16 Apr How does the decline in the Sydney real estate market affect my property settlement?
Many clients have been concerned about how the decline in the Sydney market, over the last 6 -12 months , could affect their family law property settlement. There has been significant fluctuation in the market in this period and as much as 35% has been shaved off the expected value of some properties.
The impact of this is often felt by those involved in family law property settlements, as a party is sometimes left with no choice but to sell their property promptly in a cooling market.
Clients need to exercise caution when providing instructions as to the value of their real estate when seeking to negotiate a property settlement with their former spouse. Clients need to make offers based on the best estimate as to the value of the property.
Estimating the property’s value?
Estimating the property’s value?
Knowing the value of your real estate is important as it may affect the decisions you make regarding the other assets in your settlement. An indication of the property value can be obtained through one or more of the below methods:
- Obtaining two or three written market appraisals from local real estate agents. The agents will often perform this task for free in an attempt to win your listing.
- Perform their own research by researching real estate websites, such as realestate.com.au or domain.com.au. Both websites are excellent resources and contain information for current, selling prices, and a history of sold prices. Although this won’t provide an accurate value of your property, it will indicate the local market trends.
- Engage a Professional Real Estate Valuer. Valuers provide the most accurate valuation of the market value of the property. If both parties cannot agree on the value of a property the court can also appoint a valuer. A professional valuer will come at a cost. The costs vary dependent upon the individual valuer and the work involved and the costs usually shared by both parties.
- btaining two or three written market appraisals from a local real estate agents. The agents will often perform this task a for free in an attempt to win your listing.
- Perform their own research by researching real estate websites, such as http://www.realestate.com.au or http://www,domain.com.au. Both websites are excellent resources and contain information for current, selling prices, and a history of sold prices. Although this won’t provide an accurate value of your property, it will indicate the local market trends.
- Engage a Professional Real Estate Valuer. Valuers provide will provide the most accurate valuation of the market value of the property. If both parties cannot agree on the value of a property the court can also appoint a valuer. A professional valuer will come at a cost. The costs vary dependent upon the individual valuer and the work involved and the costs shared by both parties.
How can the drop in price impact property settlements?
If both parties agree to sell their property and divide the proceeds on a percentage basis, then the effect of the decline in property price will be simply shared. Both parties will take a hit on the sale price but will have the benefit of buying in a cooler property market.
Where one party seeks to remain in the property and a lump sum is to be paid to the other party, this is often referred to as being “bought out” of the property. It is important to have accurate and current property values in place in this scenario.
If the “buy out” figure is based on an old property value it could now represent a larger percentage of the value of the property and unfairly disadvantage one party.
Often the funds for a buyout such as this will come from a mortgage taken out by the remaining party secured over the subject property. The bank will establish a current value of the property before approving a mortgage. Serious issues can arise when the property value has dropped during negotiations so that on settlement there is insufficient equity to satisfy the mortgage for the “buy out”.
In cases such as this it is often worthwhile for clients to invest in the cost of a professional real estate valuer to update the value their home whilst engaging in the settlement discussions or court proceedings.
Drafting orders around this issue
The decline in the Sydney market has affected many divorcing clients. In some cases, people are apprehensive about whether they should sell a property or hold off on the sale until a later date.
However, with carefully drafted Family Law Orders, provision can be made for a postponed or delayed sale, rather than immediate sale of the property. Consideration needs to be given to fall back provisions in the orders in the event of any future disagreement as to the value of the property when the home is eventually sold.
The real estate market is always difficulty to predict. The fluctuation in prices can have a significant effect or a Family Law property decision, especially where the family home is often the single most valuable asset of the marriage. Careful consideration must be given to the impact of the fluctuations in values of properties throughout the Family Law process to ensure that a party is not unfairly disadvantaged as a result