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Using a professional appraiser in a California divorce

On Behalf of | May 18, 2022 | Divorce

Most Californians realize that marital property is divided according to the community property rule, that is, all property acquired during the marriage must be split equally. This rule does not require the liquidation and equal division of all assets. Many couples negotiate (or the court orders) different assets to be transferred from one spouse to the other until each spouse receives total assets equal to 50% of the marital estate.

How does community property affect ownership of the family residence? Three solutions are common: 1) the house is sold to a third party, and the net proceeds thereafter divided equally, or 2) one spouse purchases the interest of the other spouse in the home, or 3) the marital assets including the home are divided in such a way that each spouse receives 50% of the marital property. In each case, the couple will want to know the fair market value of the house. This is especially true for high asset couples.

Fair market value

Many high asset couples retain appraisers to help them value their assets, especially real estate. A professional appraiser’s task is to determine the fair market value that a willing purchaser would pay to a willing seller, assuming that neither party is under any compulsion to either buy or sell.

The mechanics of making an appraisal

A professional appraiser will first visit the property to be valued (the “subject property”) to determine its size and physical condition. The appraiser will take careful measurements of each room and the overall size of the structure. The appraiser will also examine the physical condition of the subject and note whether any improvements or important items of maintenance are required. The appraiser will next examine the surrounding neighborhood to determine whether the house is comparable in value to its neighbors. After gathering this information, the appraiser will use one of three methods to reach an estimate of fair market value.

The first approach, the costs of materials and labor to replicate the structure is rarely used because material prices have escalated at a rapid rate in the years since the subject was build. The second, the income approach to value, is rarely used for residential structures unless they contain rental units. The most common approach is the comparable sales approach. The appraiser will identify three or four homes that are comparable in size and condition and that have recently changed hands. The sales price can be obtained from public records. The appraiser will then make adjustments to reflect differences between the subject and the comparable sales properties. The result is a written report stating the appraiser’s professional opinion about the fair market value of the subject.

The appraiser’s report can be given to the opposing party and the judge. The report can then help both parties agree on the value of the home and choose a method of allocating the home’s value.

An experienced divorce attorney can help a person choose an appraiser and work with the appraiser to arrive at a reliable and accurate estimate of fair market value.