Retrospective Appraisals
What Was Your Property Worth on a Specific Date in the Past?
Sometimes knowing what a property is worth today isn't the question that needs to be answered.
You may need to know what a home, cottage, investment property, commercial building or piece of land was worth several months or even many years ago.
This is known as a retrospective appraisal.
Cade Appraisals Inc. provides professional retrospective real estate appraisals to establish an independent opinion of property value as of a specific historical date.
Retrospective appraisals may be required for estate and probate matters, separation and divorce, capital gains and tax purposes, litigation, family or beneficiary disputes and other situations where a historical property value is required.
What Is a Retrospective Appraisal?
A retrospective appraisal develops an opinion of a property's value as of an effective date in the past.
For example, a property may be worth $800,000 today, but the question may be:
“What was this property worth on June 15, 2020?”
The appraiser's job is not to take today's value and simply estimate backwards.
Instead, the property must be analyzed within the market conditions that existed around the historical effective date.
That means researching historical sales, listings, market conditions and property information relevant to that period.
The result is an independent, professionally supported opinion of value as of the required historical date.
Why Would I Need a Historical Property Value?
There are many reasons someone may need to establish what real estate was worth in the past.
Retrospective appraisals are commonly requested for:
Estate and probate matters
Date-of-death valuations
Capital gains and tax matters
Change-of-use situations
Separation and divorce
Matrimonial property matters
Family and beneficiary disputes
Litigation
Partnership or shareholder disputes
Historical property transfers
Accounting and financial matters
Other legal or financial purposes
The appropriate valuation date should be confirmed with your lawyer, accountant or other professional advisor when the appraisal relates to a legal or tax matter.
Date-of-Death & Estate Retrospective Appraisals
Estate matters are one of the most common reasons for requiring a retrospective appraisal.
An executor or Estate Trustee may need to establish the value of real estate as of the
deceased owner's date of death.
If the appraisal isn't ordered until months or years later, that does not necessarily mean it is too late to determine a historical value.
A retrospective appraisal can research the property and market evidence applicable to the required historical date.
Estate properties may include:
Family homes
Condominiums
Cottages
Waterfront properties
Rental properties
Commercial real estate
Farms
Rural properties
Vacant land
Other real estate assets
The appropriate valuation date and tax treatment should be confirmed by the estate's
lawyer or accountant.
Retrospective Appraisals for Divorce & Separation
A separation or divorce may also require a historical property valuation.
In Ontario family-law matters, the value required for a particular purpose may relate to a
specific historical date rather than today's market value.
If several years have passed since that date, today's property value could be considerably different.
A retrospective appraisal examines the real estate market that existed around the required effective date and develops an opinion of value based on the information relevant to that period.
The appropriate legal valuation date should be established by the parties and their family-law professionals before the appraisal begins.
Capital Gains & CRA-Related Retrospective Appraisals
Tax-related matters can also create a need for historical real estate values.
For example, an accountant may require a property's fair market value as of a particular date associated with an inheritance, change in use, property transfer or another tax-related event.
In these circumstances, the appraiser provides the real estate valuation.
The appraiser does not determine the client's tax liability or decide which date should be used for tax purposes.
Your accountant or tax professional should establish the required effective date and tax treatment before the appraisal is completed.
Change-of-Use Appraisals
A common example involves a property that changes from a principal residence to an income-producing property, or vice versa.
The Canada Revenue Agency has rules regarding changes in use of real estate, including circumstances where a property can be considered disposed of and immediately reacquired at fair market value. Elections and exceptions can also apply.
If your accountant determines that a historical fair market value is required, a retrospective appraisal can establish an independent opinion of the property's value as of that specified date.
Because tax situations vary, your accountant should determine whether an appraisal is required and the date that should be used.
Retrospective Appraisals for Litigation
Legal disputes do not always arise immediately after the event being disputed.
By the time a matter reaches mediation, arbitration or litigation, several years may have passed.
The relevant question may therefore concern the property's value at an earlier point in time.
A retrospective appraisal can provide an independent historical opinion of value for lawyers, property owners and other authorized parties.
Depending on the matter, the appraiser may need to research historical sales, property information, market conditions and other evidence applicable to the required date.
How Is a Retrospective Appraisal Completed?
A historical appraisal is not simply today's property value adjusted by a general percentage.
The appraiser attempts to reconstruct the relevant market as it existed at the effective date.
Depending on the property and assignment, this can involve researching:
Historical comparable sales
Historical property listings
Historical market conditions
Property characteristics at the effective date
Neighbourhood conditions
Land values
Rental information
Zoning and land-use information
Previous MLS information
Available photographs
Renovation history
Building permits
Previous appraisal information
Other relevant historical evidence
The amount and type of research required depends on the property, historical date and
intended use of the appraisal.
Historical Comparable Sales
Comparable sales are particularly important in many retrospective residential appraisals.
However, the appraiser should generally be looking at market evidence relevant to the historical valuation date rather than simply using today's sales.
For example, if the required effective date is in 2019, today's sale prices do not directly establish what purchasers were willing to pay in 2019.
The appraiser researches the market surrounding the historical date and analyzes sales that provide meaningful evidence of the property's value at that time.
Adjustments or other analysis may be required to account for differences between the subject property and comparable properties.
What If the Property Has Changed Since the Historical Date?
This is one of the most important considerations in retrospective appraisal work.
Imagine you need the value of your home as of 2017, but you completed a major renovation in 2022.
The house the appraiser sees today may not be the same house that existed in 2017.
Perhaps the kitchen was replaced.
The basement was finished.
An addition was constructed.
A garage was added.
The bathrooms were renovated.
Or the property may have deteriorated rather than improved.
The appraiser needs to understand, as reliably as possible, the property's characteristics
and condition as of the historical effective date.
What Information Can Help With a Historical Appraisal?
If the property has changed, historical documentation can be extremely helpful.
Useful information may include:
Old photographs
Previous MLS listings
Building permits
Renovation invoices
Construction contracts
Floor plans
Surveys
Previous appraisals
Insurance documentation
Property records
Rental agreements
Information regarding the dates of renovations
Other reliable historical documentation
You do not necessarily need to have every document listed above.
The appraiser will determine what information is available and whether there is sufficient reliable evidence to complete the assignment.
What If I Don't Have Old Photos?
Don't assume a retrospective appraisal cannot be completed simply because you don't have historical photographs.
Depending on the property and date, other sources of information may be available.
Previous listings, public records, permits, plans, property information and other documentation may help establish the characteristics of the property at the required date.
However, the farther back the valuation date is, the more challenging it can become to obtain reliable information.
Any significant uncertainty must be appropriately addressed within the appraisal.
Can You Appraise a Property From 5, 10 or 20 Years Ago?
Potentially, yes.
There is no simple rule that a retrospective appraisal becomes impossible after a particular
number of years.
The important question is whether sufficient reliable property and market information can be obtained to develop a credible opinion of value.
Older effective dates can require significantly more research because historical comparable sales, property records and information regarding the property's condition may be more difficult to obtain.
The feasibility of the assignment should therefore be considered on a case-by-case basis.
Retrospective Appraisals for Properties That Have Already Been Sold
A property does not necessarily need to still be owned by the person requesting the appraisal.
There may be situations where a historical valuation is required after the property has already been transferred or sold.
The appraiser must determine whether sufficient reliable information is available regarding the property and its characteristics as of the required date.
Depending on the circumstances, historical listings, photographs, records and transaction information can become particularly important.
Current Market Value vs. Retrospective Market Value
These are two separate valuation questions.
A current appraisal asks:
“What is this property worth now?”
A retrospective appraisal asks:
“What was this property worth as of a specified date in the past?”
The answers can be very different.
Real estate markets can rise, decline or remain relatively stable over time. Individual properties can also change because of renovations, deterioration, additions or changes in their surroundings.
This is why a current property value should not simply be substituted for a historical valuation.
Types of Properties That Can Be Appraised Retrospectively
Retrospective appraisal assignments can involve many types of real estate, including:
Residential homes
Condominiums
Cottages and waterfront properties
Rental properties
Multi-residential properties
Commercial properties
Industrial properties
Mixed-use properties
Rural residences
Farms and agricultural properties
Vacant land
Development properties
Unique real estate
The methodology and amount of historical research required will depend on the individual
property and assignment.
Frequently Asked Questions About Retrospective Appraisals
What is a retrospective appraisal?
A retrospective appraisal develops an opinion of a property's value as of a specified date in the past.
Can you tell me what my house was worth 10 years ago?
Potentially, yes. The appraiser must determine whether sufficient reliable historical property and market information is available to complete the assignment.
Do you use today's comparable sales?
The analysis is focused on market evidence relevant to the historical effective date. The appropriate evidence depends on the particular appraisal assignment.
Can you complete a date-of-death appraisal years later?
Potentially, yes. Retrospective appraisals are commonly used when a historical value is required after the relevant date has already passed.
Can a retrospective appraisal be used for divorce?
Yes. Historical property valuations may be required in matrimonial matters. Your lawyer should confirm the appropriate effective date.
Can you complete a retrospective appraisal for capital gains
purposes?
Yes. If your accountant or tax professional determines that a historical property value is required, an appraisal can be completed for the specified effective date, subject to the availability of sufficient information.
What happens if the property has been renovated?
The appraiser may need to establish what improvements existed as of the historical effective date. Historical photographs, listings, permits and renovation records can be helpful.
What if the property has already been sold?
A retrospective appraisal may still be possible if sufficient reliable information about the property and historical market can be obtained.
Looking Back to Determine Property Value
Real estate values change, properties change and markets change.
When you need to know what a property was worth in the past, today's value may not answer the question.
A professionally prepared retrospective appraisal looks back at the relevant property characteristics and market evidence to develop an independent opinion of value as of the required historical date.
Cade Appraisals Inc. provides retrospective real estate appraisal services for estate and probate matters, divorce and separation, capital gains and tax matters, litigation and other situations requiring a historical property valuation.
Need a Retrospective Appraisal?
Contact Cade Appraisals Inc. with the property address, purpose of the appraisal and required historical valuation date.