Family Law Property Valuations Explained
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1. How do you determine the value of a property?
- The value of the property is not:
- The price you purchased the home for or the price you paid to build the property; or
- A valuation for bank purpose for a loan; or
- What the house next door sold for.
- The first step in determining the value of a property is to exchange guesses as to the value through your respective solicitors in an attempt to agree on a value of the property.
- If you and your former partner are unable to agree on the value of your property by lawyers swapping your proposed figure, the next step would be for you to each obtain a market appraisal from a real estate agent. Market appraisals are quick and cheap (sometimes even free) to obtain. The real estate agent estimates the “value” of the property by reference to the sale price of similar homes in your area.
- In the event that you and your partner obtain market appraisals that are vastly different and you are unable to reach a compromise figure, the next step is to jointly appoint a single expert to prepare a formal valuation report for the property.
2. What is a single expert?
A single expert is a certified practising valuer registered by the Australian Property Institute. A single expert is jointly appointed by the parties.
A benefit of having a jointly appointed single expert valuer is that the cost of their report is typically shared between the parties. Most importantly, the value provided by the single expert is accepted by the Court as evidence without either party having to apply separately to the Court to accept the evidence.
3. How is a single expert appointed?
There are a number of ways to jointly appoint a single expert:
- Usually, one party can nominate the names of three valuers, from which the other party can select one.
- The parties can apply for an appointment of a valuer through an independent institution, such as asking the President of the Australian Property Institute to select someone.
- The parties can request that the Court appoints a valuer from a list each party provides to the Court.
Once the identity of the single expert is agreed upon, the next step is reaching an agreement as to what instructions to give the single expert. There are also a number of specific requirements outlined in the Family Law Act which are required to be complied with.
These instructions and requirements are set out in a jointly written letter of instruction prepared and signed by both parties’ respective lawyers.
4. What is the Process of the Valuation?
- The single expert will value the property based on what is known as the “fair market value”. This is the price that a willing but not anxious buyer, acting at arm’s length, with adequate information, would be prepared to pay to a willing but not anxious seller of the asset.
- There is no fixed rule as to the proper method of valuation and there are a variety of valuation methodologies used to determine the fair market value, such as completing a direct comparison of recent sales evidence or conducting a yield analysis. The expert gets to choose and must justify why the choice was made.
- Upon determining the valuer of the property, the single expert will then prepare a report containing photos and descriptions of the property together with the details of their analysis. If the report is entered as evidence in the Family Court, the valuer provides an Affidavit confirming the report and that the rules have been complied with.
5. What if I’m not happy with the valuation report?
- If a party disagrees with the valuation report or wishes to clarify certain aspects of it, then they may ask “specific questions” of the single expert within 21 days of receiving the report. These questions must be in writing and provided to all parties to the proceedings.
- If, upon receipt of the single expert’s answers, issues remain unresolved, the next step is to obtain your own private report from another expert witness. If the value asserted in the second private report is 10% or more different from the value asserted by the single expert, you might contemplate making an application to the Court to lead adversarial evidence.
- In order to rely on your second report at Court, you will need to obtain the Court’s permission to do so. The Court will only grant leave to obtain evidence from another expert if it satisfied that:
- There is a substantial body of opinion contrary to any opinion given by the single expert;
- Another expert witness knows of matters, not known to the single expert, that may be necessary for determining the issue; or
- There is some other special reason for adducing evidence from another expert witness.
- If leave is granted to file your second report and the two experts disagree on the value of the property, both expert witnesses may be cross-examined at trial and the Court will then make a determination as to the value of the property or the judge may direct them to confer, not to reach a compromise but to identify why (ie. what factors) lead them to reach different conclusions as to value.
- If your second report asserts a value that is within 10% of the value asserted in the single expert’s report and you don’t wish to spend the money in making an application to the Court to include the second report as evidence, you can leave your criticisms of the single expert’s report to the hearing. At the hearing, your barrister will have a chance to cross-examine the single expert with the intent to persuade the judge that the single expert made some errors and the property should therefore have a different value to that proposed by the single expert.