Property Division: Valuing Real Property in Divorce

 Posted on April 15,2015 in Complex Property Litigation

Section 6.711(a) of the Texas Family Code mandates that prior to entering a judgment that divides the estate of the parties," the court must enter affirmative, written findings regarding the value of the community estate's assets, as well as the value of separate assets. Subsequent case law has made it clear that there cannot be a just and right division of the estate if these findings are absent.

Real estate is difficult to value, especially in a high-asset divorce. The amount on the tax roll is usually inflated, so the taxing authority can collect additional revenue. There may be other issues as well. In some cases, the "property" may be an unimproved piece of land. Moreover, especially regarding income-producing property, the sales value may be too high or too low.

The Process

Although it is not a complex divorce case, courts frequently cite Duer Wagner and Co. v. City of Sweetwater in support of the market approach. This method essentially uses the tax appraisal amount as a baseline, and then adjusts it up or down based on the recent sale of comparable properties in the area. A real estate appraiser typically performs this exercise, although a licensed realtor may suffice as well.

Once the appraiser arrives at a figure, further adjustment may be needed. For example, a house may need repairs to make it salable. And, since demand may fluctuate wildly, an appraisal that is several months old may need to be reconsidered in light of current market conditions.

The income approach discussed in Destec v. Freestone Central Appraisal District may be more appropriate in some cases. This method focuses on the revenue that a property generates, be it a rental house, an oil and gas lease, or any other similar property. This number can be misleading as well, if there was not a tenant in the property or the exploration company was not drilling during the period examined.

If neither of these methods are appropriate, courts typically use the cost method as a fallback. This approach considers the replacement cost minus any depreciation, and it is often used on unimproved land that is the subject of complex property litigation in divorce.

One of the first steps in a real estate division is to fairly asses the property's value. For a consultation with an aggressive Georgetown complex litigation attorney, contact our office. Mr. Powers has been Board Certified in Family Law since 1988.