When you ask for an appraisal it’s vital to know what sort of valuation you are seeking. Toward that end, what follows is some detailed information on the various terms related to value.
Fair Market Value is a hypothetical concept which allows no advantage to either buyer or seller. Here are some different legal definitions: IRS Publication 561 Fair market value (FMV) is the price that property would sell for on the open market. It is the price that would be agreed on between a willing buyer and a willing seller, with neither being required to act, and both having reasonable knowledge of the relevant facts. If you put a restriction on the use of property you donate, the FMV must reflect that restriction.
Fair Market Value for Charitable Donation purposes Internal Revenue Regulation Section § 1.170A-1(c)(2) Fair Market Value is the price at which property would change hands between a willing buyer and a willing seller, neither being under the compulsion to buy or sell and both having reasonable knowledge of relevant facts.The 8283 Form that the appraiser you hire signs along with the donor was updated in December of 2014.
Fair Market Value for Estate Tax purposes Treasury Regulation § 20.2031-1(b) Fair Market Value is not to be determined by a forced sale, nor is the Fair Market Value of an item of property to be determined by the sale price of the item in a market other than that in which such an item is most commonly sold to the public taking into consideration the location of the item wherever appropriate.
Fair Market Value is the appraisal term used today (2014) for IRS Estate Taxes, Noncash Charitable Contribution for donations and when an owner is looking to sell his personal property (this should not to be confused with an estimated range an unqualified appraiser or an auction house might provide). We’re not trying to confuse you about Fair Market Value; we’re trying to educate the public on the complexities of appraisal report writing. While we are not lawyers or accountants, Art of Estates appraisers are trained to apply the USPAP standards in developing documents to be used by those parties.
Insurance Replacement Value (IRV) This is simply the replacement value attached to one or more items for an insurance company to compensate the owner for damage or theft. This valuation could be made before or after a loss depending on the situation and intended purpose of the appraisal. There are four categories within the Cost Approach to Value for your insurance: Replacement Cost (new) Replacement Cost (used) Production Cost (manufacturer to replace) Reproduction Cost.
Most insurance companies cover their client’s personal property up to a certain dollar amount, also referred to as a threshold, without having to pay additional fees to cover their paintings, antiques, porcelain or other general personal property areas and categories that may exist in home, office or in some cases vacation home. Personal property covered by a normal insurance policy can reach up to $50,000, $100,000, $500,000 and in some cases, similar to museums, a blanket policy that covers nearly everything. The blanket policy usually has a strong inventory involved so that the insurance company has an idea of what coverage may look like in a catastrophic event. It’s up to the insured to to make certain that their insurer knows what is covered, what isn’t and to what extent they would like the policy to cover.
Insurance companies and the property owner should both be honest up front about the values of the assets that should be covered in the insurance policy to reduce the potential for fraudulent behavior by either party. Who wants to wait for the insurance investigator who may have no experience in dealing with unique personal property that may become the subject of a claim? We know it’s complicated, and with our expert experience with the insurance process we’ll provide the report required for unfortunate circumstances. We’ve even provided restoration quotes in the later stages of negotiations between parties.