A common effort made to save money in equitable distribution cases could actually end up costing the divorcing parties a lot of money. In most equitable distribution cases, which is the division of marital assets and debts, the most common item of property dealt with is that of real estate. Almost every case involves at least one piece of “real” property, typically being the home that was lived in by the parties prior to their separation. Some cases involve additional items of real property, such as vacation homes or rental properties. A case recently decided by the North Carolina Court of Appeals makes clear one issue regarding real property that is most likely already known by attorneys and judges, but may be overlooked due to the divorcing parties want to save money at the trial for their equitable distribution case. What is this pressing issue to consider? It involves the judge’s determination in the value of real property.
One of the first big steps in an equitable distribution case requires both parties to file equitable distribution affidavits. These affidavits allow each party to set forth their argument for each of the items of property to be divided by the court, and what the party contends the value of each item to be. Early on in the process, you and your attorney may agree to estimate the value of your house as an initial contention of value. Often parties have access to a real estate agent or broker who may be able to offer their opinion as to the fair market value of the house. Generally, real estate agents won’t charge you for their opinion of the fair market value. They utilize “comps” that take into consideration what houses like yours near you are currently selling for.
There is more than one reason attorneys and their clients may consider using a realtor. Not only because the opinion is free, but because if you were to sell your house, there is a good chance you would use these comps as recommended by your realtor in deciding the price at which to list and ultimately sell your home. This cheaper and quicker avenue for determining the value may not be a bad idea if you are going to be settling your case with the other party. If the realtor is someone you both trust to do an accurate job, then both parties are more likely to feel they are getting a fair and educated opinion and can agree to use this value in settling their entire property case. However, if you are not able to settle and the case has to go to court, this value by the realtor is not good enough for the judge.
If your equitable distribution case does make it to a trial, then the court is first tasked with identifying the items of marital property and then making a determinate about the fair market value of the marital property at the date of the divorcing parties’ separation. The fair market value of a home is the value of the home minus any encumbrances. Encumbrances are typically the mortgage and/or home equity line on the property. While the realtor may be able to make a recommendation to potential sellers of a home as to what they could sell the house for, this is usually based on comparing the home’s size, location, and amenities to other homes in the same area. While the court sees this basis of assessment as valuable, it is different from what is needed to satisfy a judge as a true in-depth look at the value of your home. To accomplish what the court requires you must have a full appraisal done of the real property, which is going to cost money. Generally, equitable distribution cases can be expensive, and so many times the parties look for any way they can cut costs.
If a realtor is good enough to value your home for its sale, then it seems like they should be able to offer this value for the court’s purpose, right? However, it’s been made clear by the Court of Appeals that this is not the way to cut corners in your case as it may cost you in the long run. One way to potentially save money is for the parties to agree to share in the cost of an appraisal by choosing a neutral third-party to complete the appraisal. Though, all too often because of mistrust between the parties, each party may choose to pay for and obtain their own appraisal and offer competing appraisals at trial. The other additional cost you should consider is that if you want the appraisal to be guaranteed to be admitted as evidence, there is a chance you may have to have the appraiser present in court to testify about their appraisal report and value. Most appraisers charge a separate fee for this.
So is it worth it to try to avoid the cost of hiring someone to do the appraisal and possibly testify in court? While this is something you want to discuss with your attorney, the short answer is, no. If there is not sufficient evidence to support the judge’s finding as to the fair market value of the residence on the date of separation, the case can be appealed by either party. If the appeal is granted, the case is then sent back to the trial court judge to hear further evidence as to the value and to make sufficient findings to support the judge’s valuation of the residence. The appeals process is expensive and time-consuming. Additionally, once the case is appealed, any ruling by the court can be stayed while the appeal is pending, meaning that you could continue to be left without a resolution in your case even longer.
There are some areas in your case you may decide are not worth pursuing due to time, cost, and what is at risk. When it comes to equitable distribution, there is usually too much at stake to risk either the judge not being able to make a decision, or the judge’s decision being appealed for not receiving sufficient evidence of your real property’s value. Don’t let your desire to save a little money now, cost you a lot in the end.