How Is the Appraisal Calculated for the Baltimore CHAP Tax Credit?

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Direct answer

The City sets your CHAP credit from two appraisals by a Maryland certified appraiser. The first values the property before rehabilitation and goes in with your application. The second values it after the work, due within 90 days of the final use and occupancy permit. The credit offsets City tax on the increase between them.

I am Ed Drost, a Maryland State Certified Residential Appraiser. I have appraised homes across Baltimore City and the surrounding counties since 1989, and CHAP pre- and post-rehabilitation reports are part of my regular work. Owners often hear that the CHAP appraisal is a "projected value" exercise. It is not, and the difference matters. This is part of our Baltimore appraisal Q&A series. For the full process, see the CHAP Historic Tax Credit Guide.

What are the two appraisals, and what does each do?

For projects given preliminary approval after October 1, 2014, the City sets your credit from two appraisals, both at your expense. A Maryland Certified Residential or Certified General appraiser prepares them, and the Department of Finance reviews each one before it is accepted.

The two CHAP appraisals side by side
	Pre-improvement appraisal	Post-improvement appraisal
What it values	The property before rehabilitation	The property after the work is finished
When it is due	With your application. The regulation allows up to 90 days from submitting the application.	Within 90 days of the final Use and Occupancy permit, or of the last permit inspection if no U&O permit is required
What it sets	The base value. City tax on this value stays yours to pay.	The new value. City tax on the increase over the base is what the credit offsets.
Counts toward the 25% spend?	Yes. The appraisal fee is an allowable cost.	Yes, for the same reason.

The first appraisal is a snapshot of what you own today. The second is a snapshot of what you finished. Neither one is a forecast. If someone tells you the City wants a "projected completion value," ask them to show you where the regulation says so. I have not found that language in the rules.

How does the City turn two appraisals into a credit?

The credit equals the City property tax on the post-improvement value minus the City tax on the pre-improvement base value. The City computes that number once and applies it for 10 tax years. For projects with construction costs up to $5.0 million you receive 100% of the credit each year. Above $5.0 million it drops to 80% for years 1 through 5, then falls from 70% to 30% over years 6 through 10.

The credit covers City property tax only. State and county tax lines on your bill are not part of it. I walk through the arithmetic with real numbers in How to Calculate Your CHAP Tax Credit Savings.

What must the appraisal report contain?

For single-family properties the City provides an Appendix A scope of work, and I follow it. The report is more than a number.

The market value definition the City requires.
Interior photos of every bathroom and the kitchen, along with the rest of the property.
At least three settled comparable sales, not listings or pending contracts.
An opinion of value made by a Maryland Certified Residential or Certified General appraiser, with the license number on the report.

The City reviews what the appraiser relied on, so the comparable sales and the adjustments have to make sense for a Baltimore rowhouse. This is where local knowledge shows. Two blocks can sit in different submarkets, and a comparable from the wrong one gets questioned.

When do you order each appraisal?

Order the first one when you are ready to apply, not after. Work started before the initial appraisal is not considered, and work between submission and CHAP's preliminary approval can make the property ineligible. A pre-improvement appraisal ordered late can slow the whole file.

Order the second one as the job winds down. The 90-day clock starts at the final U&O permit, or the last permit inspection if the City issues no U&O. Work finished after that date is not counted in the post-improvement value, so punch-list items belong before the final inspection, not after.

The two clocks
Clock	Starts when	Runs for
Pre-improvement appraisal	You submit the application	Up to 90 days
Post-improvement appraisal	Final U&O permit or last permit inspection	90 days
Application without preliminary approval	You submit the application	Expires after 180 days

What mistakes do owners make with the appraisals?

Treating the appraisal as the 25% test. The City's FAQ says 25% of full cash value, and the regulation ties the baseline to the assessment record. I tell owners to confirm which figure applies to their house and budget on the higher number.
Letting the post-improvement window lapse. Missing the 90 days can stall final certification, and the 10-year credit does not start until final certification.
Finishing work after the final inspection. Anything done after that date does not count toward the post-improvement value.
Hiring someone without the right license. The City requires a Maryland Certified Residential or Certified General appraiser. Check the license on the State's lookup before you pay.

A short call to the appraiser before the work starts saves more money than any other step. I would rather answer your questions on day one than rework a report in month eighteen.

Common questions

Who can do a CHAP appraisal in Baltimore?

The City requires a Maryland Certified Residential or Certified General appraiser. The Department of Finance reviews each report, so the appraiser should know the City's Appendix A scope and the local rowhouse market.

Is the post-renovation appraisal a projection?

No. As I read the regulation, the post-improvement appraisal values the property after the work is finished. It is due within 90 days of the final Use and Occupancy permit, or the last permit inspection if no U&O permit is required.

How long do I have to order the pre-renovation appraisal?

The regulation allows up to 90 days from submitting the application. Work started before the initial appraisal is not considered, so I do not recommend waiting.

Do the appraisal fees count toward the CHAP 25% requirement?

Yes. The City's regulation lists appraisal among the costs that count, along with architectural design and engineering.

How many comparable sales does the City require?

For single-family reports under the City's Appendix A, at least three settled comparable sales.

What happens if I miss the 90-day post-improvement deadline?

Final certification can stall, and the 10-year credit starts with the first tax bill after final certification. Ask CHAP in writing before the window closes if you think you will miss it.

Sources

This article is general information, not legal, tax or financial advice. Program rules change and every project is different. Confirm current requirements with CHAP and the Baltimore City Department of Finance before you start work.