There are three major categories which are currently termed “historical properties”: (1) properties that are associated with events or persons important in the past development of the United States, (2) properties that demonstrate styles of architecture, building construction, or engineering, and/or (3) properties that express a particular culture or place.
Before commencing the valuation of a historical property, at least nine questions must be asked:
1. What is the significance of the property in the history of the United States and to its region, community, or neighborhood, and what is its architectural, and/or cultural significance as it relates to a historical figure or event?
2. What designations does the property have or is it eligible for in recognition of its significance?
3. Is the property singly or is it one of a grouping of historical properties?
4. Is the property eligible for historical rehabilitation tax credits or other tax credits?
5. Is the property eligible for grants, low-interest loans, and other benefits?
6. Will the rehabilitated property benefit from heritage tourism?
7. Is the property encumbered by, or eligible for, a preservation or conservation easement?
8. Is the property suitable for adaptive uses?
9. What extraordinary costs for rehabilitation or operation should be considered?
After the abovementioned questions are answered, the highest and best use is determined, and the three traditional approaches (including Income, Sales Comparison, and Cost) are applied. Finally, a reconciliation of value is concluded.
One way to prevent demolition or harmful changes to properties that have historical or architectural significance is to impose sets of building restrictions. Preservation easements prohibit or limit the changes that owners can make. The objective of historical preservation easements is to preserve architectural integrity so that the individual properties, whole blocks, and neighborhoods will not be destroyed. Preservation easements are binding on the donor/owner and all subsequent owners. Easement donations are considered to be charitable gifts and are income-deductable for tax calculations. All types of properties are eligible, including owner-occupied single-family dwellings.
Easements must be donated in perpetuity to a government entity or qualified 501(c)(3) charitable organization, and must protect and preserve land areas for the public, natural habitats, open space, or historically important land area.
The Internal Revenue Service regulations typically do not allow deductions for charitable contributions of property in excess of $5,000 unless the donor obtains a qualified appraisal report.