No one really wants to think about the logistics of dividing up property in the middle of a divorce. Yet, you’ll be asked by all family and friends about whether you’ll be “keeping the house.”
Needless to say, nothing about property appraisal is that straightforward. That’s doubly-true in the midst of an emotional whirlwind.
You might rethink your preferences, and whether you’ll want to keep your primary residence, or sell it off so the profits can be divided between you and your ex-partner.
If that’s not stressful enough, if you have vacation homes, you’ll have to make decisions about those as well. But, there’s no need to worry. A big chunk of the mental and emotional load can be taken off your shoulders. You can get a professional property appraiser to assess your properties for value.
Keep on reading for our full breakdown of why hiring a property appraiser during a divorce is critical. We’ll also take a look at the process of determining your home’s value works.
Why Do You Need a Property Appraiser?
In the simplest terms, by nailing down the home value, you can proceed into splitting the house fairly. Having a professional and licensed appraiser will be your best bet for ensuring that things are valued correctly, so everyone can move on with their lives.
There are also specific financial logistics that need to be dealt with, especially if the house isn’t 100% paid off yet. For instance, the spouse who’s interested in outright buying the house will probably need a cash-out refinance, or another form of mortgage refinancing. Therefore, determining the value of the house is the essential first step to take.
Property Appraisal During a Divorce: The Home Value Edition
Generally speaking, a professional property appraiser for a divorce will already have hefty experience in determining a home’s fair market value. As we’ve previously mentioned, you’ll want to have concrete numbers on hand. This way you can start (or resume) the negotiations with both your ex-spouse or even a potential buyer.
Two key values will shape the whole process: the fair market value of the home and the net proceeds you will share with your ex-spouse.
The fair market value of your home is basically the listing price of your house. It’s what the house could reasonably sell for, after taking all the relevant factors into account.
The net proceeds that you can expect to share with your ex-spouse are calculated by subtracting what you already owe on the house from the home value.
For example, if your home’s market value turned out to be around $700,000, with you owing around $200,000, then the net proceeds will be $500,000.
This final $500,000 will be the amount that you’ll split with your ex. In the case of having a 50/50 interest in the house, you can expect to get around $250,000 after the house is sold.
The Appraisal Process
You might be wondering how exactly an appraiser would assess your home’s value.
The first step would be gathering important data points. Factors like inspecting the property, determining the total square footage, the number of rooms, the lot size, and other factors.
Once the appraiser has this data on hand, they’ll start looking at the overall condition of the property, as well as external environmental factors like the crime data in the area, the housing trends, and the neighborhood amenities.
All of this research gets recorded using a Uniform Residential Appraisal Report. Afterward, the appraiser or a realtor will perform a comparative market analysis (CMA).
What Is a Comparative Market Analysis?
A traditional comparative market analysis (CMS) is a key methodology used to determine the value of your home. The basic premise is using comparable sales of similar homes in the same area.
For example, the appraiser will take a look at your property and take note of any unique features that make the property stand out. Then they’ll identify comparable properties that have been recently sold. These properties are known as “comps.”
Moreover, appraisers will try their best to nail down the most recent sales available to compare to your property. The closer in similarity your property gets to its “comps” the more accurate the sale prices will reflect the actual market conditions and its valuation of your home.
Dealing With Outliers
Sometimes the theory doesn’t exactly match the application and raw data coming in.
Therefore, if the appraiser found homes in the CMA that rank rather low (or high) in price, it’ll be considered an outlier. This allows the appraiser to remove it from the data set, as it’s not an accurate representation of the typical sale value in the area.
Furthermore, you’ll want to keep in mind that your property value will also be assessed by municipal authorities for tax purposes. Yet, this value isn’t directly related to your home’s fair market value. You might see your property appraisal numbers come in much higher or lower in comparison to the value used by the authorities to calculate your property tax bill.
The Benefits of a Full Appraisal During a Divorce
On the surface level, you might think that just getting a CMA done will be enough to assess your home value. And that would have been correct if it weren’t done during a divorce.
The general motivator behind divorce is the lack of trust, for better or worse. Thus, getting a full appraisal can be the best protection you can give to yourself.
If you ask around, you’ll find that the majority of appraisals done through banks as part of divorce refinance will be on the low side. So, doing a full appraisal without the bank acting as the middle man will help you limit any potential risk that the bank might highball you when granting you a loan.
Simplifying the Divorce Process One Appraisal at a Time
Going through a divorce is already stressful enough, without adding valuations and appraisals to the mix, as well as wondering whether your ex-spouse is planning on fleecing you through the process.
By having a property appraiser on hand to take care of the valuations, you get to enjoy some peace and also financial security, as you’ll be getting the most out of your valuation.
We hope that our guide into the intricacies of home appraisal during the divorce was enough to shed some light on the situation and make it a lot less scary than before.