A question that is commonly asked during divorce is “How do we determine the value of our home for purposes of the divorce if we are not actually selling it?” The answer is: “It depends.”

It depends on the method you and/or your husband select or upon which the judge relies. Some of the more common methods I have witnessed being used in divorce proceedings include the following:

1. Hiring a Certified Real Estate Appraiser to produce a real estate appraisal. Appraisers use a variety of methods to calculate the value of property, however they generally consider the actual value of the lot upon which the house sits, the replacement cost of the structure(s) on the lot and the sales prices of comparable homes recently sold within close proximity to the property in question. Banks use Real Estate Appraisers to determine the value of property before they extend credit to the property purchaser or owner.
2. Hiring a Real Estate Broker who is licensed and experienced in the sale of property in the neighborhood. The property value, as provided by a Broker, may be greater or less than the value established by an Appraiser for the same property. The valuation may differ because it is common for real estate to sell above and below appraised values when the market is in a boom or slump. For example, a home in Beverly Hills located next door to Tom Cruise and Katie Holmes’s house may be appraised for $10 million, but may sell for twice that because it is located in a highly coveted neighborhood and is surrounded by celebrities. A party who wants real estate to be valued at more or less than the appraised value for purposes of divorce will often use Real Estate Brokers to calculate the price.
3. Referring to and relying upon property tax records. City and state property tax offices calculate property taxes based upon the value of the real property and any structures located thereon. The tax man’s methods for determining appraised values are often a mystery and in some cities and states, have historically generated values far below those set by Certified Real Estate Appraisers or Brokers. Thus, this method for valuing property is rarely used.

In addition to the foregoing, couples also establish the value of their real estate for purposes of divorce arbitrarily. Some use the purchase price while others use the outstanding mortgage balance. There are also those, for whom money is no object, who will pay a premium based solely on the sentimental value of a home. For example, I witnessed a spouse pay her husband $300,000 more than the $1.5 million appraised and fair market value of the property because she couldn’t bear to part with it. If only we all had the liberty to pay for such sentimentality.

So, as I mentioned above, the method used to determine the value of your home may be the one your husband agrees to accept or the court requires. Notwithstanding, because property values may differ based on the method used, be sure to ask your lawyer which strategy he or she recommends, which may ultimately depend upon your position as seller or purchaser or the property in question.

This is not legal advice. You should consult an attorney if you have legal questions that relate to your specific divorce. Technorati Tags: divorce divorcing getting divorced property value valuation asset division appraise appraisal real estate home house marital residence law legal woman relationships women