Last week a client asked me the following question (which is edited for clarity).
“I need to have my house appraised due to a divorce. Is there any difference between a divorce appraisal and a refinance appraisal?”
The answer is yes. While the appraisal report may look outwardly similar, there are four key differences between appraisals done for divorce and those done for other factors like finance or refinance. Appraisers are required by licensing laws to determine the appropriate research and reporting (the scope of work), given the intended use and intended user, that will yield credible results. A divorce appraisal has a different intended use, user, and scope of work from that of an appraisal done for a loan or a lender.
Refinance appraisals are centered on the lender requirements, use, type of form, and other needs. For example, an appraiser for a refinance might point out that there is a repair necessary given the lender’s minimum property requirements. The lender might require that the appraisal be made with the condition that the issue has been repaired (“subject to”) and then the lender would choose not to fund the loan until the repair is completed. On the other hand, a divorce appraisal is made “as is” which may result in a very different value conclusion.
A divorce appraisal can often become a point of contention between the involved parties. Occasionally, an appraiser must testify in court to defend the analysis and conclusions made within the report. Appraisers who perform such appraisals typically have specialized training, in addition to standard licensing, which helps to prepare them for a courtroom appearance. Divorce appraisals are presented in a manner that anticipates the potential for legal testimony.
A divorce appraisal might be timelier than a refinance appraisal. Typically, a refinance appraisal is done close to the date of the refinance while a divorce appraisal can be effective on any date specified by the client, which might be the date of separation. Real estate markets change quickly and just a few months can mean many thousands of dollars. Even when prices are stable here in Portland, Oregon values will often swing by five percent from the winter low to the summer high. Consult with your attorney to be sure on the correct date of value (effective date) when ordering an appraisal for divorce.
Refinance appraisal reports are presented on a different form than divorce appraisals. Strictly speaking, the appraisal report form does not matter from a standpoint of analysis. However, most lending and refinance appraisal forms are preprinted with statements specifying that the intended use is for mortgage finance purposes. (See the image at the top of this post.) In a divorce, such statements could discredit the entire appraisal report.
Did I leave anything out or do you want to join in the conversation? Let me know in the comments below.
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