CMA vs Certified Appraisal for Pennsylvania Estates: What the Law Requires

When someone dies owning real estate in Pennsylvania, the executor needs a property valuation for the inheritance tax return (Form REV-1500). The instinct is to call a real estate agent and ask for a Comparative Market Analysis — it's free, fast, and looks professional.

It's also illegal to use for this purpose.

Why a CMA Won't Work

Under Pennsylvania law (63 P.S. § 455.608a), a licensed real estate agent is prohibited from preparing a Comparative Market Analysis (CMA) or Broker Price Opinion (BPO) for estate planning, tax reporting, or asset distribution among heirs — unless there is an active or contemplated real estate transaction.

Filing an inheritance tax return isn't a transaction. Dividing an estate among beneficiaries isn't a transaction. If the property isn't being listed for sale, the agent has no legal authority to provide a valuation that the executor uses on a tax filing.

The Department of Revenue can and does challenge returns filed with improper valuations. A CMA-based filing can trigger a review, delay estate settlement, and expose the executor to penalties and interest.

What You Need Instead

A formal retrospective date-of-death appraisal prepared by a Certified Residential Appraiser (or a Certified General Appraiser for commercial or mixed-use properties). This appraisal establishes the fair market value of the property as of the exact date of death — not the date the appraiser visits.

The appraisal must comply with the Uniform Standards of Professional Appraisal Practice (USPAP) and is recognized by both the Pennsylvania Department of Revenue and the IRS.

Expect to pay $300–$600 for a standard residential appraisal. Complex properties — multi-unit buildings, working farms, properties with mineral rights, or commercial real estate — can cost $1,000 or more and may require specialized expertise.

Why the Date-of-Death Value Matters Twice

The appraised value serves two purposes:

1. Pennsylvania inheritance tax: The fair market value determines the taxable amount reported on each REV-1500 schedule. At 4.5% for children and up to 15% for non-lineal heirs, even a $50,000 valuation difference creates a significant tax swing.

2. Federal stepped-up basis: Under IRC Section 1014, the property's cost basis resets to its fair market value at the date of death. If heirs later sell the property, capital gains tax is calculated from this stepped-up basis — not the original purchase price.

A low appraisal reduces inheritance tax today but increases capital gains tax when heirs sell. A high appraisal does the opposite. The right answer depends on the family's plans for the property and their respective tax brackets.

When a CMA Is Appropriate

A CMA or BPO is perfectly acceptable when:

• The executor is listing the property for sale and needs a market price estimate
• The property is being sold as part of estate administration and the agent is involved in the transaction
• The valuation is for internal family discussion only and won't appear on any tax filing

In these scenarios, the CMA complements the formal appraisal — it doesn't replace it.

Common Level Ratio: An Alternative for Smaller Estates

For properties where the cost of a formal appraisal seems disproportionate, Pennsylvania allows the use of the Common Level Ratio (CLR) — a state-published multiplier that converts the county's assessed value to an estimated fair market value.

The Department of Revenue publishes CLR factors by county and updates them periodically. Multiply the property's assessed value by the CLR to get an estimated fair market value for the inheritance tax return.

This approach is simpler and costs nothing, but it may not reflect the property's actual condition, improvements, or local market dynamics. For high-value properties or estates with multiple heirs, a formal appraisal is worth the investment.

Coordinate Valuation With Your Estate Plan

Property valuation is one piece of a larger estate administration puzzle. The Pennsylvania Advance Directive & Living Will Kit covers the full arc — from healthcare decision-making to inheritance tax strategy — so executors understand which steps come first and how each decision affects the others.

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