One of the most difficult issues in virtually all Texas divorces is dividing the couple’s assets. And dividing the value of the family home can be the most difficult of these asset-related disputes.
Negotiating the value of the family home and an equitable split in that value is rarely successful because family homes carry much emotional weight for each spouse, and splitting the value of the home is as much an emotional issue as it is a legal issue.
An extremely effective method of valuing the homestead involves hiring a professional real estate appraiser to provide a professional estimate of the home’s fair market value.
What does an appraiser do?
Very few people facing a divorce have ever dealt with real estate appraisers, and this post will provide an overview of the appraisal process.
An appraiser’s main job is to provide an unbiased opinion of the fair market value of the family home (or other property being appraised) assuming that a willing seller will agree to a sale price that reflects the amount that a willing buyer will pay.
The appraiser’s first step is a careful visual inspection of the subject property. While the inspection may vary depending upon the type of property being appraised, a residential property inspection usually includes the following steps.
The appraiser will make a detailed written description of the property, including age of the property, construction materials, any necessary maintenance, the number of rooms, any external structures, such as a large garage, tennis court or swimming pool.
The appraiser will also note the existence and condition of internal spaces such as the kitchen, bathrooms, a recreation or family room. Each room will be carefully measured and the appraiser will make a visual record of the interior, using a video camera or similar device.
The appraiser will also tour the surrounding neighborhood and make notes on the size and apparent value of nearby homes.
Arriving at an opinion as to fair market value
After completing the visual inspection of the subject, the appraiser will search public records of recent transactions for completed sales of structures that are comparable to the subject in size, physical condition, and special features.
The appraiser will then choose an approach to value from the three approaches to value most commonly used in appraising residential property: cost approach, income approach, and sales comparison approach.
The cost approach and income approach are rarely used for residential properties unless they contain a rental unit or other income-producing unit.
The cost approach is rarely used because the cost of labor and materials for the subject are very likely to have increased since the subject was completed. The most commonly used approach to value is the sales comparison approach. In this approach, the appraiser selects at least three comparable properties that are similar to the subject and adjusts the sale price to reflect any significant differences between the comparable properties and the subject property.
Once the comparable properties are chosen and compared to the subject, the appraiser will select an estimate of fair market value that adequately reflects the market value of the subject in the current real estate market.
The appraiser will prepare a written report containing the appraiser’s methodology, the opinion of fair market value, and the analysis that led to this conclusion.
Using the appraisal report
The divorcing couple may both agree with the appraiser’s opinion as to fair market value. In such cases, the couple can decide to either keep the house and include it in the overall value of assets that are being divided or use the appraisal to negotiate a sale to a third party.