The Valuation of Real Estate in Divorce

Going through a divorce is daunting enough, and figuring out how to distribute real estate only adds to the stress. High net-worth individuals with millions of dollars in real estate assets can oftentimes find themselves in complex situations to divide those assets. If you don’t have the correct information and appropriate legal counsel, you can end up settling for less than you would otherwise be entitled to as to your share of the marital assets that in essence could secure your financial future for years to come.

In the state of Florida, marital assets and liabilities are part of what is known as “equitable distribution” in divorce cases. This includes real estate. Marital assets are presumed to be divided 50/50 unless there are factors that would support an even split not equitable under the facts and circumstances surrounding the case. Owning businesses, accumulating debt and other liabilities, a partner wasting marital assets, and the levels of education of both partners can all be factors that might affect the distribution of assets.

The first step in properly determining the valuation of real estate is assessing which real estate assets are considered “marital property”. If a property is marital, meaning it was purchased during the marriage, or both partners have ownership, it is subject to the 50/50 presumption as to distribution. If the property was purchased prior to the marriage or was gifted from a third party, such as with an inheritance it will likely remain a non-marital asset and would be awarded to that spouse.

If the property is marital, it’s important for the spouses to agree on how much the property is worth. Oftentimes partners disagree on how to divide the property or what the property’s true value is. In this case, settlement discussions or mediation can be used to see if the parties can agree before raising the issue with the judge at trial. That way, there is an open line of communication and a judge won’t have to become involved.

If a settlement negotiation falls through, it will be left for a judge to decide.

Florida courts value marital assets by many different appraisal methods. In divorce cases involving real estate, the “real property” method is most commonly used. This applies to any homes, apartments, businesses, land, etc. at issue. Real property is typically valued according to the current Fair Market Value (FMV). This is a method in which the value of the real estate is determined by how much the average buyer would be willing to pay for it on the open market.

However, the FMV is not the end-all-be-all rule for real estate valuation. There are four things to keep in mind when valuing real estate in a divorce court:

1. There are other factors involved outside of the current FMV when valuing real estate. Do not go into court thinking that the only thing going into a judge’s decision is the FMV. Valuing real estate is much more complex depending on the circumstance and marriage, as well as if children are involved.
2. You are also dividing debt, not just real estate. Remember that real estate is not the only asset getting divided. You are also dividing financial assets, which include debt, which would include any liens and or mortgages associated with the property.
3. The property’s potential future value can affect a court’s decision in valuing real estate. If the marital property has the potential to increase or decrease in value in the future, that can affect a court’s decision on the valuation. Things like the location, condition, cultural or historical significance, or vacancy of the property will affect its worth as well as potential rental income can be considered..
4. Consider hiring a certified real estate appraiser to provide a report as to what value may be necessary. If the spouses cannot agree often, an expert in real estate value is a necessary choice. Your lawyers will discuss the use of a real estate expert and in what capacity taking into consideration the client’s goals and the cost involved. Getting a lawyer that understands your goals and is experienced in litigating valuation issues is preferred and can help you get through this process.

To minimize the understandable stress of the divorce process, having a legal team on your side to represent your needs is important. Yaffa Family Law Group is dedicated to helping their clients have the smoothest divorce process possible. Call (561)276-3880 to book a complimentary consultation.