Any experienced divorce attorney will tell you that every divorce is different, but almost all divorces share one important feature: the valuation of the family home. For wealthier couples, this dispute could involve hundreds of thousands of dollars. The value of the family home often becomes a subjective argument about emotions that cannot be accurately valued. In such situations, hiring a professional real estate appraiser may be the only way to resolve the dispute.
What does an appraiser do?
An appraiser’s main task is to provide a professional opinion about the price that a fully informed and motivated seller expects to receive from an equally and motivated buyer; the short-hand term for this number is “fair market value.”
How does an appraiser reach an opinion as to fair market value?
Most appraisers follow the rules published by the American Appraisal Institute. These rules are known by the acronym “USPAP” – “Uniform Standards of Professional Appraisal Practice. Most appraisers follow both the process and analysis outlined in the USPAP rules. Under USPAP rules, an appraiser’s first step is to visit the property. During this visit the appraiser will make careful observations about the interior and exterior of the building. The appraiser will note whether the exterior has been well-maintained or whether the exterior needs a significant repair, such as a new roof or repainting.
The appraiser will also make detailed measurements of the size of the property, every building on the property, and every room in the interior. The appraiser will also make a list of special features, such as a master bathroom suite, a family theater, and perhaps exterior features such as a tennis courts or a swimming pool.
Approaches to value
Professional appraisers use one of three approaches to value. The first approach, replacement cost, is rarely used for any building that is more than two or three years old because the cost of labor and materials has steadily appreciated since World War II.
The second approach, based on the anticipated income of the property, is rarely used for residential properties unless the property contains one or more dwelling units.
The third approach uses the sale price of properties that have recently changed hands. This method is known as the comparable sales approach to value.
After completing the inspection of the property, the appraiser will gather information from public land records concerning the sale price of similar properties, referred to a “comparables” or “comps.” The appraiser looks for comps that are comparable in size and condition to the house that is the subject of the appraisal. Using this information and personal knowledge about the local real estate market, the appraiser will form a professional opinion about the fair market value of the subject property.
This conclusion, together with copies of the records and other information used by the appraiser, will be placed in a folder that is delivered to the client. The court and the adverse party may also receive a copy of the report if the case is not settled prior to trial.
Benefits of a professional appraisal
As can be seen the appraiser labors intensively to deliver an unbiased opinion as to fair market value. An appraiser’s report can eliminate much disagreement about the value of the subject property. The cost of hiring an appraiser may be significantly offset by savings in attorneys’ fees.