Here are just a couple of the many questions I’ve received recently on fair market values.
Dear Real Estate Adviser,
My sister and I own the home where my mother lives. I’d like to sell my share, but we’re having a hard time establishing fair market value. Three Realtors have given us a range of values, but my sister’s suggested price is nowhere near that range. Should I get a lawyer to help establish a price?
My wife and I are divorcing. She had an evaluation done that said our home is worth $114,000, although the town values it at $185,000. Should I get another evaluation to determine the proper value?
Dear Linda and Ronald,
Driving many of these wide disparities between tax-assessed or agent-estimated values of homes and their actual sales price are a number of factors, including unrealistic thinking, hidden motivations, an unwillingness to accept market realities and borderline greed. Of course, it doesn’t help that home values have nose-dived in so many parts of the country in the past four years and have stubbornly failed to emerge, or that foreclosures and short sales must be factored in when determining values in a neighborhood.
By all means, Ronald, you should get your own appraisal done, which is what I assume you mean by “evaluation.” To avoid conflicts of interest and additional hard feelings, each party in a divorce should get an independent appraisal performed if they own a home together. It’s not unusual for one or both spouses in divorces to try to cajole an appraiser to lower or raise a home’s valuation to serve their individual purposes. But with a second appraisal in play, the two parties — or the divorce judge — will be more inclined to come up with a compromise.
In fact, many firms have appraisers who are experienced with “divorce appraisals” that are supportable in court. And no, Linda, you probably won’t need an attorney to determine value. But you will need an appraisal from a seasoned professional. You might suggest to your sister that she get her own appraisal done as well, and then you can compare notes — much as the divorcing couple should do.
Certainly, the price opinions of those three Realtors are relevant. While there’s a chance that one or more of them is trying to grease the wheels for a fast sale with a too-low price, it’s more likely in this instance that they’re simply trying to talk your sister down from unrealistically high expectations.
As for assessments sent out by a city or county property tax authorities: Rarely do these represent up-to-date, fair market value. Many such assessments are done every other year and are often based on old information and not-so-recent sales. In fact, if there is a too-wide chasm between a taxing authority’s assessment and market realities, as may be the case with Ronald’s house, it’s probably time to challenge or “protest” that valuation. Taxpayers can back their appeal using more recent sales, home-absorption rates in the neighborhood, drops in local median sale prices and the value of average seller concessions — which all shape the big picture. Cities are typically not in a hurry to readjust property taxes because they are so revenue-strapped. So taxpayers have to take that initiative sometimes.
Of course, the only value that really matters in a home sale is the price that is on the check at closing. I wish both of you luck.
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