For most New York families in the process of ending their marriage, one of the most stressful issues is the division of family assets, especially the family residence. Couples usually have three options:
- Award the house to one spouse and offset the net value of the house with other property
- Sell the house to a third party and split the net proceeds evenly
- One spouse purchases the interest of the other spouse
Regardless of which option may be chosen, the couple must have an accurate value for the property. The most reliable method of determining the value of the home is to retain a professional appraiser. While hiring an appraiser may seem like an unnecessary expense, the value of the family home is likely to be the most valuable asset in the marital estate, and by comparison, the appraiser’s fee is small.
What does an appraiser do?
The appraiser’s first task is to visit the property to be appraised (usually called the “Subject”). While at the Subject, the appraiser will make a detailed visual inspection, checking the quality of maintenance and the presence of any unique features that may affect value. The appraiser will carefully measure each room and the overall dimensions of the property. After performing this inspection, the appraiser will select one of three approaches to value to reach an opinion on fair market value. (Fair market value is usually defined as the price that a willing buyer would pay to a willing seller.) The three methods are comparable sales approach, replacement cost approach, and income approach. The latter two methods are rarely used for an appraisal of a residential property because the methods do noy yield a reliable estimate of fair market value.
The comparable sales approach
The appraiser will obtain the sale prices of recent sales of comparable properties in neighborhoods similar to the neighborhood whether the subject is located. These prices can usually be obtained from public records. The appraiser then compares the size and features of these comparable properties. The appraiser may modify the value of the Subject based on how it compares to these other properties. After making any necessary adjustments, the appraiser will arrive at an opinion as to the fair market value of the subject. The opinion will be expressed in a written report that will be given to the party who paid for the appraisal, the other spouse, and, if the case goes to trial, to the judge.
How to use the appraisal
The appraisal gives the divorcing couple a solid basis for valuing their house. The couple can use the appraisal as a bargaining tool if they elect to sell the house or split the value between themselves. Anyone interested in obtaining an appraisal to value a family home may wish to consult an experienced divorce attorney for advice on how the appraisal may used in the current case.