If you're handling an estate that contains a house or other real estate, it's probably the most valuable asset in the estate. You'll need to know what it's worth, for several reasons: to report a taxable gain or loss on the eventual sale; to make an inventory of the deceased person's assets, if the estate goes through probate; and to fairly divide estate assets among several beneficiaries, if that's what the will called for.
One way to find out a property's fair market value is to quickly put it on the market and sell it. And in some cases, that's just what inheritors may want to do. (Find out more about transferring real estate after death.)
If you sell the property within six months or a year after the previous owner's death, the IRS will usually accept the selling price as the fair market value at the date of death. That's assuming, of course, that the sale was made fairly and on businesslike terms. If a family member or friend was given a special below-market price, it will probably be obvious. Estate beneficiaries are likely to complain (as they should), and the IRS might not accept the value when it comes to figuring how much taxable gain (if any) there was on the transaction.
Inherited real estate might not be sold quickly, however, if market conditions may make it more sensible to hold onto the property for a while. And if the estate is going through probate, delay is inevitable because you might need to notify beneficiaries and possibly even get court approval before selling real estate.
So, short of actually selling the property, how do you get a reliable estimate of the value of a house, condominium, or residential lot? The easiest way is to ask two or three local real estate agents to walk through the property and give you a figure, in writing. If they know about recent sales of comparable properties in the neighborhood and whether the market is hot or cold, taking the average of their figures should give you a reasonable result. Valuing real estate is always a somewhat subjective exercise, however. A good real estate agent will give you a realistic estimate, to avoid getting your expectations too high. But an agent who hopes to be hired to sell the property might romance you with a high estimate.
The most reliable and defensible number will come from a formal appraisal, conducted by a licensed real estate appraiser. Appraisers have no reason to inflate a valuation. You'll probably need an appraisal if the real estate is commercial property or income-producing residential property such as a duplex or apartment building. Such assets are harder to value accurately than most residential units, for which there are lots of comparable sales.
To find a licensed appraiser, ask a local real estate agent, mortgage broker, or bank to recommend someone. Expect to pay at least several hundred dollars for a residential appraisal, and more for an appraisal of commercial property.
However you decide to proceed, don't procrastinate too long. Real estate markets can change quickly, and you need the date-of-death value. It's hard for anyone to reliably estimate that later.