UNHAPPY WITH YOUR APPRAISAL, DON’T BE
Your Appraiser does not want you to get on the wrong side of the IRS.
Appraisers love those moments when they can reveal to a client that their asset is worth ten times more than they thought.
If you bought an item for $1,000 and your appraiser tells you it is worth $10,000, that is a happy day for you and your appraiser.
But now imagine you have an item you thought was worth $10,000 and your appraiser tells you it is worth $100. Not as happy of a day.
Appraisers are all about facts and data; appraisers have to justify their findings.
If you find yourself receiving an appraisal where the news isn’t what you expected, here are three reasons this might be good news:
If your appraisal was for insurance, you have likely been overpaying. Markets change and even if the value of the asset was $10,000 at some point, things happen that can bring the value down to $1,000.
It is suggested that you have property appraised every five years for insurance so if damage occurs your coverage will be up to date.
If your appraisal was for the IRS, your appraiser likely saved you from having a bad day.
The IRS has the most stringent requirements for appraisals, whether for estate or donation, the values in the appraisal report must be justified, if not, there are consequences.
If the IRS thinks you claimed erroneous deductions, they can withhold your refund or audit you.
If the IRS disagrees with the appraised values, the appraiser can face financial penalties, civil penalties, or be prohibited from practicing. In other words, an appraiser could lose their livelihood.
Your appraiser likely knows that you are going to be disappointed with the opinions in the report. Despite not wanting to disappoint the client, appraisers have high standards of ethics and are not going to compromise their reputations.
For reports that conform to the Uniform Standards of Professional Appraisal Practice (USPAP), appraisers sign certifications. Among the certifications they sign is that the engagement to perform that assignment was not contingent upon reporting a predetermined result and that compensation for completing the report was not contingent upon reporting a predetermined result or a value that favors the client.
While the appraisal may not be what you thought it would be, know that your appraiser is doing everything they can to assist you in saving money or saving you from the wrath of the IRS.
For more on IRS requirements for donation appraisals visit: https://www.irs.gov/pub/irs-pdf/p561.pdf
If you are in need of an appraisal or REALLY feel like your appraiser is incorrect and the appraisal needs review please contact us.