One of the most troublesome issues in any divorce is dividing the couple’s assets. For most couples, the most valuable asset is the family home, and dividing this asset under California’s joint property laws can be complex and emotional. One of the most effective methods of arriving at a fair valuation for the family home is hiring a professional real estate appraiser to provide an accurate estimate of the home’s fair market value.
The appraiser’s basic task
An appraiser’s basic task is to provide a professional and unbiased estimate of the home’s fair market value, assuming that both buyer and seller are well informed about market conditions and that both are willing to consummate a sale transaction. Most appraisers in Los Angeles (and elsewhere in California) subscribe to the Uniform Standards for Professional Appraisal Practice (USPAP). These standards set out uniform methods of inspecting a property, comparing it to similar properties and developing a reliable estimate of fair market value.
How the appraiser reaches an opinion as to value
The appraiser’s first task is an inspection of the property to be appraised (called the “subject”). The appraiser will visit the property, inspect both the interior and exterior and assess the overall quality of the home. The appraiser will collect certain information about the property, including the age of the home, the legal description and size of the lot, and the general nature of the neighborhood in which the house is located.
The appraiser will measure each room and make a video recording of the house’s interior and exterior. The appraiser will use this video as a guide to their opinion as to value. The appraiser will also judge the state of maintenance of the home, such as whether the roof is sound, whether the house needs painting, and whether accessory structures such as a garage, are in good repair.
Evaluating the data
The appraiser will analyze all of the data that have been collected and then choose an approach to value. Three choices are available: the replacement cost approach, the comparable sales approach and the income approach. In appraising residential property, the replacement cost approach is used only for very new structures.
For a building that may be several decades old, the replacement cost does not give an accurate fair market value. The income approach does not yield an accurate value for most single-family homes and is reserved only for apartment building. The most reliable approach is the comparable sales approach.
In using this approach, the appraiser relies on public records of recent land sales. The appraiser must compare these homes with the subject and make a professional judgment about the extent to which the comparable sales are indicative of existing market conditions.
Reaching an opinion as to value
The appraiser will digest all of the collected information and make a considered judgment about an estimate of fair market value for the subject. Once this judgment is reached, it is embodied in a written report that is given to the client and perhaps to the judge and the other party in the divorce.
Getting professional advice
An experienced divorce attorney can help choose an appraiser and then advise on the best way to use the appraisal.