Dividing Assets in Divorce? How do you know when you need a Divorce appraisal?

No one gets married planning to get divorced, but unfortunately, sometimes it is the best option for both parties. If you find yourself in this situation, you will have to agree to the division of all of your assets. Personal property items, bank accounts, credit card debt, and retirement accounts will be relatively simple because they have a finite or definitive value. Issues may arise when you try to divide your most valuable asset, your home.

If the divorce is amicable you may be able to agree on a value using a real estate agent or an AVM like Zillow, Redfin, or Realtor.com. Most suburban subdivisions will have plenty of data points to make these models relatively accurate and if all three are within a few thousand dollars we recommend using these appraised values to agree upon the home’s fair market value.

When there is a mortgage on a home and there is no cash or other marital assets available for one spouse to “buy out” the other who is leaving the marital home the real property can be refinanced through your lender. An appraisal will be completed by the bank and whatever that value is can be the finite amount that can be used to divide assets equally. Or the sale process needs to be initiated to have the money necessary to have a spouse accept the settlement.

Here are a few signs it may be time to seek out an independent real estate appraiser for an objective assessment:

✔️ Your home is not in a typical suburban subdivision with several comparable sales and housing trends are easy to determine.

✔️ There have been extensive upgrades or updates made by the homeowners.

✔️ The house has many deferred maintenance items or needs considerable repairs.

✔️ You have separate divorce attorneys and they are advising you to get “your own” appraisal because you are unable to settle marital assets and are heading for court.

✔️ There is a court-ordered sale of a family home in the divorce. This will typically occur when attorneys are not involved in the division of assets. The judge assigns a neutral third party to determine the actual value and possibly sell the house.

✔️ You need a retroactive appraisal or multiple effective dates for an accurate assessment settlement. Generally, this is necessary when one spouse owns the house before the marriage, vacates the property as of a certain date, separation begins, or an official divorce date is filed.

✔️ Has time passed since the filing date and the house has experienced significant appreciation in residential real estate?

✔️ You just can’t agree on the value! Are you $10,000 or $100,000’s of thousands of dollars apart?

Things to Look for When Searching for Divorce Appraiser

Select an Appraiser with Courtroom Experience

When selecting a home appraiser, an important thing is to choose one with courtroom experience. Expert witness testimony may be necessary if the parties do not settle on an agreed value of the home. The ability to defend the independent appraisal in front of a judge and opposing divorce attorney is paramount. Being able to explain complicated appraisal theory as well as professional appraisal practice to laymen is important in communicating appraisal results. Expert witness testimony can be the deciding factor in a court case, so it is essential to choose an appraiser who is well-versed in both appraisal theory, real property valuation, and courtroom procedure.

Some Appraisers that Specialize in Divorce Appraisals and Fair Market Value

The majority of appraisers complete only bank or lending assignments in their everyday work during the house selling process. They are experts in completing Fannie Mae forms like the 1004 you may have or your spouse got may have seen a copy of when the house was sold. The definition of market value is the Fanie Mae definition is to be used exclusively for equity determination for mortgages guaranteed on the secondary market. These lending appraisals may include a cost to cure for minor repairs. In the courtroom, your lawyer may or may not use this definition but more often proceeds divided using the IRS definition of Fair Market Value. This is an “as is” definition with specific reporting requirements associated with a fair property sale that is required by the IRS.

We will go into the details of the potential fair market value differences in a later post but if you find an appraiser using a Fannie Mae 1004 form or URAR for a divorce appraisal you are probably in the wrong place. I have been party to a divorce property settlement where the other spouse submits a previous appraisal that was obtained for a refinance or home equity loan. If the divorcing couple accepts this property appraisal then, “God bless them!”, divide the other assets, give each their fair share, close the divorce proceedings and move on. However, it is important to know that the Fannie Mae definition of market value, assignment conditions, intended use, and intended users are only for a mortgage transaction and technically not to be used in any other way.

Why You May Need Retrospective Property Appraisal

In the typical real estate transaction, a house is sold through real estate agents. A real estate appraiser is engaged by a lender through an appraisal management company. Your home is appraised after the selling price is set and your house is appraised for the current value. All appraisers should be well trained in current value appraisals but there are fewer that can complete retrospective assignments competently. While a retrospective appraisal does not require a different appraisal methodology it does come with a mindset of putting yourself in the past that some appraisers will not be conscious of. Think about the value of your property in 2018 as opposed to the value today. Before the pandemic, there was a shortage of inventory but still “normal” appreciation. During the pandemic there were the lowest interest rates in decades, multiple offers on a house as soon as it came on the MLS, buyers willing to pay well over the asking price, and closing a deal included writing a personal letter to the seller!

Divorce appraisals often need more than one effective date. Consider a scenario where a spouse bought the property on their own in 2005, lived with their fiance in the property since 2011, got married in 2018, and filed for divorce in 2020. It would behoove you to find an appraiser who understands the retrospective appraisal and can support it with market data from the time period you need the report. Retrospective appraisals can be more complex and time-consuming but are essential in determining an accurate opinion of value. Look for a licensed appraiser who specializes in divorce, probate, trust, and financial planning and they will be qualified to complete retrospective appraisal assignments in your local market.

How Long Does a Home Appraisal for a Divorce Take to Complete, and How Much Does it Cost?

If you have read this far you have an understanding of what is involved in producing a defensible home appraisal and why you need to hire a divorce appraisal expert. The typical turnaround time for divorce appraisals is one to two weeks and generally costs two to three times the amount you would pay for a lending appraisal. We can’t post on the website exact appraisal fees because of Sherman Anti-trust Regulations regarding real estate appraisers. (Google it for your area to get an idea or click see VA appraisal fees for your state) The more complex the property and if multiple effective dates are needed the higher the appraisal fee. We can say that the fees are $1,500 for any court appearance or in-person settlement negotiation, $300/hr for actual testimony time, and $150/hr for meetings, court preparation, additional research, and privileged discussions with the client or attorney.

Don’t hesitate to reach out!

Eagle Home Appraisal offers a high level of professional expertise, privacy, and integrity in delivering quality appraisal reports for our clients that they can depend on. Please contact us by email or phone to answer any questions you may have regarding valuing your property during a divorce. Our fees are higher than most and in many cases, a full appraisal report is not necessary for every situation but we are more than happy to answer any questions that may ease your mind during this turbulent time.