So you’re getting divorced. Whether it’s from a curious friend or family member, eventually the question comes up, “So… are you going to keep the house?” Well – are you? Often times it’s not as simple as whether you or your spouse will, “keep the house.” It may be in one or both of your financial interests to sell the marital residence and divide the profits according to an agreed upon (or court ordered) distribution.
This is an important decision that should be considered in consultation with your Pennsylvania Divorce Attorney. Negotiating a settlement agreement depends in large part on a fair, impartial and accurate assessment of the value of the marital estate (assets and debts) to be divided. Valuation of assets can be easy in the case of bank accounts (the balance in an account on any given date is non-negotiable). But when it comes to real estate, values aren’t as fixed. For an accurate evaluation of what your property is really worth, you’ll need the expertise of a professional real estate appraiser.
Jeff Landers, contributor to Forbes magazine, suggests a few things to keep in mind when you’re dealing with real estate appraisals for divorce:
Most real estate appraisals are based on comparable sales. To determine fair market value, an appraiser will look at the property in question, making special note of any unique features. Then, comparable properties that have recently sold in the same market will be identified. The more recent sales there are to compare to, the more confident you can be that these sale prices reflect actual market conditions. The comparable sales, in conjunction with any special features of the subject property, are used to determine a number that represents the appraiser’s best assessment of fair market value for your property.
Also, remember this: The property’s value as assessed by municipal authorities for tax purposes is also researched as part of the appraisal process, but it isn’t directly related to fair market value. Your property appraisal may come in much higher or lower than the assessed value used to calculate your property tax bill.
Make sure you use an appraiser who’s knowledgeable in the local market. If your financial portfolio includes real estate in different markets, it is very important to engage appraisers who are familiar with those markets. Fair market value for a condo in Aspen, Colorado isn’t best evaluated by an expert on the real estate market in Westchester County, New York. The property will be most accurately assessed by professionals who work in those specific markets. Make sure you hire an appraiser who has expert knowledge of the market in which you’ll be selling.
Real estate values change over time. You may also need to call on a real estate appraiser if you need to determine what a property was worth at some time in the past. This is called an historical, or “retrospective” appraisal.
Fair market value is only part of the story. Once you have determined the fair market value, you’ll need to subtract the existing mortgages to find out what your current equity is in the property.
Your equity in the property is not the same as money in the bank! If you can sell your property for more than you paid, you may owe both Federal and state capital gains tax after your $250,000 exclusion as a single woman.
Figuring out a fair and accurate value for real estate is complicated and should be handled by experienced professionals. Remember, the best possible outcome depends on having experts on your team who can anticipate and handle any surprises in the divorce process. If you’re interested in determining the value of your real property, whether in anticipation of a divorce or otherwise, contact our Pittsburgh Divorce Lawyers for a referral for a qualified real estate appraiser who you can trust to make a fair and accurate appraisal.