What Is Our House Really Worth?

February 15, 2019

The marital home is arguably one of the most important assets a couple will own. Assigning it a realistic and accurate value in a divorce may take more time and thought than most couples give to this task. Carelessly choosing a dollar value may result in a financial headache.

The easiest, and typical route to take when valuing the marital residence is to look at the town property tax bill.  However, we generally don’t recommend going this route. Towns value properties only periodically. In between these periods the real estate market can go up or down, and the house itself can have undergone renovations that would change the value.

Another popular method is to look at a neighbor’s house that has recently sold. While this may be a reasonable facsimile for our client’s house, consideration should be given to differences in the two houses. Are they similar in size and design? Perhaps the neighbors recently renovated their kitchen or added a deck, which adds value. Or our client has a corner lot which is more attractive. At the very least a licensed appraiser should be brought in to walk through the house and give their estimate of a reasonable price should the house be listed for sale.

While an appraiser’s evaluation will take into consideration the general condition of the house, the value could change if there are undiscovered (or simply unaddressed) problems. For instance, if the roof is 25 years old it may need to be replaced within a few years. There could be termite damage that has yet to be revealed. Therefore, it would be a good idea to go one step further than a visual inspection of the house, and have a true home inspection. This will be a comprehensive examination of the house from the roof to the basement, including the electrical system, plumbing and insulation. The inspector will present a written report of all deficiencies. It may cost a few hundred dollars but is well worth the fee for the depth and breadth of information it provides.

Any expensive deficiencies that are discovered through a home inspection should be taken into consideration when making a decision about the house. If the couple is going to sell, they might not get the price they expect because of the repairs that a buyer would insist be made before they purchase. On the other hand, if one party is going to keep the house the cost of imminent and necessary repairs may become a discussion point. Who will pay for the repairs, and where will the money come from?

If the house is definitely going to be sold, a search should be undertaken to ensure there are no existing liens. A lien can be placed for unpaid mortgage or taxes, or for unpaid work to a contractor. It would be a nasty surprise for the seller to discover that they need to pay off the lien before the house can be sold or retitled.

In summary, it is a good idea for our clients to have an appraiser provide a market value, invest in a home inspection and do a lien search early in the divorce process.  These steps will ensure that there are no unwelcome surprises when the house changes hands.

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