House Appraisal in a Divorce

Most states use a system to ensure equitable distribution of property, which attempts to fairly compensate divorcing spouses for their contribution to the marriage. Equitable means fair, and does not necessarily mean a 50-50 split. The divorce distribution generally favors the spouse with fewer economic resources. Some property is not considered marital property, such as an inheritance one of the spouses received during the marriage. As long as the property never entered into co-ownership, it is not considered in the property settlement.

Real estate – particularly the marital home – is often the largest asset of a divorcing couple. If real estate rights transfer without research and analysis, which is an appraisal, serious consequences may adversely affect one or both of the spouses.

Appraisers investigate each marital property, researching legal descriptions, evidence of ownership and liens on the property. They evaluate a property’s fair market value as of the date of the divorce. Appraisers define fair market value as the value an equally informed buyer and seller would agree upon as a fair price. They also assume that both the buyer and seller are under no pressure to enter into the transaction. In a divorce, one spouse may need or want to buy out the other and would like the appraisal to be valued lower than fair market value. Depending on the type of property, the appraiser gives weight to the most appropriate appraisal process.

The appraisal process begins when the appraiser does a “property visit.” He or she questions the homeowner about the property, particularly problems, concerns and special circumstances. The appraiser takes measurements, looks into crawl spaces, checks for updates to plumbing and electricity and any other amenities and does a visual inspection of the siding, roof and yard. The appraiser looks for features or conditions different from the norm for the neighborhood that raise or lower value. Sometimes, homeowners may add features that do not contribute to the home’s value in proportion to the price paid for them, such as a swimming pool or wine cellar.

Following the property visit, the appraiser uses a standardized template to compare the subject property with at least three similar properties in the neighborhood that have sold within the last six months. He compares the number of bedrooms and bathrooms, square footage, existence of a fireplace or view, the general condition and so forth, making dollar-based adjustments in each category between the subject house and comparison properties #1, #2, and #3. The sales prices of the comparison homes that sold determine their value.

Finally, using his or her professional expertise and judgment, the appraiser makes a definitive analysis, giving the most weight to the comparable home that most closely resembles the subject home. Thus he determines a market-based value for the subject home. Often, this final analysis is explained in narrative. The appraiser seeks what is termed an “unbiased, arms-length, and stand-alone” valuation of the property.
Real estate valuation employs three approaches. They evaluate property from three perspectives: the sales comparison approach, the cost to replace approach and the income approach.

  • The sales comparison approach compares the property with others that have recently sold, making adjustments upward or downward based on features that differ between the subject home and the comparable home(s).
  • The cost to replace approach assumes that a well-informed buyer would not purchase a home for a price that is higher than the cost to buy a lot and build a new home identical to yours.
  • The income approach measures the net income the property can produce and integrates that feature into the appraised value. This approach is generally used for rental properties. If the appraiser uses more than one of these approaches, the final report reconciles the three approaches, giving weight to the process most applicable to the subject property.

Each spouse should obtain a separate appraisal of the marital home because Independent appraisals protect each spouse’s interests. The court reconciles the value that will be used for the property division if the appraised values differ significantly, and will decide between differing valuations if that becomes necessary. If hiring two appraisers is cost-prohibitive, spouses should agree on one appraiser. In this case, both spouses should be present during the appraiser’s inspection.

To save money, some divorcing couples may circumvent an appraisal by using a real estate agent to provide a competitive market analysis, or CMA. Generally, the CMA provides only an indication of current market trends. It does not entail the legal and financial research performed by an appraiser.

Parties in the divorce sometimes try to influence the appraiser’s opinion because one of the spouses wants to buy out the other spouse’s interest. Professional appraisal regulations protect appraisers from pressure to arrive at a predetermined conclusion to ensure an objective report and to maintain high ethical standards in the industry. The appraiser must write a report to comply with these guidelines.

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