Valuing Your Home at Divorce
For many spouses, their home is the largest asset they need to divide during their divorce. In order to determine how it can be divided, the first step is to understand it’s value. But how do you value a home at the time of a divorce?
To determine the exact value of your home in the market, selling your home may be the best option. While there are experts who can give you an estimated value for your home (see below), the market or “what people will pay for you house” is the true value of real estate. For many, selling their home may be the cleanest option for dividing the asset. The challenge is often that there is not only a financial value, but also an emotional value attached to a home. For this reason, many find they are not ready to sell their home at the time of divorce. If that’s the case, there are other options.
Instead of selling your home, one spouse could keep the home and “buyout” the other spouse’s equity. To determine the “buyout” value, you typically need to look at the fair market value (FMV) of the home versus the loans or liens against the home. For this reason, determining the FMV of a home is critical to determining a fair, equitable agreement.
Ways to Value
Zillow or Redfin
The least expensive, but also least precise process is using online resources such as Zillow, Redfin, or Realtor.com. These sites provide an estimated value of your home for no cost. It is important to be cautious of these values, as they are often inflated or can be based on incorrect information related to your home.
Local realtors can run a “comp analysis” or comparative analysis to give you a range for what your home is worth. This is the same analysis that would typically be run when a relator considers what to sell your home for. Often for free, a relator will run a desktop analysis. This means they run an analysis from their office, based on the information you provide them and the information they can find online. For a relatively low fee, a realtor may come out to your home to run a more comprehensive analysis by walking through your property.
While an appraisal may be the most expensive option, it is typically the valuation method preferred by courts. An appraiser is an expert who inspects the property and provides a value based on recent sales in the area comparable to your home. The value is based on several factors, including size of the property, updates, location, and more.
Ultimately, it is important that you and your spouse mutually agree to a valuation process. This prevents unnecessary expenses from adding up by getting multiple valuations until you find a valuation that you prefer. In mediation, my clients have access to a list of valuators who will act neutrally to help both spouses find a value that you can create equitable agreements around.