Ensuring Fairness in Appraisals for Divorce: Adhering to USPAP

Introduction

In the realm of divorce proceedings, equitable division of assets is paramount. Among these assets, real estate holdings often take center stage. Yet, the valuation process can be fraught with challenges, particularly when it comes to mitigating advocacy in property appraisal. As professionals bound by the Uniform Standards of Professional Appraisal Practice (USPAP), real estate appraisers play a crucial role in ensuring impartial and credible valuations. However, in the context of divorce cases, additional complexities can arise, particularly concerning the independence and impartiality of the appraiser and sometimes due to material value discrepancies between appraisers.

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The Role of USPAP:

USPAP serves as the cornerstone for appraisal standards in the United States, providing rules and standards for appraisers to adhere to, including those that address the requirements for appraiser independence, impartiality, objectivity, and ethical conduct. Upholding these standards and rules is essential in appraisals performed for any reason, however, in divorce cases, the potential for advocacy can sometimes be heightened. Spouses may share conflicting opinions or information concerning the property’s condition, features, and amenities but it is up to the appraiser to analyze their own independent observations of the property being appraised. Adhering to USPAP ensures that appraisers approach their work with integrity and impartiality, regardless of the circumstances or information provided to an appraiser. Often, such information submitted to an appraiser is very meaningful, however, it is always up to the appraiser to appropriately verify and analyze any such information submitted to them and conclude with their own independent opinions.

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Independence in Appraisal:

Central to the USPAP framework is the principle of credibility and independence. Appraisers must remain independent and impartial, free from any undue influence that may compromise their judgment and conclude with credible assignment results. In divorce cases, where tensions between parties can sometimes be palpable, maintaining independence becomes even more critical as an appraisal that intentionally favors the cause of the client is prohibited in USPAP. A competently and impartially prepared appraisal favors all parties involved in a martial dissolution case in that it reflects a disinterested third party’s valuation which helps ensure fairness on the division of the appraised asset. An appraiser must not allow the intended use of the assignment or a client’s objectives to cause the assignment results to be biased.

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Attorney Engagement:

In many divorce cases, real estate appraisers are hired through the attorneys representing each party individually, or by one of the spouses. However, in instances where an appraiser has a recognized reputation for competency, stipulations for both law firms/spouses to use the same appraiser can be helpful in ensuring impartiality, as the appraiser’s report is being relied upon by all parties. Such a stipulation also results in lower appraisal costs to the spouses as two separate appraisals are not typically ordered in that circumstance.

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Interaction with Property Owners:

It is not uncommon in appraisals conducted in connection with marital dissolution cases for each spouse to be present with the appraiser at the time of the property inspection. While experience has shown that overwhelmingly spouses want fair and credible appraisals, on occasion an appraiser can receive inconsistent details about the property being appraised, such as upgrades, features, or conversely, condition issues. While it is appropriate for an appraiser to consider information provided by the property owner(s), the ultimate opinion of value is the appraiser’s alone, as developed and communicated compliantly with USPAP.

Mitigating Value Disparity Between Appraisers:

Despite these safeguards, the potential for two appraisers developing disparate opinions of value on the same property is not uncommon. In such instances a careful review of the opposing appraiser’s work product can help identify the reasons for any such value disparity, however, it is also possible that different appraisers simply have developed different opinions of value based on reasoning and/or analysis they feel to be credible. While appraisers can and do develop different opinions of value on the same property on occasion, USPAP requires that the appraiser’s developed opinions be credible. In cases like that, unless an agreement is reached for the spouses to split the value difference in the division of the asset, a settlement can require the appraiser’s expert witness testimony at a deposition and/or trial where a fact finder will hear the respective positions of each appraiser during their testimony and decide whose reflects the more credible conclusion. Working with appraisers who have substantial testimony experience can help ensure optimal trial results.

Conclusion:

Navigating the real estate appraisal component of divorce cases requires a steadfast commitment to upholding the principles of USPAP. By maintaining independence, and diligently adhering to ethical rules and standards, appraisers can fulfill their role with integrity and fairness. In doing so, they play a vital role in facilitating equitable resolutions in divorce proceedings, ultimately serving the best interests of all parties involved.