How to determine value of asset - property - for FAFSA

Paying for College
1

Any ideas of a reasonable way to estimate the value of property with the following characteristics:

  1. Not our primary home so must be reported on FAFSA
  2. Passed down from family. Now owned jointly with several relatives, three of which are retirees and live on the property
  3. Federal housing calculator isn't usable because the property was bought in the early 1960's as raw land and a house later built on it
  4. In the middle of no-where so I can't find any comparable sales near-by. Zillow shows a vast expanse of nothing in the vicinity of the property.
  5. No outstanding mortgages or loans on the property.

It should be simple: market value minus loans divided by number of joint owners

However, I can’t figure out how to estimate the market value in a way that would be better than plucking a number out of thin air.

2

On what valuation are property taxes (if any) assessed? Will that get you close?

3

^^. Probably not…

What size is the land/acreage?

What size is the home in square feet?

Is there just one home?

Any other buildings on the property? If so, what are they and size

Middle of nowhere? No stores, gas stations, anyone around for how many miles? How do they get food, etc?

Does the property generate any income?

4

Barring all else, take your best guess, they aren’t going to require that you get the property appraised.

5

True, an appraisal isn’t “required,” but that is an answer to OP’s question (and it will be the most accurate value).

6

Remember, you are valuing a partial interest in the property. The value is what a willing buyer would pay for your family’s interest, which may be less than the total value divided by number of owners. At the very least, someone buying it would have to bring a legal action for partition to get their portion out of it (if the other owners didn’t agree to sell). So you have to subtract the legal fees and costs to bring that action. Partial interest discounts generally run between15% and 30% when the IRS is involved (I.e., that’s what they’ll accept, or what a court will allow if there is a dispute over taxable value).

7

@Sweetbeet

The value of the property does not include any POSSIBLE litigation anyone needs to take to buy it.

This property owner should try to figure out…what would the selling cost be for the whole property?

Where I live, a RECENT appraisal would be at least helpful in that the tax appraisal for property taxes is a about 75% of the actual property value. So if the property has been appraised for tax purposes within the last few years…start there. Ask your tax collector in the town what the appraisal is, when it was done, and what %age of the market value they say it is.

At least that will be some help.

8

Also what is the insured value on the homeowner’s insurance, would that help?

9

Let’s not confuse a property assessment for tax purposes with an appraisal that determines fair market value. And I agree that determining fair market value shouldn’t include any possible litigation or court costs. If the student’s parent’s share of the property is 25%, determine the current fair market value of the property and then divide by four. The fact that it can’t be easily sold by the parent because of the partial ownership interest doesn’t matter.

10

I genuinely appreciate the feedback so far. Here’s a little info to respond to comments:

  1. I actually have done a "best guess" but don't have any real knowledge/experience to feel confident in my own estimate. I figured someone here would surely be smarter than me. :-)
  2. The property tax assessment looks really low so I don't think it is the actual value. The suggestion to contact the property assessors office and ask at what percent of value they calculate the assessment is a good lead. At least it would be a somewhat defensible approach.
  3. I don't think the home insurance value would help much because the house alone is insured and the property also has acreage.
  4. Unfortunately, I agree with the posters who note that you can't really take the difficulty of selling or finding an interested buyer into account. I looked pretty thoroughly for any official guidance on this and they pretty much stick with "market value" as what you are supposed to report.
  5. I really don't want to spend money on an appraisal.
11

Nor should you. Maybe call a real estate agent in the county and see what comps they can share with you.