A high-asset Michigan couple who has decided to dissolve their marriage must face the difficult issue of valuing their assets so they can be divided equitably.
For these couples, valuing the family home can be the most difficult issue in the division of their assets. Not only is the family home perhaps the couple’s single most valuable asset but it can be loaded with uncountable memories that may cloud any attempt by the couple to agree on the home’s value.
One of the best ways to obtain an objective value for the family home is by retaining a professional real estate appraiser to make an impartial estimate of fair market value.
The appraiser’s task
Virtually all reputable appraisers subscribe to the Uniform Standard of Professional Appraisal Practice (USPAP), which is a code of rules and appraisal procedures published by the Appraisal Foundation to ensure that all appraisals are conducted to industry-wide standards. According to USPAP, an appraiser’s primary function is to provide a professional estimate of the fair market value of the property to be valued (the “subject”) assuming a willing seller and a willing buyer operating under existing market conditions.
How an appraiser proceeds
Once retained, the appraiser visits the subject and makes a careful interior and exterior of the building. The appraiser will measure the sizes of all rooms and make notes on the physical condition of the structure. The appraiser also records observations regarding the need for any major repairs, such as a new roof or new siding.
The appraiser next consults local government records concerning recent sales of properties of comparable size and condition. (These properties are usually referred to as “comparables.”)
Appraisers generally use one of three accepted approaches to value: the replacement cost approach, the income approach, and the comparable sales approach. The comparable sales approach is the most frequently used.
The appraiser studies the selling price of comparable properties and makes adjustments for differences in size, physical condition, and location.
Using the appraisal
A professional appraisal can often help persuade the other party to agree on the value of the homestead. The couple can then use the appraised value as a negotiating tool if they should decide to sell their home and add the net proceeds to the marital estate.
If a trial is required to resolve asset division issues, the judge can also refer to the appraisal. A knowledgeable divorce attorney can provide valuable guidance on how to best use a professional report.