Arizona Divorce | his image shows a yellow sticky note that reads Important! Items not included in appraisal

Arizona Divorce | The Appraisal Minus the Mortgage Does Not Equal Equity

Friends, this is very important! Please read this very carefully!

In many dissolutions of marriage cases throughout Arizona, judges and attorneys may consider if they have the house in their case appraised, and then subtract the mortgage owed they will have an equitable number for the division of the equity dollars in the home. 

This is not an accurate step to proving equity and I will share with you why.  

A Home Appraiser is Not a Licensed Home Inspector

A home appraiser is not a licensed home inspector, nor does the home appraiser provide a home inspection of the home.

The appraiser provides a professional opinion of the value of the home based on what they visually see, current market analysis, and professional expertise. 

No Warranties on the Condition of the Home

In nearly every home appraisal report there is a disclaimer from the licensed appraiser that states they are making no warranties as to the physical condition of the home. 


The Additional Cost Factors Must Be Figured Into the Value of the Home

If the home must be sold before the divorce, during the divorce or shortly thereafter, home repairs and updates needed to make the home ready to sell, real estate sales commissions, property taxes, home inspections, home warranties, attorneys fees, and closing costs must all be figured in to reach the true equity of a home. 

The appraiser takes none of these factors into consideration. They simply provide a professional opinion of value of the home on the day they walked through the home, as their research shows.

For Example

Let’s take a $600,000 home that has a $250,000 remaining mortgage that will need to be paid off when the house is sold. 

Some judges and attorneys will suggest that $350,000 is the equity in the home. I disagree!

Let’s say that the air conditioners on the home need to be replaced at a cost of $25,000. 

Let’s say that the home needs $35,000 in upgrades in order to sell the home for top dollar. 

Let’s say that selling cost (real estate commissions) are $30,000.

Let’s say that closing cost fees are $10,000

As you can see, the repairs that need to be made and the selling cost total $100,000. 

The divorcing couple will need to pay these costs in order to sell this home, so our argument is that the true equity in the home is $250.000, not $350,000.  

The home was acquired during the marriage and the all of the cost to selling the home should be divided equally to get the true equity value.

Additional Reading:  House Due Diligence   Can You Just Refinance the Mortgage? 

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What I Do:

1. I help people who own a home together, and plan to separate and/or divorce, avoid making very expensive and long-lasting mistakes with their co-owned home.

2. Although my information can help anyone who plans to divorce, it is best suited for those who are not contesting the divorce (too much) and are as amicable as possible. 

How Do I Do This?

1. I'll  consult with my clients and compassionately help them completely understand all of their options with the home. 

2. I'll explain the option of one person keeping the home and refinancing the home, so the former spouse is no longer on the mortgage loan.

3. I'll explain the option of selling the home and splitting the equity, and then each person having the option to buy a new home on their own.

4. I'll explain why an appraisal-minus-the-mortgage does not equal true equity, and why a home inspection (sometimes called house due diligence) is very important at this time.

5. I'll explain to my clients how their decisions with respect to the home will impact their quality of life for many years to come, positively or negatively.

6. I'll explain how the information I can provide will help my clients make better decisions for their future. 

7. I'll explain how my clients can avoid making expensive and long-lasting mistakes.

8. I'll introduce my clients to other professionals, such as mortgage professionals who can better explain the refinancing and new purchase options.   

9. I'll explain my discounted commission rates that I offer my clients if they choose to sell the house and choose me as their REALTOR®.