The Appraisal Gap — What Your Appraisal Actually Covers (and Doesn’t)
If you are going through a divorce, the home appraisal may play a major role in deciding how much equity one spouse pays the other. But before you sign your Marital Property Settlement Agreement, remember: an appraisal is not a home inspection or a title search.
An appraisal estimates the home’s market value based on specific assumptions. It may not identify title issues, liens, or easements. And if the appraisal is completed “subject to” repairs, the appraiser may be assuming those repairs will be completed properly.
If the appraisal value is "Subject To" repairs make sure to discuss the repair costs with your attorney before signing a property settlement agreement or agreeing to a final buy out number.
Even before an apparisal it may be worthwhile to hire a licensed home inspector to provide a home inspection report so that you are aware of possible issues and costs to repair.
Some question to discuss before finalizing your settlement:
- Is the appraisal “as-is” or “subject to” repairs?
- Are there known roof, HVAC, or other major repairs?
- How will the cost of any deferred maintenance — an older roof, an aging HVAC system, anything you've been “meaning to get to” be split between the parties.
- Has the market changed since the appraisal?This is typically a concern if more than 60 days has passed since the apparisal report.
A little extra review before signing can help prevent an expensive surprise later.