[Noel Cookman]

New here. The issue is old and probably already settled. But, the most reliable appraisals in divorce are obtained the only way any appraisals are obtained when mortgage financing is needed – the lender orders/obtains the appraisal as part of the loan process. No other appraisal can even be viewed by the lender. This federalized guideline (included in Dodd-Frank) was 15 years old 2 days ago, May 1, 2024. Nothing in 15 years has exceeded this process in terms of reliable values. When the lender is the client, lending guidelines form the bias. All clients (ordering appraisals) have a bias. The most useful bias is the one had by the person who pays or lends their own money for the subject property. Divorce buyouts/equalizing have at least two competing biases, neither of which moves the parties toward a real-world dollars-and-sense determination of value.

There isn’t much good in Dodd-Frank but the appraisal rule works well. And, it is universally applicable in residential mortgage lending.

I beat this drum constantly when addressing divorce parties and professionals. DON’T ORDER YOUR OWN APPRAISAL. IT WILL BE TOTALLY USELESS.

[Noel Cookman]

Thanks for being gracious. 😀

[Noel Cookman]

Apologies for late reply. I am organizing myself so I can keep up with communication. Thanks for your patience.

Highlights from my CLE course to attorneys on Valuation and Appraisals in Divorce.

1. Best way. Have the client who is the potential borrower (for a mortgage refi and possible buyout) apply with a Divorce-Lending pro. This is standard for us and we’re used to it. Since the appraisal ordered by the lender is the only appraisal that can be considered by the lender, BAM – you have what you need. The lender typically gives a copy of the appraisal (digital now so it’s graphically an original) to their applicant. Watch out for expirations as appraisals have a shelf-life (4-6 months) with possible extensions. Out Divorce-Lending pros get a feel for the timing of the divorce (stage of pendency) and, in perfect situation, they want to get the appraisal ordered early enough for it to be useful in negotiations and late enough so as not to expire before a closing. Sometimes, that’s impossible (several reasons….for another discussion, I’m sure) but, more often than not, the timing of the divorce can be accommodated while providing relevant, usable information (like the appraisal).

– one other advantage, such an appraisal can be transferred to another lender without the final lender, necessarily having to order “their own.” None of the following suggested solutions has that advantage. That is, appraisal ordered by homeowners, clients, attorneys, courts, mediators, etc. cannot be so transferred to a lender.

2. Next best. Order through an Appraisal Management Company recommended by the likely lender. And, ask the managing company to perform the appraisal as it would normally be done if it were ordered by a lender. Drive the point home by stating, a lender will be viewing and analyzing the appraisal. (Your preferred Divorce-Lending pro should perform that task for you).

3. Same as #2 but order straight from an appraiser (possibly one suggested by an Appraisal Management Company). Give appraiser the same instructions – in writing so that both parties/attorneys and you (the mediator) can see the instructions. You’re aiming – not only for fairness but – for universal lender standards…the “as if” thing.

4. When in mediation and entertaining an appraisal already performed (but not by a lender or one that has expired – ask the lender when it expires as that is a lending standard NOT an appraisal company standard), use one of my “Mediation Magic” phrases in the MSA:

Calculation of “equity” or a party’s interest in the property is subject to lender’s review of appraisal which the lender obtains pursuant to federal law and standard mortgage guidelines.

I assume that some instruction (re: home valuation) to the parties and attorneys would need to precede such an insertion in the MSA. I can provide notes from my course. The single, most powerful phrase that should settle the matter is: Pursuant to federal law, the only appraisal which a lender may consider (i.e. process, order, obtain, underwrite, evaluate or even VIEW) is the appraisal which it orders through a very prescribed manner, again pursuant to the same federal law. This provision has been standard since May 1, 2009 and was included in the subsequent Dodd-Frank Wall Street Reform Act.

The lender may not even SEE the appraisal which is ordered and obtained by anyone else – not even if it’s ordered by the Chief Justice of the United States Supreme Court.

I hope this helps. Do not hesitate to reach out to me with questions or comments. [email protected]; offices 972-724-2881; attorney/mediator HOTLINE 817-454-4555.

Again, apologies for the lateness of the reply.