When a wealthy New Jersey couple decides to end their marriage, both spouses will have intense concerns about dividing their assets. In most cases, dividing the value of the family home will be the most contentious issue the couple faces. Each of them probably has a strong opinion concerning the value of the house, and these feelings are often compounded by each person’s belief about the remaining assets will be divided. Many valuation disputes are resolved after one or both of the parties retains a professional appraiser to assess the fair market value of the family’s residence.
What does an appraiser do?
The job of the appraiser is to determine how much a willing buyer will pay to a willing seller for the asset in question. Professional real estate appraisers usually conduct their appraisal according to the Uniform Standards of Professional Appraisal Practice (“USPAP”). These rules require appraisers to follow uniform procedures in valuing the homestead. Three different appraisal methods can be used: replacement cost approach; income approach; and comparable value approach. The comparable value approach is by far the most frequently used approach to estimating value, and the basic steps of this method are set out in this post.
After being retained, the appraiser will visit the subject property and conduct a thorough inspection. This inspection will include the basement, any attic crawl space, and any other buildings on the property, such as a separate garage. The appraiser will determine the age of the property, measure the size of the rooms and make a note of amenities such as fire places, a finished basement, and a swimming pool. The appraiser will then search for similar properties that have recently been sold (this information is usually available from public records. The appraiser will compare these properties to the property being appraised. Using settled USPAP procedures, the appraiser will raise or lower his opinion of value for the subject property based upon how it compares to the comparable properties. For example, if the subject property has a three-car garage, the appraiser may assign it a value that is slightly higher than a comparable property with only an attached single car garage.
What happens next?
The appraiser will prepare a written report setting forth the appraisal method that was used, a review of comparable properties, and the appraiser’s option as to fair market value. The report can be used as a negotiating tool if the parties are willing to agree on the appraised value, or it can be used as a marketing tool if the parties decide to sell the house and split the proceeds. If the parties cannot agree on how to divide the value of the house, it can be submitted to the judge at trial, and the judge will use the report in making its decision on asset division.
Anyone interested in using an appraiser to assist in the value of the family home may wish to consult an experienced family attorney for advice on how an appraisal will be made.