What's the Best Way to Value Real Property in a Divorce?

When divorcing couples decide to call it quits one of the first things they think about is ‘what to do with the marital home?’. Should we sell it? Will one of us keep it? What’s it worth?

Obviously, assessing the value of the marital home and other real estate owned in a divorce is a big deal in the settlement process. The question is how to best determine the value.

How do we determine the value of the real property? Should we have an appraisal done or should we ask a real estate professional? It actually depends on what you might do with the property so understanding the difference between an appraisal and a Comparative Market Analysis (CMA) is important.

The two most common methods for assessing the value of real estate are obtaining an appraisal from a licensed appraiser or having a real estate professional provide a CMA— but what’s the difference between the two? To start, both methods are an opinion of value and no two will ever give you the same value. The primary difference is perspective.

• An appraisal is completed by a licensed residential appraiser who bases their opinion of value off of recent comparable home sold sales data.
• A Comparative Market Analysis (CMA) is completed by a licensed real estate professional who bases their opinion of value on what the property may potentially sell for in the current real estate market.

While both opinions of value are valid, it is important to understand the perspective of each opinion and how the two methods apply to the current situation of the marital home.

• When considering the option of one spouse retaining the marital home and refinancing, an appraisal may be the better option. Keep in mind that mortgage financing will require an independent lender-owned appraisal. It may be prudent to order the appraisal through the CDLP™ during the settlement process to make sure all parties involved are using the same appraised value.
• If considering a sale of the marital home, a CMA may be a better option.

As a divorce mortgage planner, the CDLP™ can help divorcing homeowners make a more informed decision regarding their home equity solutions while helping the professional divorce team identify any potential conflicts between the divorce settlement, home equity solutions as well as real property issues. 

Divorce Mortgage Planning is a holistic approach to the process of evaluating mortgage options in the context of the overall financial objectives as they relate to divorcing situations. Working directly with the divorce team, a CDLP™ understands the intersection of divorce, tax, real estate, and mortgage financing. The role of the CDLP™ is to help integrate the mortgage selected into the overall long and short-term financial and investment goals, to help minimize taxes, to minimize interest expense, and maximize cash flow.

Involving a Certified Divorce Lending Professional (CDLP™) early in the divorce settlement process can help the divorcing homeowners set the stage for successful mortgage financing in the future. 

This is for informational purposes only and not for the purpose of providing legal or tax advice. You should contact an attorney or tax professional to obtain legal and tax advice. Interest rates and fees are estimates provided for informational purposes only and are subject to market changes. This is not a commitment to lend. Rates change daily – call for current quotations.  The information contained in this newsletter has been prepared by, or purchased from, an independent third party and is distributed for consumer education purposes.

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