Valuing a couple’s assets can often be the most difficult issue in an Arizona divorce. Valuing the family residence can be an especially difficult issue if the couple has lived in the house for several years. People develop emotional attachments to the family home, and these attachments often influence the parties’ individual opinions about the value of the house. One effective method of solving this problem is retaining a professional real estate appraiser.
What does an appraiser do?
A professional appraiser is ethically bound to provide an impartial opinion about the fair market value of the property (usually called the “subject”) under current market conditions and assuming the existence of a willing seller and a willing buyer. This statement is fairly simple, but the actual appraisal process is usually far more complex.
Most professional appraisers subscribe to the Uniform Standards of Professional Appraisal Practice (“USPAP”). These standards provide an ethical and technical standard for appraising real property. An appraiser who does not subscribe to USPAP may not be entirely reliable.
The process of determining an opinion as to value
The appraiser begins the appraisal process by visiting the subject. The appraiser will make a careful inspection of both the interior and exterior of the subject. The size of all rooms will be carefully measured, and the appraiser will make note of any significant improvements, such as an updated kitchen or modernized bathroom. The appraiser will also examine the exterior of the subject to determine whether the home has been properly maintained. Finally, the appraiser will tour the adjacent neighborhood to obtain a sense of the value of nearby properties.
Approaches to value
Appraisers generally use three approaches to value:
- Cost approach, which is an estimate of the cost of replacing the home. Because the costs of labor and materials have probably increased by several times since the home was built, this approach is rarely used.
- Sales comparison approach uses recent sales of houses of similar size and quality to obtain a standard of value for homes that are comparable to the subject. Sales comparison data is usually available from public records.
- Income approach uses the likely income produced by the property; this method is almost never used for residential appraisals.
In using the sales comparison approach to value, the appraiser will make adjustments for any differences between the home and the homes that appear to be comparable in size and quality. The appraiser will then review the data and develop an impartial opinion of the net fair market value of the home.
The final appraisal report is given to the client and the court. One important use of the appraisal is to convince the other party of the value of the homestead. The appraisal report can also be used to negotiate an appropriate sale to a third party. Divorce attorneys are often able to help their clients find a qualified appraiser.