Monday, February 2, 2009

Divorce and Valuing Property

The Modern Woman’s Divorce Guide asks a question I get fairly often, What is your property worth in Divorce?:

"It depends on the method you and/or your husband select or upon which the judge relies. Some of the more common methods I have witnessed being used in divorce proceedings include the following:
  1. Hiring a Certified Real Estate Appraiser to produce a real estate appraisal. Appraisers use a variety of methods to calculate the value of property, however they generally consider the actual value of the lot upon which the house sits, the replacement cost of the structure(s) on the lot and the sales prices of comparable homes recently sold within close proximity to the property in question. Banks use Real Estate Appraisers to determine the value of property before they extend credit to the property purchaser or owner.
  2. Hiring a Real Estate Broker who is licensed and experienced in the sale of property in the neighborhood. The property value, as provided by a Broker, may be greater or less than the value established by an Appraiser for the same property. The valuation may differ because it is common for real estate to sell above and below appraised values when the market is in a boom or slump. For example, a home in Beverly Hills located next door to Tom Cruise and Katie Holmes’s house may be appraised for $10 million, but may sell for twice that because it is located in a highly coveted neighborhood and is surrounded by celebrities. A party who wants real estate to be valued at more or less than the appraised value for purposes of divorce will often use Real Estate Brokers to calculate the price.
  3. Referring to and relying upon property tax records. City and state property tax offices calculate property taxes based upon the value of the real property and any structures located thereon. The tax man’s methods for determining appraised values are often a mystery and in some cities and states, have historically generated values far below those set by Certified Real Estate Appraisers or Brokers. Thus, this method for valuing property is rarely used.
In addition to the foregoing, couples also establish the value of their real estate for purposes of divorce arbitrarily. Some use the purchase price while others use the outstanding mortgage balance....
The last option gets used most often in the average divorce. Real estate we want to have appraised and I would want an appraiser if I had some sort of unique antiques (I have antiques on my mind right now).

The question about worth then becomes questions of evidence. Can it be admitted into evidence before the court? What evidence exists to contradict? How persuasive is our evidence and how persuasive is their evidence?

I had a landlord-tenant case two weeks ago. The landlord claimed a diminution of value to the real estate due to water damage. Landlord testified she bought and sold real estate which was intended to qualify her as an expert. On cross-examination, landlord admitted she had not bought or sold real estate in the particular area of Anderson for about ten years. The only house she had sold in that area was one that had burnt. She had no appraisals made of the home. Landlord lost that part of her case.

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