One of the most contentious issues in many Colorado divorces involves the value of the family home. Each party may have different emotional attachments to the house, and each therefore approaches the value of this asset from a starkly different perspective. Fortunately, valuing the family home can be done through a professional real estate appraisal.
Understanding the appraisal process
A professional real estate appraiser is hired to provide an impartial opinion as to the fair market value of the real property under consideration. “Fair market value” is defined as the amount of money that a willing buyer will pay to a willing seller, assuming that both are fully informed about real estate values in their locale.
Across the United States, appraisers use three approaches to determining the value of real property: replacement cost, income approach, and market value or comparison sales approach.
The Colorado constitution contains a specific directive to use the market approach in valuing residential real estate. This requirement produces a happy coincidence in that most professional appraisers prefer the market approach in valuing residential property.
How does the market approach work?
In employing the market approach the appraiser must first inspect the property to be appraised. This inspection begins with a physical inspection of the property (often referred to as “the subject”). The appraiser will measure the exact dimensions of the plot of land on which the subject stands.
The appraiser will also measure each room of the house and take note of any external benefits, such as a swimming pool, tennis court, third garage and the like. The appraiser will also use digital photography to make a visual record of the subject. The appraiser will also take note of the physical condition of the subject, especially noting the need for any significant repairs, such as a new roof or exterior paint job.
The appraiser will next check public records to acquire information about any recent sales that involve homes of similar size and quality to the subject. The appraiser will make a record of the price in these sales and will form a preliminary opinion as to value. This preliminary opinion will be checked against sales of comparable properties to help the appraiser form a final opinion as to fair market value.
The parties in the divorce can then use the appraiser’s report to either negotiate a sale to a third party or to incorporate the appraised value of the home into their other assets that must be divided in the divorce.
Using a professional appraiser helps remove an especially emotional issue from the list of questions that must be resolved in a trial.