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Using an appraiser to value real estate in a California divorce

On Behalf of | Dec 4, 2023 | Business Divorce

One of the most difficult issues to resolve in any California divorce is the fair market value of the family home. The home has significant emotional value for each spouse, but different reasons may motivate each spouse.

A professional appraiser can provide an impartial opinion as to the home’s fair market value, and this opinion can be used to negotiate an acceptable sale price with a third party, or the divorcing couple can include the net value of the home in the list of marital property to be divided by the Court.

Understanding the methodology of professional appraisers may help a couple decide whether to pay the cost of a professional appraiser.

What does an appraiser do?

The appraiser’s main task is to develop an impartial opinion about the value that a willing and informed seller can expect to be paid by a willing and informed buyer for a specific piece of real property.

Most appraisers are bound by a code of rules adopted by Congress in 1989; these rules are familiarly known as “USPAP” – Uniform Standards of Professional Appraisal Practice.

Visiting the “subject”

The appraiser’s first step is to visit the property to be appraised, called the “subject.” The appraiser will make a detailed inspection of the exterior and interior of the subject. The inspection will include noting the physical condition of the interior and exterior. The inspection will also include detailed measurements of every room and the overall lot occupied by the subject.

Most appraisers use modern digital tools to make a record of their observations; these tools can include sophisticated 35mm cameras and video cameras. The appraiser will also note the need for any repairs or improvements, such as a new roof, up-dated appliances, or eliminating a source of water in the basement.

Choosing an approach to value

After gathering the data produced by the site inspection, the appraiser will gather additional data from public sources about the sale prices of other houses in the neighborhood, real estate taxes, and likely assessments for public utilities. At this point, the appraiser will choose an approach to value.

For residential properties, the choice is usually limited to the comparable sales approach. The other two approaches to value – income approach and replacement cost – do not produce accurate opinions as to fair market value and are rarely used for residential appraisals.

Preparing an opinion as to fair market value

The appraiser will next examine the list of comparable properties to find properties that are comparable in size, features and price to the subject.

Combining all this information with information gleaned from the inspection and with personal knowledge of the local real estate market, the appraiser will develop a professional opinion as to the fair market value of the subject.

This opinion, together with the supporting information, will be placed in a notebook that will be delivered to the client and to the court.

The divorcing couple can use the information in the appraisal opinion to negotiate a price with a third-party buyer or they can incorporate the appraiser’s opinion into their own agreement about dividing their assets.