What makes a divorce appraisal different?

Let’s face it, going through a divorce is an emotionally challenging time for everyone taking part.  It involves many difficult decisions about the kids, investments and marital assets, including who gets the house.  When it comes to the house and other real estate, the two most common choices are selling and dividing the proceeds, or one party can “buy out” the other.  In either case, one or both parties will order an appraisal of the residence and other real estate
holdings.

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

  • The divorce appraisal is likely to have a retrospective date of value, meaning the value of the property will be based upon a date in the past (perhaps the filing date, the date of marriage, the date of separation or the date of purchase) rather than the current date.
  • In some cases the appraisal will provide both a retrospective
    value as well as a current value.
  • Occasionally, in a divorce situation, the appraiser may be called upon to testify is count as an expert witness.  As a witness, the appraiser may not be an advocate for either side of the proceedings, regardless of who may have hired him.  The appraiser may only testify about the appraisal and the data/analysis contained therein.
  • Since a divorce appraisal is not related to financing or lending, it does not have to comply with Fannie Mae guidelines (or UAD Guidelines).
  • Typically, a divorce appraisal is completed on non-Fannie Mae forms such as the GPAR forms or it is written in a narrative format.
  • In completing a divorce appraisal, the appraiser is bound the same confidentiality and USPAP requirements that he would be in completing a lending appraisal.  That means that the appraiser cannot share information about the appraisal with any party other than his client and/or his client’s attorney, unless legally required to do so.

Most attorneys’ primary concern when they order an appraisal is the final value and how it will affect their case. They are usually not too worried with how the report is presented, so long as it is defensible. Many attorneys are used to receiving residential appraisals on the URAR 1004 Form which is the most commonly used Form for residential appraisals.

Why give it a second thought, right?  Wrong.  This could prove to be a huge mistake.

FACT: The common URAR 1004 Form is not intended to be used for valuation matters other than mortgage finance. (It even says so right in the report.)

Yet, all too often, this is the “go to” Form for appraisers who may not be experienced performing appraisal for legal purposes. Their mistake could cost you your case.

Imagine being in court for a hearing and presenting your appraisal prepared on the URAR 1004. While the court may not know the nuances of the Intended Use of a URAR 1004, a savvy opposing counsel, township solicitor or expert appraisal witness could very easily point this out. Technically, the report is invalid as a result of 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. There are a number of general purpose appraisal forms 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.)  The Appraisal Institute has even developed its own USPAP compliant GP Forms as have most appraisal software providers.

So, next time when ordering an appraisal; be sure to specifically ask your appraiser which Form they intend use. 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.

It is always important to work with an experienced mortgage professional who specializes in working with divorcing clients. A Certified Divorce Lending Professional (CDLP) can help answer questions and provide excellent advice. To find a CDLP in your area, please click here.

 

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.

 

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