When a homeowner passes away, real property is almost always the largest asset in the estate — and it almost always requires a certified appraisal before the estate can be settled. Whether the estate is subject to federal or state estate tax, whether heirs plan to sell the property, or whether assets must be divided among multiple beneficiaries, an accurate determination of fair market value is foundational to every step that follows.
This guide explains the appraisal process for estates: what value standard applies, why the effective date matters so much, how the IRS and state taxing authorities use the appraisal, what happens to the stepped-up cost basis for capital gains purposes, and how executors and estate attorneys should go about ordering the right appraisal at the right time.
Date of Death vs. Current Market Value: A Critical Distinction
The first thing to understand about estate appraisals is that the relevant date is almost never today. Estate appraisals are retrospective — they determine the fair market value of the property as of the date the owner died, not the date the appraisal is ordered.
This distinction is not procedural — it has real financial consequences. Markets move. A property that was worth $850,000 on the date of death might be worth $920,000 six months later, or $790,000 if the market softened. The estate must be valued as of the moment the decedent passed away, regardless of what happens afterward.
For a retrospective appraisal, a qualified appraiser reconstructs market conditions as they existed on the effective date. This means selecting comparable sales that closed on or before the date of death, analyzing market trends as they appeared at that point in time, and forming an opinion of value as if the appraisal were being performed on that specific day.
The effective date is everything in an estate appraisal. Getting it wrong — even by a few weeks — can result in an incorrect tax calculation, an unequal distribution, or an appraisal that the IRS rejects.
Why Fair Market Value Is the Standard
Estate law uses a specific definition of value: fair market value, defined as the price at which property would change hands between a hypothetical willing buyer and a willing seller, neither under any compulsion to buy or sell, both having reasonable knowledge of relevant facts.
This is a market-based standard — it is not what the family paid for the property decades ago, not what a single interested buyer offered, and not what the online estimators say. It is a professionally reasoned opinion of what an arm's-length transaction would produce on the open market as of the effective date.
This standard applies across the board: for federal estate tax purposes under IRS guidelines, for New York State estate tax purposes, and for the calculation of stepped-up cost basis that affects every heir who eventually sells the property.
Stepped-Up Basis and Why It Matters for Heirs
Under current federal tax law, heirs who inherit property receive a stepped-up cost basis equal to the fair market value of the property on the date of the decedent's death (or an alternate valuation date, if elected). This is one of the most significant tax advantages available in estate planning.
Here is why it matters in practical terms. If a parent purchased a home in 1985 for $120,000 and it is worth $1.1 million at the time of death, the heir who inherits and later sells the property does not owe capital gains tax on the $980,000 appreciation that occurred during the parent's lifetime. Their basis is stepped up to $1.1 million — the fair market value at death.
If the heir then sells the property for $1.15 million two years after inheriting it, they owe capital gains tax only on the $50,000 gain that occurred after the date of death — not on the full appreciation from the original purchase price.
The stepped-up basis is only as accurate as the estate appraisal that establishes it. An appraisal that understates value creates a lower basis than the heir is legally entitled to, potentially resulting in unnecessary capital gains taxes upon sale. An appraisal that overstates value can create problems if the IRS audits the return. Getting the number right matters — and only a certified, defensible appraisal produces a number that will hold up to scrutiny.
IRS Form 706 and the Estate Tax Appraisal Requirement
Federal estate tax is reported on IRS Form 706, the United States Estate (and Generation-Skipping Transfer) Tax Return. Form 706 must be filed for estates with a gross value exceeding the federal exemption — which as of 2026 is $13.99 million for individuals (subject to legislative change).
When Form 706 is required, the IRS mandates that real property be valued at fair market value and that the methodology be defensible. For residential real property, this means a certified appraisal prepared by a qualified appraiser — typically a state-licensed or state-certified residential appraiser — following Uniform Standards of Professional Appraisal Practice (USPAP).
The appraisal report must include:
- The effective date of value (the date of death)
- A physical description of the property
- The appraisal methodology and comparable sales used
- The appraiser's qualifications and certification number
- A signed certification and statement of limiting conditions
New York State has its own estate tax with a lower exemption — currently $7.16 million — so many estates that fall below the federal threshold still face New York State estate tax. The same appraisal standards apply at the state level.
Even for estates below the taxable threshold, a certified appraisal is often necessary to establish stepped-up basis, to distribute assets fairly among multiple beneficiaries, or to satisfy the requirements of the Surrogate's Court during the probate process.
Date of Death vs. Alternate Valuation Date
In some circumstances, the executor of an estate may elect to use an alternate valuation date — six months after the date of death — rather than the date of death itself. This election is permitted under IRC Section 2032 and may be advantageous when the estate is subject to federal estate tax and the property (or the estate as a whole) has declined in value after death.
| Valuation Date | When It Applies | Key Consideration |
|---|---|---|
| Date of Death | Standard for all estates | Value as of the exact date the decedent passed away |
| Alternate Valuation Date | Electable under IRC §2032 if estate tax is owed AND it reduces both estate value and tax | Six months after date of death; both conditions must be met |
| Stepped-Up Basis Date | Matches whichever valuation date is elected | Establishes the heir's cost basis for future capital gains calculations |
The election of an alternate valuation date requires both conditions to be satisfied: the overall value of the gross estate must decrease, and the estate tax liability must also decrease. An appraiser cannot make this determination — it is a tax and legal decision made by the executor in consultation with the estate attorney and CPA. What the appraiser provides is the accurate value as of whichever effective date applies.
What Executors Need to Do
If you have been named executor of an estate that includes real property, your responsibilities with respect to the appraisal are straightforward but time-sensitive:
- Identify all real property in the estate — including primary residences, vacation properties, investment properties, and any partial interests.
- Note the exact date of death — this is the effective date for the appraisal. Precision matters; the appraiser will reconstruct market conditions as of that specific day.
- Engage a certified appraiser early — Form 706 is due nine months after the date of death (with a six-month extension available). Appraisals for complex properties or estates with multiple properties take time. Starting early avoids delays.
- Provide the appraiser with relevant documentation — deed, most recent tax assessment, any recent improvements, permits, or prior appraisals. The more information available, the more accurate and defensible the appraisal will be.
- Confirm USPAP compliance — any appraisal submitted to the IRS or used in a legal proceeding must meet USPAP standards. Confirm with your appraiser that the report will satisfy these requirements.
How to Order an Estate Appraisal: Timeline and Process
The process of ordering an estate appraisal is similar to ordering any certified appraisal, with some important differences.
Step 1 — Contact the appraiser and provide the effective date. The first conversation should clarify that this is a retrospective appraisal with a specific effective date. The appraiser will confirm that they have access to market data for that period and can form a credible opinion of value.
Step 2 — Schedule the inspection. Even for a retrospective appraisal, the appraiser must inspect the property — or document its condition as of the effective date to the extent possible. For properties that have been substantially altered since death, photographs, contractor records, or other documentation of the property's condition at the effective date are important.
Step 3 — Comparable sales research. The appraiser will research sales that were available in the market at or before the effective date. This is the most time-intensive part of a retrospective appraisal — the appraiser must not only find appropriate comparable sales but confirm that those sales were known to market participants as of the effective date.
Step 4 — Report preparation and delivery. A complete estate appraisal report — a full USPAP-compliant summary or self-contained report — typically takes one to two weeks from inspection to delivery, depending on the complexity of the property and the availability of comparable sales data.
Typical timeline: Plan for two to four weeks from initial contact to final report delivery. For unusual properties, properties with limited comparable sales data, or estates involving multiple parcels, allow more time.
Common Questions from Estate Attorneys and Heirs
Can the estate use an online estimate or tax assessment instead of a certified appraisal?
No. Neither automated valuation models (such as Zillow's Zestimate) nor municipal tax assessments constitute fair market value for estate purposes. The IRS requires a certified appraisal from a qualified appraiser. Courts handling probate proceedings require the same. An online estimate carries no professional accountability and will not withstand scrutiny in any legal or tax proceeding.
What if the property has already been sold before the appraisal is ordered?
The sale does not eliminate the need for an appraisal of the date-of-death value. The sale price of a subsequent arm's-length transaction can be relevant evidence of value, but the appraiser must still form an opinion of value as of the effective date — which may differ from the later sale price if market conditions changed. An appraiser can typically complete a retrospective appraisal even after the property has transferred, using historical market data.
How long after death can an estate appraisal be completed?
There is no absolute deadline for completing a retrospective appraisal, but the practical limitation is data availability. The further the effective date recedes into the past, the more challenging it can be to reconstruct the market. For most residential properties in Westchester County, Manhattan, and surrounding areas, retrospective appraisals can be completed reliably for effective dates going back several years. Beyond that, data gaps may affect the reliability of the analysis.
Does the property need to be vacant before the appraiser inspects it?
No. The appraiser can inspect an occupied property. If the property is occupied by a surviving family member or tenant, coordinate access in advance. The appraiser needs to walk through all accessible areas of the interior and photograph the exterior.
What if multiple heirs disagree on the value?
Disputes over estate value are not uncommon, particularly when real property must be divided or when one heir wishes to buy out others. In these situations, each party may obtain their own appraisal. When the appraisals produce different conclusions, the attorneys typically attempt to reconcile the difference — or the matter is referred to the Surrogate's Court for resolution. A well-documented, USPAP-compliant appraisal from a qualified appraiser with local market experience is the strongest foundation for any of these scenarios.
The Bottom Line for Executors and Heirs
Real estate appraisal in an estate context is not optional and it is not a formality. The value established in the estate appraisal directly affects the estate tax calculation, the stepped-up basis available to every heir, and the fairness of any distribution among beneficiaries. Errors — whether through an unqualified appraiser, an incorrect effective date, or an inadequate methodology — can result in tax underpayments that trigger IRS scrutiny, tax overpayments that cost the estate real money, or legal disputes among heirs that take years to resolve.
Engaging a qualified, experienced appraiser early — before the estate tax filing deadline, before beneficiaries make decisions based on an assumed value, and before any significant changes are made to the property — is the single most important step an executor can take to protect the estate and the heirs it serves.