When divorcing, should you obtain an appraisal or a Comparative Market Analysis? 

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 determine the value best.

The two most common methods for obtaining 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? 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 sell for in the current real estate market.

While both opinions of value are valid, it is crucial to understand the perspective of each opinion and how the two methods apply to the current situation of the marital home. For example, when considering the option of one spouse retaining the marital home and refinancing, an appraisal may be the better option. On the other hand, if considering a sale of the marital home, a CMA may be a better option.

So, what makes a Divorce Appraisal different than a traditional mortgage appraisal?

A divorce appraisal is not the same as your typical appraisal used for lending purposes. Some of the differences are:

Since a divorce appraisal is not related to financing or lending, it is not required to comply with agency guidelines (or UAD Guidelines). Typically, a divorce appraisal is completed on a non-agency form such as the GPAR (General Purpose Appraisal Report) form or written in a narrative format.

When they order an appraisal, most attorneys’ primary concern is the final value and how it will affect their case. Therefore, they are usually not too worried about how the report is presented, so long as it is defensible if contested. The most common appraisal form is the Universal Residential Appraisal Report Form – URAR 1004.

Does the form really matter? It does!

The common URAR 1004 Form is not intended to be used for valuation matters other than obtaining mortgage financing. (It even says so right in the report.) Yet, all too often, this is the go-to form for inexperienced appraisers presenting appraisals for legal purposes. This technicality could potentially cause you to have a non-defensible appraisal.

Technically, the report is invalid due to the Form’s Intended Use being violated by the appraiser. The court could deem the report inadmissible and jeopardize your client’s case.

There is a simple solution. Several general-purpose appraisal forms are available to residential real estate appraisers that are also in compliance with USPAP. They are typically called GPAR Forms (General Purpose Appraisal Report), and they address most residential usages (single-family, multi-family, and condo.) 

When ordering an appraisal, be sure to ask your appraiser which Form they intend to use. For example, if they say the URAR 1004, you need to insist that they use a GPAR Form, or you run the risk of presenting an invalid appraisal.

What is the Statement of Assumptions and Limiting Conditions in an appraisal report? First, it should be noted that each standard appraisal form contains a general notice of Statement of Assumptions and Limiting Conditions. Prudent attorneys and divorcing homeowners should note that the licensed appraiser is submitting an opinion of value for residential real estate only. They are neither a surveyor, inspector, title representative, nor engineer. Below is a sample of the generic Statement of Assumptions and Limiting Conditions commonly found in standard appraisal forms.

It is wiser to rely on a current title report to verify ownership and outstanding liens against the property during divorce proceedings. If property lines, out-buildings, etc., are in question, it would be wise to hire a surveyor to survey the property. When the appraisal report indicates there may be property conditions in question, such as a furnace or other mechanical concerns, roofing conditions, or general repairs noted such as broken windows, obtaining a complete home inspection may be in the homeowners’ best interest.

There is one last thing to consider regarding obtaining an appraisal during the divorce process.

Note that the mortgage lender cannot use the appraisal acquired during the divorce settlement process upon which a settlement was agreed upon. Each lender must use only a lender-owned appraisal ordered directly by the mortgage company during the mortgage process. If mortgage financing will be required as part of the settlement agreement, i.e., an equity buy-out, it would be in the best interest of all parties involved to obtain the services of a Certified Divorce Lending Professional (CDLP™) to begin the mortgage process. This provides confidence to all parties that the same valuation will be used throughout the process.

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.

Copyright 2021—All Rights Divorce Lending Association

1 Comments
Matt: Great info!
by Terry Hunter December 13, 2021 at 01:57 PM
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