Selling an Inherited Property in Denver? Why a Date of Death Appraisal Matters in Colorado

If you’ve recently inherited a property from a loved one in Denver or a surrounding community, you may be wondering what steps to take next. Selling an inherited home in the Denver Metro area comes with its own unique set of challenges—and one of the most important and often overlooked steps in the process is getting a Date of Death Appraisal.

As a Certified Real Estate Appraiser with over 20 years of experience throughout the Denver Metro area, I've helped many Colorado families navigate this process. Whether you're selling a home in Arvada, Littleton, or Highlands Ranch, settling an estate in Aurora or Westminster, or fulfilling legal requirements for property in Thornton or Parker, a Date of Death Appraisal for Colorado properties can save you time, money, and potential headaches down the road.

Let's break down why this type of real estate appraisal is necessary, how it helps property owners, and what you need to do to get one.

What Is a Date of Death Appraisal?

Before diving into the reasons why this specialized appraisal matters for property sales, let's clarify what we're talking about. A Date of Death Appraisal determines the fair market value of a property specifically as of the date when the previous owner passed away—not as of today's date.

It's essentially a retrospective valuation that establishes what the real estate was worth at that precise moment in time, regardless of how the real estate market has changed since then.

Why You Need a Date of Death Appraisal When Selling Inherited Property in Colorado

Here are the compelling reasons to obtain this specialized real estate valuation:

1. The Tax Advantages Are Substantial

The single most compelling reason to obtain a Date of Death Appraisal when selling inherited property is the potential tax savings through what's called a "step-up in basis."

Here's a real-world example: A client inherited her father's Denver home that he had purchased back in 1975 for just $45,000. By the time of his passing in 2023, the property was worth approximately $650,000. Without a Date of Death Appraisal, if she had sold the home, the IRS might have considered her taxable gain to be the difference between the $45,000 purchase price and whatever she sold it for—potentially resulting in capital gains tax on over $600,000!

However, with a properly documented Date of Death Appraisal, her cost basis "stepped up" to $650,000. When she sold the property six months later for $680,000, she only had to pay capital gains tax on the $30,000 increase since her father's passing—saving her tens of thousands in taxes.

The IRS isn't simply going to take your word for what the property was worth when your loved one passed. You need professional documentation from a certified appraiser, and that's exactly what a Date of Death Appraisal provides.

2. Denver's Real Estate Markets Change Rapidly

If you've inherited property in the Denver Metro area or along the Front Range, you know our Denver real estate market can shift dramatically in just a few months. The Denver Metro area in particular has seen some neighborhoods appreciate by 10-15% in a single year, while others have experienced temporary declines.

When selling an inherited property in Colorado, the market value on the date of death establishes your tax basis—not the value when you decide to sell. If you wait a year after inheriting before selling, and don't have a Date of Death Appraisal, you might end up paying taxes on appreciation that occurred during that waiting period.

Alternatively, if the market declines after the date of death and you sell for less than the property was worth when you inherited it, a properly documented date of death value could allow you to claim a loss for tax purposes.

3. It Simplifies the Probate Process

When you're selling inherited property, you're often doing so as part of a larger probate process. Colorado courts overseeing probate generally require formal documentation of all assets in the estate, including real property valuations.

Having a professional Date of Death Appraisal ready can significantly streamline the probate process, allowing for a quicker sale of the property. I've seen situations where heirs were eager to sell an inherited property, but delays in probate due to inadequate documentation held up the process for months.

4. It Helps Prevent Family Conflicts

When multiple heirs inherit a property together, tensions can arise over its value—especially if some want to sell while others wish to keep the property. A professional Date of Death Appraisal provides an objective valuation that can prevent disputes and ensure everyone receives their fair share.

One particularly contentious case I worked on involved three siblings who inherited their mother's home in Parker. Two wanted to sell immediately, while the third wanted to buy the others out. Without an agreed-upon value, the negotiations turned bitter. Once I provided a Date of Death Appraisal that all parties recognized as fair and objective, they were able to reach an amicable resolution.

5. It Provides Documentation for Estate Tax Returns

For larger estates, a Date of Death Appraisal is essential for federal estate tax returns. While Colorado doesn't have its own estate tax, federal estate taxes apply to estates exceeding $13.61 million (as of 2024).

Even if your inherited property doesn't push the estate above this threshold, proper documentation is still required for the federal estate tax return (IRS Form 706), which must be filed within nine months of the date of death.

6. It Helps with Marketing the Property

When selling an inherited property in todays competitive market, potential buyers often have questions about its history and value trajectory. A Date of Death Appraisal provides validated information about the property's worth at a specific point in time, which can be valuable in negotiations.

I've worked with real estate agents who effectively use the information from Date of Death Appraisals to show potential buyers how a property has appreciated over time, creating a compelling story about the homes investment potential.

When Should You Get a Date of Death Appraisal?

Ideally, you should order the appraisal as soon as possible after the property owner's passing. This timing is optimal because:

1. Memories and evidence are fresh: The property's exact condition is still well-remembered.
2. Less research required: The appraiser won't have to work as hard to establish historical data about market conditions.
3. Tax filing deadlines: Estate tax returns must be filed within 9 months of death unless an extension is granted.

That said, an experienced appraiser familiar with the Denver Metro area and properties along the Front Range can still provide an accurate retrospective valuation months or even years after the date of death by researching historical market data, though the process becomes more challenging with time.

What to Look for in a Denver Real Estate Appraiser

Not all appraisers have experience with date of death valuations in Denver, Colorado. When selecting a professional for this specialized work in the Denver Metro area, look for:

• Specific experience with estate and Date of Death Appraisals in the Denver area
• Familiarity with the local market where the property is located, from Parker to Thornton
• Certification and proper licensing in Colorado
• Understanding of IRS requirements for estate valuations
• Experience working with Colorado attorneys and estate planners

Common Mistakes to Avoid When Selling Inherited Property

After helping many families through this process in Denver and the surrounding areas, I've seen several pitfalls that can cause problems:

Using Online Estimators or Tax Assessments

These rarely reflect true market values and will not satisfy IRS requirements. County tax assessments are particularly problematic as they often lag behind actual market conditions.

Selling Without Resolving Title Issues

Inherited properties sometimes have complicated title situations that need to be cleared before selling. This is particularly common in older neighborhoods.

Failing to Coordinate with Estate Attorneys and Tax Professionals

The sale of inherited property involves legal and tax considerations that require expert guidance from professionals familiar with Colorado property law.

The Bottom Line: Don't Skip This Critical Step

While it might seem tempting to bypass a Date of Death Appraisal when you're planning to sell an inherited property, doing so could cost you significantly in unnecessary taxes and complications. The modest investment in a professional appraisal can provide substantial returns through tax savings, smoother probate proceedings, and fewer family conflicts.

1. It ensures legal compliance with tax and Colorado probate requirements
2. It can potentially save thousands in unnecessary taxes
3. It helps prevent family disputes by establishing objective values
4. It provides executors protection from liability under Colorado law

In my 20 years appraising properties, I've seen how a thorough, professional Date of Death Appraisal provides peace of mind during a challenging time. The process doesn't have to be overwhelming with the right professional guidance from a local Denver area appraiser.