A divorcing couple must fairly divide their marital assets. If they own a home, this will most likely be the highest valued asset that will need to be divided. For that reason, it is vitally important that they obtain an accurate, professional appraisal of their home’s value.
This article will discuss six aspects of property appraisals that divorcing spouses should keep in mind. Professional appraisers will handle the details in each of the following cases. Having said that, it is worthwhile to become familiar with the process to ensure the appraisal is performed accurately.
#1 – Neighborhood Comparable Sales
The purpose of a real estate appraisal is to determine the fair market value of the house in question. An appraiser will look up recent sales in the divorcing couple’s neighborhood and compare them. He or she will also review comparable properties with the same number of bedrooms and bathrooms. Such properties should also be similar in square footage. In short, they should be relatively close in value.
If one of the houses in the neighborhood sold for a price that is significantly higher or lower than the average, it should be dropped from the comparable list. It is a reasonable assumption that the price does not reflect the current market value for similar properties.
#2 – Home Visit
The appraiser will then pay a visit to the property in question. One of the homeowners should be present to answer any questions that the professional may have. He or she will ask the homeowner if there are any particular problems with the house.
The appraiser will also want to know about recent improvements. For example, the property being appraised may be a refurbished Victorian home, and the couple had the house completely rewired. This factor would play an important role in assessing a valuation.
Homeowners oftentimes make improvements that do not add to the value of their properties. This is the case when the amount of money spent on improvements exceeds any resulting increase in the home’s value.
#3 – Valuation Changes During Marriage
A new wife may move into her husband’s existing property after they get married. Neither husband or wife is going to be concerned with how much the home was worth when the marriage took place. But when a divorce is imminent, the home’s increase or decrease in value becomes relevant.
In this event, the appraiser will prepare a “retrospective” or “historical” appraisal on the change in the property’s value during the marriage. This will be important if there is a significant increase in value. It is also important if the divorcing couple expects to sell the house at a loss.
#4 – Number Of Appraisals
Often, there is only one appraisal done on behalf of both divorcing homeowners. If one party becomes suspicious of a particularly low-value or high-value appraisal, he or she can order another one.
It will be up to the family law judge to consider the two appraisals and ultimately decide which best reflects the value of the property. Some judges will add the values of both appraisals and divide th total amount by two. Other judges may order his or her own appraisal with an appraiser that the court has used in the past to resolve such discrepancies.
#5 – Tax Assessments
All properties are assessed by government officials in order to determine what property taxes will be owed following the sale of the family home. An appraiser will take the tax assessor’s valuation into consideration, but it is only one of many factors in his or her appraisal. Oftentimes, an appraiser will come up with a market value that exceeds or is less than the valuation determined by the tax assessor. This is normal.
#6 – Subjectivity
No two appraisers will assign the same value to a home’s features. For instance, one professional may assign a high value to the property’s backyard coy pond while another will consider the pond to be a detraction. It is essential that a professional appraiser with no vested interest in the couple be assigned to determine their home’s value. Otherwise, they may have to pay for a dispassionate, court-appointed appraiser.
Although a professional home appraisal seems like a simple matter, it is influenced by numerous factors. As noted earlier, the individual performing the task will handle the details. That said, a working familiarity with the process will ease some of the confusion and frustration if discrepancies arise.