You would be surprised… (a discussion of Fair Market Value of personal property)

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30 Aug You would be surprised… (a discussion of Fair Market Value of personal property)

Because of my work doing One Week Clear Outs with folks who have recently lost a loved one and need to get the home cleared out and ready for sale, I have been reading a lot of articles and blog posts about personal property values, (known as the Fair Market Value, or FMV, of personal property) so that I can keep abreast of the trends. This is important because when clearing out a house, it is essential for me to have a good idea of what items are of value and should be considered part of the estate and must be assigned a value, and which are not, and can be tossed or given away. Sometimes, to the untrained eye, something that appears worthless can be of great value. Conversely, something which has long been considered a “family heirloom” can have little or no value in the current market.
I am not an estate liquidator, but I work closely with these knowledgeable experts in the process of clearing out the home. I do this so that I can be sure to get the most return on my clients’ property when we are clearing out their home, whether they are downsizing, going through a rapid relocation where they can’t take everything in their current space, or for an estate clear out.
Determining FMV is a complex topic, therefore, I am going to give only a thumbnail outline of some of the things I have discovered in my research, which I hope will be informative. For more detailed information, you can contact an estate appraisal firm or an estate attorney.
Here is a round up of some valuable posts from various sources around the web, followed by a few takeaways that I have gleaned from my reading.
After a loved one dies, people are grieving and often vulnerable. It is an extremely challenging time to make decisions and unfortunately, all too often, there are what is known as “embattled heirs”, each vying for a piece of the pie. Compounding the emotional component is the fact that most people are not experts and often have no idea the value of the items in the estate. You hear stories of estates held up by warring siblings bickering over items they erroneously thought were precious but in fact were of of little or no monetary value.
When my father passed away, he had an art collection of about 50 or so pieces that he had been collecting over the years. We had always thought the art was valuable, but in the end, the entire collection only sold at auction for about $10,000.  We were shocked.
Times change. Tastes change. Trends trend…
And decor buying trends are changing rapidly. The ‘treasures’ that aging parents and grandparents are handing down these days are sometimes literally a dime a dozen and today’s younger generation has a completely different style of decorating. The thrift shops are often not accepting most furniture, save the most high end.
Recently, I was clearing out a beautiful postwar Park Avenue apartment in NYC. The walls in the grand living room were walnut with beautiful moldings along the ceiling. The realtor told me that the next buyers, most likely in their 30’s or 40’s would probably tear down the walls and paint everything a warm neutral palette. Sleek, modern, uncluttered, clean lines, greenery and plants, geometric tiles, metallics, sustainable and handmade goods. That’s the decorating forecast for 2016 according to Macala Wright, marketing analyst and trend forecaster. What to do, then, with the bulky ‘brown’ furniture so prevalent in the homes of yesteryear?
This, from an article in the Washington Post in March of 2015:
Stephanie Kenyon, 60, the owner of Sloans & Kenyon Auctioneers and Appraisers in Chevy Chase, says the market is flooded with boomer rejects. “Hardly a day goes by that we don’t get calls from people who want to sell a big dining room set or bedroom suite because nobody in the family wants it. Millennials don’t want brown furniture, rocking chairs or silver-plated tea sets. Millennials don’t polish silver.” The formal furniture is often sold at bargain prices, or if it’s not in good shape, it might go straight to the dump.
Here is the IRS definition of Fair Market Value: Fair market value is defined as the gross price that property would sell for on the open market between a willing buyer and willing seller, with neither being required to act, within reasonable timing and both having reasonable knowledge of the relevant facts. 
Many people believe FMV to be what they see the item listed for on eBay, which is a microcosm of the “marketplace”. It is important to remember that anyone can list an item for any price they choose on eBay, however unreasonable. A more accurate estimate of FMV would come from a review of the completed auctions for that price. (Showing what people were willing to pay for that item on the open market.) (see below)
In fact, Intuit’s donation tracker app and website portal called TurboTax It’s Deductible (actually a great product and it’s free!) uses values (guided by the IRS) gleaned from completed eBay auctions and from thrift store sales with sound, conservative estimation algorithms for assessing the fair market value of the items.
Here is an interesting quote from an article on the American Society of Estate Liquidators website:

Let’s talk about other things that are NOT Fair Market Value [FMV]:

  • It is not what you paid for an item (most people pay high retail and not FMV).
  • It is not wishful thinking.  True values are arrived at with careful research and methodology.
  • It is not family lore.  We know the stories of how “valuable” mom always said an item was, but that is not fair market value.  Many of our older moms may not understand how very different things are today, or why little girls have little interest in their prized possessions.
  • It is not outdated appraisal values that were probably written for insurance purposes or in a much healthier market.
  • It is not what you think it should be, nor the amount of money needed to pay bills.
  • It is not the asking price you see on a similar item on the internet or Ebay.  Asking prices are just asking prices.  We’re interested in what it actually SOLD FOR.
  • It is not based on sentimentality (how much you, or a loved one, cherished it).
  • It is not about how old it is or how long you’ve had it.  “Old” doesn’t necessarily mean it has value.

Bottom line:  An item is worth what someone will give you for it.  Always enlist the help of a professional to guide you through, when you don’t have the answers.

According to the Breus Group, there are different methods of valuation, each for their own purpose.

For equitable distribution [of an estate] [you would use the] Marketable Cash Value:
This is fair market value but net of all expenses. This value excludes all fees, costs and sales commissions and addresses the marketability of questionable items. As the value so derived represents the actual proceeds that will be paid to the seller after the sale which is in some cases 25% to 30% less than sale or hammer price, this method is most often used in equitable distribution as well as divorce settlements.

Estate Appraiser Julie Hall, the Estate Lady has some excellent advice on her informative blog The Estate Lady Speaks:

Don’t do ANYTHING until you know what it is and what it’s worth.  Do not give items to neighbors, friends, family, or charity until everything has been looked at by a professional appraiser, or you have been advised what the best method(s) is/are to proceed with dissolution of the estate.  It is well worth the cost to get this information.  It will even assist with equitable distribution, thereby keeping things as neutral as possible between the siblings.

My takeaways:

  1. Consult a professional appraiser first, before giving anything away.
  2. Don’t have expectation of the value of any item—anything could surprise you, in either direction.
  3. Fair Market Value is what people are willing to pay in the marketplace today.
  4. If you keep sentimental items, keep them because you enjoy them, not because you think your kids might want them, or to make sure your siblings don’t get them.
  5. Choose the more timeless pieces to bring home with you that you know you will appreciate for years to come. In other words, don’t keep clutter just because it belonged to your grandmother.

If you need to have an estate clear out, a house or apartment cleared out quickly for rapid sale, downsize or relocation, we can help anywhere in the United States or Canada!

If you have any questions about the One Week Clear Out, please feel free to contact Jessica: In Perfect Order

Remember, I am on your team!
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If you would like a complementary strategy session with me, where I will assess your situation and offer you immediately implementable tips, click here:  Let’s talk, Jessica!
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