When is home value determined? Separation Or later?

[2sleepy]

What is the name of your state (only U.S. law)? California
The couple was married for 5 years, wife filed for legal separation in Nov. 2005. Husband moved out of home at that time and made the house payment of $2200 a month until May of 2006, at which time he became unemployed due to an accident which left him disabled.

The home at the time of separation was worth approximately $580,000 (no formal appraisal done, the ex-wife offered the figure of $580,000 in her income/expense declaration.

A divorce decree issued in August 2007 at which time the house was probably worth about $500,000, this was an estimate only from online appraisal sites, i.e. Zillow- no appraisal was done.

There is still no property settlement, the wife's attorney has requested and received numerous continuances on the property settlement matter; in my opinion, and this is completely subjective- she knew with the market dropping so quickly, delays in settlement would benefit her client.

The husband's attorney is telling him that the current value of appx. $390,000 is what the judge will use to determine the equity in the home. I have heard from another attorney that the value at time of separation is used. Loan balance on the home is appx. $320,000.

Questions: 1. which date would be used to determine the value of the home?
2. in a declining real estate market, wouldn't a deferred sale make sense with
future sale value based on something higher than the current value?


Thanks in advance for any information you can provide

 

[LdiJ]

What is the name of your state (only U.S. law)? California
The couple was married for 5 years, wife filed for legal separation in Nov. 2005. Husband moved out of home at that time and made the house payment of $2200 a month until May of 2006, at which time he became unemployed due to an accident which left him disabled.

The home at the time of separation was worth approximately $580,000 (no formal appraisal done, the ex-wife offered the figure of $580,000 in her income/expense declaration.

A divorce decree issued in August 2007 at which time the house was probably worth about $500,000, this was an estimate only from online appraisal sites, i.e. Zillow- no appraisal was done.

There is still no property settlement, the wife's attorney has requested and received numerous continuances on the property settlement matter; in my opinion, and this is completely subjective- she knew with the market dropping so quickly, delays in settlement would benefit her client.

The husband's attorney is telling him that the current value of appx. $390,000 is what the judge will use to determine the equity in the home. I have heard from another attorney that the value at time of separation is used. Loan balance on the home is appx. $320,000.

Questions: 1. which date would be used to determine the value of the home?
2. in a declining real estate market, wouldn't a deferred sale make sense with
future sale value based on something higher than the current value?


Thanks in advance for any information you can provide

I think that the husband should be listening to his attorney. I sincerely doubt that the judge would use a value that doesn't exist any longer. This situation also doesn't benefit the wife. She has lost just as much equity as the husband has lost.

The parties could agree to a deferred sale (assuming that one of the parties could afford to continue paying the mortgage) but a judge would not order that against the will of one of the parties.

There is no guarantee that the property is ever going to be worth what it was once worth, and certainly not in just a few years, and its value could drop even more.

 

[VeronicaLodge]

also, zillow is wildly inaccurate.

 

[2sleepy]

thanks for the response, the wife wants to keep the house and is very able to make the payments, so a lower equity will definitely benefit her as she would be buying out the husband's equity.

 

[MFinancier]

Questions: 1. which date would be used to determine the value of the home?


With few exceptions, community assets and liabilities subject to the court's disposition ordinarily must be valued "as near as practicable to the time of trial." [Ca Fam § 2552(a)]


Sounds like her attorney played the market pretty well!

 

[LdiJ]

thanks for the response, the wife wants to keep the house and is very able to make the payments, so a lower equity will definitely benefit her as she would be buying out the husband's equity.

Again, she has lost just as much equity as he has, so how anyone can view that as a benefit to her, is beyond me.

 

[mistoffolees]

Again, she has lost just as much equity as he has, so how anyone can view that as a benefit to her, is beyond me.

It's a huge benefit. She has to pay him half of the equity, so her payment to him has dropped by $100 K. When the home value increases again (as it surely will if she holds on to it for a while), she gets to keep ALL of the appreciation.

 

[LdiJ]

It's a huge benefit. She has to pay him half of the equity, so her payment to him has dropped by $100 K. When the home value increases again (as it surely will if she holds on to it for a while), she gets to keep ALL of the appreciation.

The odds of it appreciating back to a pre-bust level will be slim unless she holds on to it for a VERY long time, and she will also be the only one paying the mortgage.

Seriously, if anyone is expecting the housing market to rebound in a couple of years, and have all those values going back to original levels, they are not being realistic.

 

[mistoffolees]

The odds of it appreciating back to a pre-bust level will be slim unless she holds on to it for a VERY long time, and she will also be the only one paying the mortgage.

Seriously, if anyone is expecting the housing market to rebound in a couple of years, and have all those values going back to original levels, they are not being realistic.

Whether or not that is true is irrelevant. She will be paying him $100 K less than she would have if the home value had been set earlier. She saves $100 K - no matter what the future holds.

And she keeps ALL of the gain between now and whenever she sells it. If setting the home value were postponed until some time in the future, she would have had to pay him half of any gains between now and whatever date the value was set. Now, she doesn't.

At the very least, she's $100 K better off than she would have been if the home value had been set in the past. That's pretty significant to most people.

 

[LdiJ]

Whether or not that is true is irrelevant. She will be paying him $100 K less than she would have if the home value had been set earlier. She saves $100 K - no matter what the future holds.

And she keeps ALL of the gain between now and whenever she sells it. If setting the home value were postponed until some time in the future, she would have had to pay him half of any gains between now and whatever date the value was set. Now, she doesn't.

At the very least, she's $100 K better off than she would have been if the home value had been set in the past. That's pretty significant to most people.

I am never going to agree with that. I also consider the previous value to have been a false value, created by a mortgage industry that was running amok.

 

[mistoffolees]

I am never going to agree with that. I also consider the previous value to have been a false value, created by a mortgage industry that was running amok.

Let's say you're right. Why does it matter?

if she had paid his equity based on appraised value at the time of separation, she'd have paid him $100 K more than she's paying him now. Whether that value was 'real' or not doesn't matter. That was the appraised value at the time and the value the court would have used to determine the equity split. The court wouldn't be interested in the theory that every home sold in the state was overpriced. They'd have said 'that's the going price whether you think it's fair or not'.

Sometimes you have to deal with things the way they ARE, not the way you wish they were.

 

[wileybunch]

Again, she has lost just as much equity as he has, so how anyone can view that as a benefit to her, is beyond me.

Loss on paper is different than an actual loss cashed out. I don't agree that the house will "never" be back to pre-depressed values or "a very long time". There are too many unknowns to state that with such certainty. Nevertheless, I can't see the judge holding to previous value, either, given the market situation. I had a similar thing done with valuing ex's 401(k) in my divorce. The divorce was final over 3 years before the financial settlement was done and the value had dropped during that time so it was the depressed value the judge felt was fair to use. (P.S. That 401k no doubt recovered just fine and more not too long after that but I do agree the action was mostly fair)

 

[wileybunch]

I am never going to agree with that. I also consider the previous value to have been a false value, created by a mortgage industry that was running amok.

The previous values were not solely created by that, but definitely contributed. The handling of those same mortgages now and short sale relief for homeowners is, on the flip side, creating lower negative values, as well.

 

[MFinancier]

Again, she has lost just as much equity as he has, so how anyone can view that as a benefit to her, is beyond me.

Well....She could have paid out 50% of pre crash equity like LOTS of other people did a few years ago. Now she has the house and he has 100K less....Which would you rather have? Either way you look at it...we all know she wanted the house no matter what! Now she just got a huge discount.

 

[MFinancier]

Loss on paper is different than an actual loss cashed out. I don't agree that the house will "never" be back to pre-depressed values or "a very long time". There are too many unknowns to state that with such certainty. Nevertheless, I can't see the judge holding to previous value, either, given the market situation. I had a similar thing done with valuing ex's 401(k) in my divorce. The divorce was final over 3 years before the financial settlement was done :rolleyes: and the value had dropped during that time so it was the depressed value the judge felt was fair to use. (P.S. That 401k no doubt recovered just fine and more not too long after that but I do agree the action was mostly fair)

How could that be?.....Were the financials bifurcated?