When a Pennsylvania couple decides to end their marriage, one of the biggest issues is determining the value of the homestead. Many couples engage in endless (or seemingly endless) arguments about the value of the home; these arguments waste time and run up the legal fees. A better method is to hire a professional real estate appraiser to provide an impartial and knowledgeable estimate of the home’s fair market value.
What does an appraiser do?
Virtually all professional appraisers will agree on their task: provide a professional estimate of the fair market value of the home. “Fair market value” is defined as the price that a willing buyer will pay to a willing seller under current market conditions. Most professional appraisers follow the Uniform Standards of Professional Appraisal Practice, published by the Appraisal Institute. In other words, most professional appraisers can be expected to be knowledgeable and ethical.
The specific tasks underlying a professional appraisal
Once an appraiser is retained, the appraiser will visit the subject property (referred to as the “Subject”) to make a detailed inspection. The appraiser will measure each room carefully, make a meticulous inspection of the interior and exterior condition, note any special features such as a recently remodeled kitchen or bathroom and any other features that might raise or lower the estimate of value.
Approach to value
After completing the inspection, the appraiser will select an approach to value. The appraisal profession uses three main approaches to value: replacement cost, meaning the cost of labor and materials needed to reconstruct the Subject; the income approach, meaning the amount of income the Subject is expected to generate and the comparable sales approach, meaning the price that comparable properties fetched on the open market. Residential properties are usually valued using the comparable sales approach because the replacement cost approach is not likely to yield a reasonable estimate of value and the income approach is not appropriate for residential dwellings.
After choosing an approach to value (as mentioned, the most common approach for residential properties is the comparable sales approach), the appraiser will consult public records of recent land sales to find properties similar to the Subject. The appraiser will then make adjustments for differences between the Subject and comparable properties. After these adjustments are made, the appraiser will develop a final estimate of fair market value. This estimate will be included in a lengthy folder explaining the appraisal process and the basis for the appraiser’s final estimate of fair market value.
Solid legal advice
With the final estimate of fair market in hand, the divorcing couple has two options: sell the property to a third party and split the net proceeds or use the appraisal as a measure of value in dividing the marital assets. Anyone who has questions about using an appraiser may wish to consult an experienced divorce attorney for a complete explanation of the process.