real estate valuation

How Does a Real Estate Valuation Affect a Divorce?

According to reports, 75% of seniors say their home is their most valuable asset. And 74% say that purchasing a home was one of the best financial decisions they ever made.

But what happens if you’re facing divorce, and have to split your home down the middle? 

Dividing assets during divorce can be a tough process, and the larger the asset the more important it is to get a fair split.

This is where real estate valuation comes in.

Getting a professional real estate valuation can be an important step when splitting assets. 

Keep reading to find out how a real estate valuation can affect divorce, and when to get one. 

What Role Does Real Estate Valuation Have in Divorce?

As we said above, real estate assets are usually one of the largest assets couples own together. Because of this, a real estate valuation is a standard procedure during divorce asset evaluation. 

By getting your joint property professionally evaluated you can move forward on how you’re going to split the asset.

However, there are times when a couple might choose to forgo an evaluation. 

A large majority of couples choose to sell their home and divide the proceeds. If you’re opting for this path, you might not need a real estate evaluation. Once the property sells, you can simply split the proceeds. 

A professional valuation of real estate assets can cost a few thousand dollars. If couples have determined a percentage split on the proceeds of the property sale, they can do this without incurring the expense of an evaluation. 

However, if one spouse wants to keep the home, they will need to pay the other spouse out for their share of the value. In this case, a professional real estate valuation is critical. 

Once the valuation has taken place, the spouse who’s opting to keep the home or property then has two choices. They can either forfeit other assets they’re entitled to in the divorce settlement, such as investments, vehicles, or other valuables—or refinance the home. 

If they choose to refinance, the spouse who’s keeping the home will then take on the new mortgage, and the other will receive a cash payout. 

How Real Estate Valuation Is Determined

There are a few ways you can get a real estate valuation done. You can either opt for a:

  • Formal appraisal
  • Comparative market analysis
  • Broker price opinion
  • Property tax assessment

Some couples also use online price estimator tools such as Zillow or Redfin. However, these are the least accurate option, and we would not recommend them. 

A formal appraisal is the best option and gives the most comprehensive results. During a formal appraisal, the appraiser will walk through and thoroughly evaluate your home. 

You can also opt for a comparative market analysis (CMA) from a real estate broker. The broker will evaluate your home’s potential selling price based on its features and how they compare to similar properties in your area that have recently sold. 

Some couples choose to seek a broker price opinion. This is similar to a CMA, but with less focus on comparative properties. Because of this, it’s usually less accurate than a CMA. 

Lastly, you can also use your property tax assessment to estimate value. However, this isn’t usually advisable. Property tax assessments aren’t updated regularly enough to reliably reflect a true market value.  

When to Get a Real Estate Valuation Done

Divorce can be a lengthy process, and it can be hard to know when is the right time to get a real estate valuation done. 

If you get a real estate valuation done early, this will give you more clarity on the value of the total joint assets. However, if one spouse is keeping the home and opting to refinance it—doing this too soon can increase their interest rate. 

Appraising too early can also trigger other additional expenses. For instance, if your property gets appraised by someone who’s not prepared to testify if your case goes to court, you’ll have to pay for another appraisal. 

Additionally, if property market values shift between the appraisal date and your divorce finalization, you might also have to get it re-done. 

However, there might be some situations where it’s best to get an early appraisal done. 

For instance, if one spouse wants to keep the home and the other needs their share of the equity to purchase a new home for themselves—the couple may choose to go ahead with splitting the property before the divorce proceedings have been finalized. 

Living together while divorcing can be very stressful and emotional, which is why some couples take this route. However, be aware that this can cause complications later on down the line if one party decides to contest the divorce proceedings. 

What to Do if There Are Disputes on Property Value

Speaking of disputes, what are your options if there’s a dispute on the value of any real estate assets with divorce?

If you or your spouse disagrees with the results of a real estate valuation you have a few choices. You can either:

  • Have two separate appraisals carried out and pick a value that’s midway between the two
  • Seek moderation
  • Allow the court to decide

If you disagree with a property valuation, we’d recommend the first option. It might cost more in the short term, but it can benefit your finances in the long run. 

Divorce can have long-term impacts on your financial health. For instance, 20% of women fall into poverty after a divorce. 

Regardless of your sex, it’s important to ensure you’re working with an accurate evaluation so joint assets are split fairly. 

If you don’t, this could impact you for years to come. For instance, let’s say you’re keeping the home and refinancing. If the real estate valuation overestimates the value of the property, you’ll have to take out a larger mortgage and meet higher payments every month. 

Do You Need Legal Help Splitting Assets?

Dividing assets is one of the areas that can make divorce complicated. If you own a home together, there’s a good chance that you’ll need to get a real estate valuation carried out to ensure a fair split. 

Are you in need of more info about the divorce process? Browse through our site for a wealth of free information and resources. 

Need legal help? Use our directory to find a divorce lawyer to defend your interests.