IT'S ABOUT TIME
by Stan Choate, Appraisal Tech / Valuation Associate
When someone calls our office about an appraisal, one of the first questions we ask is, “What is the Effective Date for the report?” Many clients do not know how to answer this question, which is understandable, since it belongs to the arcane world of appraisal work. We are always willing to explain what the Effective Date is and why it matters. We hope this newsletter will help our readers to better understand it for their next appraisal.
The Effective Date is the date of the opinion of value given in the appraisal report. Remember that the value of property changes over time. The appraiser can only give an opinion of value with reference to a specific date…the Effective Date.This has the greatest effect on the appraisal process when the appraiser begins to select comparable sales. In a stable market, when data is available, sales that closed prior to the Effective Date are usually more comparable than sales which closed after the Effective Date.
The Effective Date may be better understood when contrasted with two other dates: the Date of Report, and the Inspection Date. The Date of Report is the date when the report is transmitted to the client. Only in very rare cases will the Effective Date be the same as the Date of Report, and usually only when the property was not physically inspected. But that does not mean that the Effective Date is always the same as the Inspection Date, which is the date when the appraiser visited the property to do the inspection. Very often those dates are the same, but not always.
The Effective Date and the Inspection Date will often be the same when the client needs a current market value for the property. This is especially true for intended uses like refinancing, purchases, construction loans, estate planning, and divorce. For those kinds of appraisals, the Effective Date will usually be the same as the Inspection Date. If no inspection was performed, the Effective Date will likely be the Date of Report.
However, some appraisals require a retrospective opinion of value rather than a current market value. In this case, the Effective Date is set at some point in the past, before the Inspection Date and the Date of Report. The most common occasion for this retrospective Effective Date is when a property must be appraised as of the date of someone’s death for purposes of settling an estate or dealing with taxes. In most cases, the Effective Date will be the date of that person’s death. An appraisal can also give a prospective value, in which the Effective Date is set in the future, but these are rare.
All this can be confusing to clients, and they very often won’t be able to tell us for sure what the effective date of their appraisal ought to be. While we can usually help our clients answer this question, we sometimes refer them to their own attorneys or accountants, who are able to state exactly what the Effective Date should be. People seeking an appraisal would do well to confer with their attorneys or accountants before calling the appraiser, and ask them about the necessary Effective Date.
Spurgeon Appraisals has done retrospective appraisals as well as reports for current market values, and we are accustomed to aiding our clients navigate the maze of appraisal terminology. You can expect us to be diligent and detailed in the preparation of your appraisal reports.
Spurgeon Appraisals regularly appraises a variety of property types. We have experience appraising farms, residences, and commercial properties. We pride ourselves on providing excellent customer service and quality appraisals. Contact our team to see how we can meet your appraisal needs and exceed your service expectations.
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