, with neither being under any compulsion to buy or sell. In this article, we will explore the steps and considerations to determine the FMV of inherited property.
Understanding Fair Market Value
Before diving into the process of determining FMV, it is crucial to understand what fair market value entails. FMV is based on several factors, including the property’s condition, location, comparable sales, and any improvements or changes made to the property since its acquisition. It is essential to keep in mind that FMV is different from the appraised value, which is often used for mortgage purposes and is typically lower than FMV.
Steps to Determine FMV of Inherited Property
1. Gather Documentation: Begin by collecting all relevant documents, such as the property’s deed, previous tax assessments, and any improvements or changes made to the property. This information will help establish the property’s history and condition.
2. Research Comparable Sales: Look for recent sales of similar properties in the same neighborhood or area. Consider properties with similar square footage, age, condition, and amenities. This will give you a good starting point for estimating the FMV.
3. Consider Market Conditions: Analyze the current real estate market in the area, including factors such as supply and demand, interest rates, and economic trends. These factors can influence the FMV of inherited property.
4. Consult a Professional Appraiser: If you are unable to determine the FMV on your own, consider hiring a professional appraiser. An appraiser will provide a detailed report based on their expertise and research, ensuring an accurate FMV estimate.
5. Factor in Costs and Expenses: Remember to include any costs and expenses associated with selling the property, such as real estate agent fees, closing costs, and repairs. These costs will impact the net proceeds from the sale.
6. Review and Adjust: Once you have gathered all the necessary information, review your findings and adjust the estimated FMV as needed. It is important to have a realistic and accurate estimate of the FMV.
Conclusion
Determining the FMV of inherited property is a crucial step in estate planning and property sales. By following these steps and considering the various factors that influence FMV, you can ensure an accurate and realistic estimate. Whether you choose to do it yourself or consult a professional appraiser, taking the time to determine the FMV will benefit you in the long run.
