For many divorcing couples, the house is their most valuable asset. Under Utah law, all assets must be divided between the spouses equitably.
Therefore, determining the family home’s value – especially in marriages of lengthy duration – is vital to ensure a fair distribution of assets. While each spouse may think that they know what the home is worth, the actual value should be professionally determined by an experienced real estate appraiser. The techniques used to appraise real property can also be used to assign a value to other assets. Understanding the appraisal process can be essential during negotiations between the spouses.
Three methods of appraisal
An appraiser begins by assuming that the house’s value will be the same as the price paid by a willing buyer to a willing seller. The appraiser then selects one of three methods of appraisal:
- Sales comparison approach;
- Replacement cost approach; or
- Income approach.
In most cases, the appraiser will use the sales comparison approach. Increases in costs of materials usually rules out the replacement cost approach, and the income approach is used most commonly for income-producing property, such as apartments.
Beginning the appraisal
The appraiser begins the appraisal process by visiting the property to be valued. During this visit, the appraiser makes a detailed and careful observation of the house.
How many bedrooms does it have? How new are the kitchen appliances? Does the house have any other features that may affect value, such as a swimming pool or tennis court? The appraiser may also take a number of photographs to record the nature of the house and the relative state of repair.
Choosing comparable properties
After gathering relevant information about the property, the appraiser will use local land records to find from about three to six properties that have recently changed hands and have features comparable to the property being appraised (the “subject property”). The sale prices of these comparables are then adjusted based upon whether the subject property has more or fewer features that will affect value in the eyes of a willing seller.
After analyzing the comparable value of the “comps,” the appraiser will determine an estimated value for the subject property based upon whether it appears to be more or less valuable than the properties it was compared to. The appraiser will then fix an estimated fair market value. The divorcing couple can either agree to accept the appraised value or, if one party disagrees with the appraiser’s findings, that party can retain another appraiser.
In the end, the couple will either agree to accept a single appraisal, or they can submit the findings and opinions of each appraiser to the court. Anyone facing a divorce involving an exceptionally valuable home may wish to consult a knowledgeable divorce attorney about the wisdom of retaining another appraiser.