Divorce: Appraising Your Property

No doubt about it, divorce is tough.?Dividing the marital assets is one of the most important aspects during this time.

Options for the divorcing couple include selling the marital home or refinancing and splitting the equity, and in either case, a fair value has to be established for the property.?This means hiring a licensed real estate appraiser who is prepared for the unique challenges of a divorce appraisal.

Here are some commonly asked questions about the appraisal process while navigating a divorce:

How is the value of a home determined in divorce?

Because you are approaching the negotiation of a deal with an ex-spouse, or consider selling the home, it is necessary to utilize the appraiser’s knowledge and experience in order to know the value of the property first.?

A licensed real estate appraiser is required to have a great deal of professional training in real estate valuation. A high level of experience is expected, but seeking an appraiser who has had extensive experience in the geographic area, in different types of real estate valuation, and many years of experience, is preferred. ?

The appraisal will assist you in knowing the home’s fair market value, or what a reasonable selling price might be once several factors have been considered.?

You will also need to know what kind of net proceeds you and your ex-spouse will anticipate sharing.?Once you know what the market value of the home is, then you can subtract what you still owe on the property.?This will determine the net amount that you and your ex-spouse will expect to share once the property is sold, assuming that you have a 50/50 interest in the home.?

What will the appraisal inspection and process look like?

During the appraisal process, the appraiser will make an appointment with you, your ex-spouse, a realtor, or another third party,?to inspect the property. The inspection typically lasts from 30 minutes to an hour, depending upon the size and complexity of the home. They will need to see every room in the house as well as the basement, garages, and other outbuildings. They will make note of many characteristics including the living area, number of rooms, condition and amenities, as well as researching the neighborhood and housing trends for that particular area.

Appraisers typically utilize a GPAR (General Property Appraisal Report) form for a divorce appraisal, which is the appropriate form for a non-lending appraisal report.?Ask your appraiser which form she is planning to use; the 1004 form is used for lending or financing purposes and is not designed for non-lending purposes. Although there are several ways for an appraiser to value real estate properties, they will in all likelihood utilize the Sales Comparison Approach for a typical single family home; this approach compares your home to similar homes in close proximity, which have sold within a few weeks or months.

What is the difference between a realtor’s market analysis and an appraisal?

In typical situations when a home is sold, a realtor will assist with a comparative market analysis (CMA) to help determine the listing price of the property. However, in a divorce situation, which can at times be an adversarial process, a full appraisal is the best protection for establishing an objective value for the property.?No matter which spouse engages the appraiser, it is important to note that the appraiser does not advocate for either side’s interest in the completion of the appraisal report; the appraiser is bound by law and industry standards to advocate objectively and solely for the property’s most accurate market value based upon research of relevant market data.

Are there special skills involved in appraising for a divorce?

A licensed appraiser should be trained and experienced in real estate valuation in general, and knowledgeable about the geographic region in which he or she appraises. ?

In the heightened emotional environment that often accompanies divorce, the appraiser should be familiar with these dynamics, using empathy and discretion while dealing with all parties involved.?

In addition, some divorce appraisals may require a retroactive valuation when determining the value; this is an appraised value based upon a date in the past, such as the date of filing, or the actual date of separation.

In some instances an appraiser may be required to testify in court as part of the divorce proceeding. Therefore, an appraiser who is skilled and experienced at defending their report in court is important.?

How can I find appraisers that provide divorce appraisals?

Often, family and friends can help by referring a trusted appraiser, or your attorney may be able to refer you to someone that they have used in the past; they likely feel confident that the appraiser can be trusted and neutral during the appraisal process. ?

Be sure that the appraiser you select has experience in completing divorce appraisals specifically, and that they possess the expertise and education level required to complete a competent, court-defensible report. A certified real estate appraiser is recommended for completing a divorce appraisal. ?

In Massachusetts, Certified Residential Appraisers (a level above Licensed) must have completed at least 200 hours of appraisal education and training, including 15 hours of ethics and standards of practice.?2,500 hours (including 1,500 hours non-residential) of appraisal experience across at least 30 months is required; and the appraiser must pass the Certified Residential Appraiser examination. College-level requirements include an Associate degree or higher.?

Higher designations, requiring more education and experience, assure you of exceptional competency in the real estate appraisal field.?Jonathan Asker, CEO of North Atlantic Appraisals,?is a Certified General Appraiser, which, in addition to the above requirements, includes an additional 100 hours of Qualifying Education and a mandatory Bachelor’s Degree.

How should I prepare for a home appraisal?

Consider that, depending upon the anticipated outcome, the two spouses may be hoping for differing market values.?For example, if the home is being sold, then both parties would prefer for the home to be appraised at the highest value possible.?If one spouse would like to buy the other out, then that spouse would be hoping for the lowest value possible.?With significant ramifications on the line, these competing goals can lead to a situation that can be fraught with distrust.

However, if both spouses would like to sell the home, then it is in their mutual interests to perform minor repairs, perhaps even enlisting the services of a home inspector, to identify unseen issues that would come into play if the buyer’s inspector discovers them.?Even a small amount of cosmetic updating such as paint or decluttering can help to improve the sales price of the property.?Take a look at the “curb appeal” of the home, in particular landscaping or yard cleanup.

Be sure that the appraiser is aware of updates or renovations that you have completed on your home, especially if they are not easily visible, such as new windows, upgrades to kitchen appliances, new flooring or bathroom fixtures, or electrical and heating updates. You may want to make a list for the appraiser to take along to refer to as they prepare their report. If you’re already working with a realtor, they will also have insight into ideas on how to improve your home’s value as well.

Who pays for the home appraisal?

It depends; if the couple is planning to split the proceeds of the sale of the home, the couple will usually split the cost of the appraisal report.?If one spouse is buying the other and intends to keep the home, the buyer usually would pay for the report.?

Appraisal costs vary in price in MA depending on the size and complexity of the property, but a typical single family home appraisal will cost between $450 to $550, plus an hourly fee for preparation and court testimony, if needed.

What happens if spouses do not agree on which appraiser to use?

Unfortunately, during a divorce situation, spouses often experience a lack of trust with one another, which complicates the agreement of which appraiser to use, especially when one spouse prefers to engage an appraiser that they already know.?It is natural that the two parties may have some level of suspicion in this situation, when the outcome of the property value is of significance to both parties.?

Often, the problem is alleviated by both parties engaging their own appraisers.?Usually both appraisers will come to very similar conclusions of value, but If the resulting market value indications are different, it may lead to a negotiation where the parties settle upon a middle value. ?

However, if the appraised values vary widely, or the two parties are not able to work reasonably together to determine a solution, a judge may need to take part in the settlement, reconciling the value with a compromise value.

Going through a divorce is a stressful experience. Reliance upon an experienced appraiser is paramount in alleviating concerns connected with the division of real estate. If you have further questions about the appraisal process, or would like to engage our services for a divorce appraisal, Jonathan Asker will put his 40 years of valuation experience and competency to work for you. We will be happy to have a conversation with you about your particular needs, time constraints, and make the process as smooth as possible during this tough time.