If you are like most American couples, your home is your greatest asset. So what will happen to that home in the event of divorce? Must it be sold? If not, who keeps it and how is the other spouse compensated? The first thing that needs to be done is a home property appraisal at divorce, after which the couple can begin negotiating the splitting of this important asset.
Property Valuations and Appraisals
There are many factors that come into play when performing an appraisal or property valuation of a home. Of course, there are many self-proclaimed experts more than happy to offer their opinion on your home value, but keep in mind that it is only an opinion, often ill-informed. By involving a professional third-party appraiser, a truer and fairer home value can be obtained; they use the same process to determine home values when a homeowner decides to sell their residence.
As part of the appraisal process, an appraiser considers both internal and external factors, such as the structure, the property, and the neighboring environs.
External factors that impact the final evaluation include:
- Neighborhood Type – values can vary depending upon the type of area in which the home is located (urban, suburban, and rural)
- Lot Size – a larger lot in a similar neighborhood typically shows a higher value
- Zoning Classification – examples include single-family residential, multi-family residential, commercial, light industrial, industrial, agricultural, and schools
- Land Use Percentages – some neighborhoods have a mix of land use (commercial, single-unit house, multi-family housing, etc.) which can affect land and home values in the area
- Vehicle Storage Amenities – a two-car garage adds more value than a one-car garage, which in turn is worth more than a carport; a concrete driveway also increases home values
Of course, the house itself must be examined to determine the value of the structure. Again, multiple factors come into play during this internal valuation, including:
- Number of Bedrooms and Baths – in almost every case, homes with more bedrooms and bathrooms will boost value, but going beyond five bedrooms and three baths can limit the potential pool of buyers
- Square Footage – the average square footage of a home is on the rise, reaching 2,687 square feet in 2015, compared to 1,660 square feet in 1973
- Storage Spaces – additional spaces, like basements, attics, and crawl spaces aren’t part of the square footage but also add value to a home
- Type of Foundation – there are four types of foundations (concrete slab, basement, crawl space, and pier); the foundation used is another important factor in the home value
- Renovations and Remodels – renovations improve a current look, while a remodel means new appliances, furnishings, or alterations; remodels increase home values more
- Wall, Floor, and Window Materials – there are a wide variety of materials, ranging from inexpensive to high end, that can be used inside the house; higher quality materials give more value to the home
Although appraisers are not house inspectors, an experienced appraiser knows the signs house inspectors look for, such as termite droppings; obvious damage will reduce home values which repairs can easily offset.
Why a Property Appraisal?
Because a property appraisal at divorce will cost at least $300 and can run as high as $800 in larger metropolitan cities, and because splitting couples are already facing new financial challenges, there may be a temptation to skip a professional appraisal and attempt to come up with a rough estimate.
That would be a bad temptation to give into and there are several reasons why.
In the first place, it is likely a judge will require a property appraisal at divorce be performed to obtain an acceptable value to include in the couple’s joint assets. As it may be the only major asset the couple owns together, it is important that a professional evaluation is used in the interest of fairness.
Another common issue that can be avoided with a property appraisal at divorce is the situation when one of the couple wants to continue living in the residence, and therefore wants to buy out the other’s interest. Of course, the buying party wants as low a buying price as possible while the seller seeks the highest possible number.
Finally, there are occasions where the judge may determine a need for spousal support; having a set value for the home helps in deciding who needs to pay support and how much.
An appraiser eliminates all of those problems, making the judge’s job easier. Even if not required by a judge, a divorcing party would be well advised to obtain a professional property appraisal at divorce.
Skipping a Property Appraisal at Divorce
Now that you have been warned to perform a property appraisal at divorce, there are some situations when the process can be bypassed. It should be noted that in any of these situations, the divorcing couple needs to be able to communicate without fighting.
When there is “negative” equity in the home, that is when loans against the property exceed the total value, couples may decide to walk away from the burdensome debts and let the house go into foreclosure. Be forewarned: there can be taxable consequences or other legal ramifications in this situation that should be researched and understood before making such a drastic move.
Another situation where a property appraisal at divorce can be skipped is if the home is already in the process of being sold. In such a case, the job of the judge is much easier because, upon close of escrow, there will be actual cash that is easily divided between them.
There may be a few other equally rare instances where property valuation at divorce may be skipped but will apply to less than 1% of all divorcing homeowners.
In other words, prepare for performing a property valuation at divorce, not only because it makes sense but because it could be legally required. Most important is having an advocate by your side to assist you in all divorce matters. Homeownership is only one of the many issues that couples face when considering divorce; there could be other assets, such as retirement plans, and minor children are often involved, making your case more complex than just obtaining a property valuation at divorce.
That is why we are here to serve you. Our practice specializes in divorce cases and extends across other related legal fields, including family law, bankruptcy, foreclosure protection, and wage garnishment. Contact us today to learn how we can assist you during any difficult stage of your life.