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Valuing Real Estate in Divorce Cases

house made of paper money
Posted on September 6, 2022 by James Stensel

Washington State divorce laws provide that in every case the trial court must order a “just and equitable” distribution of the parties’ property and liabilities, whether community or separate. RCW 26.09.080. This includes real estate. Of course, before the court can decide how to divide and award property, it must first determine the value of that property.

One significant point of contention when dividing property is determining what something is actually worth. This is further exacerbated by the fact that the parties seeking to determine the value can have very different objectives. For example, the party that wants to be awarded a particular asset wants the value of that property to be as low as possible, while the party that is giving up their interest in a particular asset, wants the value of that property to be as high as possible. In an equitable division of property, there must usually be items of reciprocal and equal value awarded to each party in the overall division of their assets. If one party is awarded an asset at a high value, a similarly high value asset (or number of assets) will often need to equalize the division of all assets.

In Washington, the value of an asset is a question of fact, and the trial court’s valuation of an asset will generally be affirmed if it is based on the evidence presented. In re Marriage of Matthews, 70 Wn. App. 116, 122, 853 P.2d 462 (1993). The court is not specifically required to state the method used to determine the general value of an asset so long as the value assigned is within the evidence of the case. In re Marriage of Luckey, 73 Wn. App. 201, 868 P.2d 189 (1994). In determining whether substantial evidence exists to support a trial court’s finding on value, the record is reviewed in the light most favorable to the party in whose favor the findings were entered. DeBenedictis v. Hagen, 77 Wn. App. 284, 291, 890 P.2d 529 (1995). Substantial evidence is evidence sufficient to persuade a fair-minded person of the truth of the matter asserted (i.e., the accuracy of the value determined). In re Marriage of Katare, 175 Wn.2d 23, 35, 283 P.3d 546 (2012).

In a divorce, the trial court typically uses the “fair market value” standard when valuing presently owned property such as real estate, vehicles, personal property, etc. “Fair market value” or “FMV” is defined as follows:

“Fair market value” means neither a panic price, auction value, speculative value, nor a value fixed by depressed or inflated prices. We have defined it as the amount of money which a purchaser willing, but not obligated, to buy the property would pay an owner willing, but not obligated, to sell it, taking into consideration all uses to which the property is adapted and might be applied.

Donaldson v. Greenwood, 40 Wn.2d 238, 252, 242 P.2d 1038 (1952). Fair Market Value is only one standard used to determine an asset’s value. Ultimately, the determination of which valuation standard to use in a divorce is a discretionary decision by the trial court. Most often, the value assigned to an asset should be the amount for which a spouse could sell the asset.

To assist with determining value, parties will typically engage appraisal experts. Often parties will agree to do a joint appraisal with one expert to save on cost, with the caveat that either spouse may get a second opinion if needed following the joint appraisal.

Real estate valuation experts are typically accredited by the Appraisal Institute (www.appraisalinstitute.org) and regularly work to value properties in family law litigation actions. These experts are trained to determine value and use various methods, including” comparable sales” in the surrounding area and neighborhoods. The expert is usually experienced in giving depositions, responding to discovery, and providing testimony in court in support of their appraisal. These experts also provide critiques of the appraisals offered by competing experts in the case.

Not using a real estate valuation expert can be problematic. Unless parties agree in writing on a value, which typically eliminates the need for a formal appraisal, the following methods should be avoided as less reliable, less persuasive, and sometimes inadmissible when it comes to establishing the value of your real estate during your divorce case:

  • Using an appraisal engaged by your bank for your home purchase or refinance.
  • Using a “Comparable Market Report” from your local realtor.
  • Relying on values listed on Zillow.com, www.Redfin.com, etc.
  • Using your tax assessed value (assessed values are not admissible as evidence of fair cash market value. In re City of Medina, 69 Wn.2d 574, 418 P.2d 1020 (1966)).

Absent a sale that determines the fair market value of your real estate, parties must be mindful of the evidence that they use to establish values in their cases. Parties to a dissolution proceeding should anticipate working with their attorney to engage a skilled and experienced real estate appraiser to ensure that the value of the assets divided in their case are true and accurate, to the best of their ability.

If you need assistance with real estate valuation – or other issues arising in the course of divorce – the Family Law Practice Group at Lasher is ready to help.