You and your spouse or partner own a home together and want to know the house value for purposes of dividing or equalization your assets. How do you determine a house’s value for purposes of legal separation, divorce or the dissolution of a domestic partnership?
If you negotiate a marital settlement agreement or stipulated judgment, you and your spouse can agree to the property’s value –regardless of the facts.
If you ask a Judge to determine the value of a home, the Judge’s decision will be based on evidence presented in court, and the valuation date will be near the date of trial, not the date of separation, except in extraordinary circumstances. The evidence most commonly used in California to determine the value of real estate are the values of comparable homes (“comps”) and real estate appraisals.
Two: Real estate appraisals are usually prepared by appraisers licensed by the State of California’s Bureau of Real Estate Appraisers. Appraisers usually testify as expert witnesses, give their professional opinions and provide written reports with raw data included.
Each spouse may hire his/her independent appraiser, spouses may hire a joint appraiser or the court may order an appraiser be hired.
Real estate appraisers generally use two different methods for determining the value of a house. The first method is the cost approach, which takes into consideration the cost to replace any structures on the property if they are destroyed, the value of the underlying real estate, depreciation and various other factors. The second method is the sales comparison approach, which takes into consideration, the prices of comparable homes sold. Factors such as lot size, square footage, style, age of house, garages, fireplaces and amenities are matched as closely as possible to determine which sales prices are most representative of the value of the home.
If you aren’t familiar with real estate appraisals, you might find one included in the closing documents provided by the escrow, title company or lender when the house was purchased or refinanced.
Comparable or Opinions of Value are normally prepared by licensed real estate agents or brokers with knowledge and experience in the real estate market where the home is located.
Real estate brokers usually use the sales comparison approach to determine the value of the home. But, they also may consider very current market data that could make the comparable values less relevant for one reason or another. For example, if the real estate broker expert just listed two comparable homes for sale in the neighborhood, this could lead him/her to conclude that there is or will be a glut on the market and the house’s value is now less than the comparable values.
The appraised value of a home may be more or less than the comparable value.
The fair market value or actual sales price may be less or more than both the appraised and comparable values.
If spouses present conflicting values at trial the judge must choose either value or use that of an expert appointed by the court. The judge is not permitted to split the difference between the conflicting house values. He/she has to choose one or the other.
Of course, all divorces are unique and other evidence and experts may be used to determine the value of a house for purposes of divorce. But, real estate appraisals and opinions of value are used day-in and day-out in California divorces regardless of whether the property is worth $300,000 or $30,000,000.
If you’d like help determining the value of your home, and whether to keep or sell it, please schedule a consulting session.