Many clients have been concerned about how the decline in the Sydney market, over the last six 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 the client 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?
- Obtaining 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 the 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 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 again 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.
Often the funds for a buy out such as this will come from a mortgage taken out by the reaming party 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 so far as to not have enough equity left to accommodate the mortgage for the “buy out”.
In cases such as this it is often worthwhile for clients to invest in the cost of paying for a professional real estate valuer to value their home whilst engaging in settlement discussions.
Drafting orders around this issue
The decline in the Sydney market has affected a number of clients and it has made clients somewhat apprehensive about whether they should sell the property or hold off on the sale until a later date.
Family Law Orders can be drafted for the immediate sale or for a postponed or delayed settlement. Family Law Orders need to provide for fall back provisions in the event of any future disagreement as to the value of the property when the parties are selling their home.
Unfortunately the future position of the Sydney real estate market is difficult to predict, but clients need to factor the current state of the market in their settlement discussions.