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Determining historical cost basis

My dad's home was just sold in December. It had been purchased in the early 90's by his wife and him.  His wife passed away a few years ago, and the house is in Los Angeles, California, and California is a community property state.

To determine the cost basis and whether or not taxes are due, the value of the home at the time of her death (2007) must be determined. Whatever that price, my dad should get an automatic step-up in the cost basis.

I know Zillow provides charts that go back passed 2007, but it's difficult to tell if Zillow's charts are accurate--they are definitely not accurate for my house in 2007, for example.

If you were faced with figuring out the value of a home 7 years ago, how would you do it?  What is the best/most-accurate means to determine a home's value in the past?

Thanks in advance for any suggestions and/or guidance!

john
  • December 03 2013 - North Hollywood
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Answers (8)

Best Answer

Profile picture for Blue Nile
The link is the "local info" at the top of the page, and then you type in the area of interest.  As you indicated "North Hollywood" in the original post, that is one I gave.  There is both a "download" and an "embed" option on that page, thus I used the "embed" to open the image separately, than referenced it in.  You will want to use the "download" to get the Excel data.  I still don't know what tier is of interest to you, but all the tiers are in the same Excel file on separate worksheets.

For North Hollywood, the link is:
http://www.zillow.com/local-info/CA-Los-Angeles/North-Hollywood-home-value/r_46795/

For 91606, the link is:
http://www.zillow.com/local-info/CA-91606-home-value/r_96451/

Median:


Top tier is not offered for that Zip code; apparently not enough in that range.

Single Family:

  • December 03 2013
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Profile picture for itzaDogsLife
@Pasadenan - thanks, the graphs are great!  How did you generate those exactly?  I went surfing around looking for the "Zindex Trends" but wasn't able to find the link (it may well have been right in front of my eyes...not sure).  I'm specifically wanting to generate them for 91606, though I suspect they will be similar to 91106.

If you can get me to/near the link, I should be able to tackle the rest.

Thank you!
  • December 03 2013
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Profile picture for Blue Nile
North Hollywood top tier:


From the chart, it appears that no capital gains taxes would be due, but it would depend on the date, and the specific property, so as stated before, pay for an appraisal from a licensed appraiser in the area for the date of death.

"Single Family" Zindex trend for comparison:
  • December 03 2013
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Profile picture for Blue Nile
Just for some reference on how top-tier of high priced neighborhoods are doing now as compared to bubble peak, here is a chart for 91108 top tier:


And for comparison, a chart for 91106 and a couple other local Zip codes:


The data for those is can be downloaded as Excel files, with monthly values, and going back further than the graphic charts show.  (Typically 10 years prior to Zillow's start).

You probably want to do your preliminary calculations using both the Zip code index trends and the neighborhood index trends.  You may also want to look at "single family" trends instead of just the value tier.
  • December 03 2013
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You can always have a Realtor to look up sold comparable properties in 2007.
  • December 03 2013
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Profile picture for Blue Nile
By the way, I have several appraisals from 2007, and have been watching the trends for several properties in the area since then.  2007 was assumed to be "bubble peak".  In most cases, the properties are almost back to where they were in 2007, but in one case, it appears that it exceeded it by quite a bit.  But that home happens to be in the "top tier", in a "desirable neighborhood".
  • December 03 2013
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Profile picture for Blue Nile
Sorry; typo, and missed the edit window time:
If you did also ---> If you *dad* also
  • December 03 2013
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Profile picture for Blue Nile
You need to pay for an appraisal by a licensed appraiser in the area, that will look up the sales at that time.

The cost basis to use for taxes is the appraised value for the date of death.

Do NOT use Zillow historic trends; they change their calculation method from time to time, and recalculate the tends.  It will not hold up in an IRS audit nor in court.  Your appraisal from a licensed appraiser will.

If you did also passed away prior to the sell of the property, it would be the value a the date of the last to die for the cost basis, unless there was a trust spit or similar, then appraisals for both dates would be needed for determining capital gains.

If you are only looking for a rough idea of magnitude for preliminary calculations, I would uses the Zindex trends for the appropriate tier from the local info pages, link at the top of the page, and scale it for a known value date instead.  But that may be a bit difficult to do as the Zindex trends only go back about 16 years.  But inflation rates in housing over 16 years ago was a bit more consistent, you may be able to extrapolate the chart backwards to find an index value at the time of purchase for scaling.

  • December 03 2013
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