Hi, I’m Chris Walton, author of this guide and CEO of Eton Venture Services.
I’ve spent much of my career working as a corporate transactional lawyer at Gunderson Dettmer, becoming an expert in tax law & venture financing. Since starting Eton, I’ve completed thousands of business valuations for companies of all sizes.
Read my full bio here.
Divorce is a nightmare of a process, even when it’s the right path to take.
Not only are you dealing with raw emotions, and potentially the custody of your children, you’re also working out who gets what assets and how much it’s all worth.
Divorce appraisals are part of that and can feel like a logistical nightmare.
To help you make sense of it, we’re answering all your divorce appraisal questions (please feel free to skip to the part you’d like to read first):
In a divorce, all assets acquired during the marriage must be identified, valued, and divided. Yes, that includes your or your spouse’s business.
Valuation ensures the division is based on the true worth of the business rather than what you think it’s worth or what you want it to be worth.
These appraisals need to account not just for the current value of the business but also for its earning potential, liabilities, and any intangible assets like goodwill.
This process often requires a forensic accountant or a business appraiser with specific expertise in valuing businesses for divorce proceedings.
We understand how overwhelming this process can be and we’re here to help you at every step of the way. Since 2010, our team has delivered more than 3,000 independent appraisals so you can trust that you are in good hands.
If you need your business appraised as part of your divorce, please get in touch with us here.
A divorce appraisal is a professional evaluation of the fair market value of property, typically real estate. The main purpose is to ensure both parties involved in a divorce receive an equal share of assets.
A divorce appraisal and a regular home appraisal both aim to determine the value of a property. But the purpose, scope and sometimes the methodologies applied are different.
Purpose: Divorce appraisals are tailored to meet the specific needs of a marital dissolution. Regular home appraisals are used for buying, selling, or refinancing a property.
Scope: Divorce appraisals often require a more detailed analysis to address issues of joint ownership and the division of assets, considering factors like the need for one party to refinance a mortgage or the impact of asset division on each party’s financial future.
Methodologies: In a divorce appraisal, the appraiser factors in details such as potential buyouts or one party’s continued occupancy, unlike a typical home appraisal. This is because the property value may depreciate over time. This plays a huge factor in a divorce proceeding.
Also, a divorce appraisal includes the valuation of different types of assets – not just your home. Below is a complete list:
Here’s a detailed look at the property types:
Real Estate
Businesses
Personal Property
Financial Assets
Other Assets
The appraised value, i.e. the value of your assets, provides a factual basis for negotiations and settlements in the divorce process.
It influences how assets are divided, impacting decisions on who retains certain properties, how much one party pays the other for buyouts, and the basis for any financial settlements.
Courts may also rely on these values to make equitable division decisions when parties cannot agree.
Here’s an in-depth look at how the appraised value is used, with examples:
Example 1: Real Estate
Let’s say a divorcing couple own a marital home and a vacation property. To divide these assets equitably, both properties will undergo appraisal.
Suppose the marital home is appraised at $500,000 and the vacation property at $300,000.
If one party wants to keep the marital home, they may need to compensate the other party’s share by providing assets worth half the difference in value. These assets could include cash, investments, or a portion of retirement accounts.
Example 2: Business Ownership
Let’s say a business divorce appraisal valued one spouse’s business at $1 million, and that both parties are entitled to a share.
This appraised value informs how much one spouse must pay the other to keep full ownership, either as a structured settlement over time or an upfront lump sum.
Example 3: Keeping the Family Home
If one spouse wants to keep the family home but needs to buy out the other’s share, the appraised value determines the buyout amount.
For a home appraised at $400,000 with an outstanding mortgage of $200,000, if one spouse wants to keep the home, they may need to pay the other spouse $100,000 (half of the $200,000 equity) and refinance the mortgage solely in their name.
Example 4: Complex Asset Division
A couple might have diverse assets including real estate, stocks, and valuable art. Appraisals provide a baseline for negotiations, ensuring that each party receives a fair share of the total asset pool.
Let’s say art collected during the marriage is appraised at $100,000, stocks at $200,000, and their home at $600,000, they have a total of $900,000 in assets.
Dividing this equitably might involve one party keeping the art and stocks while the other keeps the home, with adjustments made for equal distribution.
Example 5: Court Decisions
In cases where couples cannot agree on asset division, courts rely on appraised values to make fair decisions.
For example, if a couple disputes the value of a shared investment property, the court will consider its appraised value when ordering its sale or division, ensuring proceeds are split according to each party’s legal entitlement.
Example 6: Tax Considerations
Understanding the appraised value of assets is crucial for tax planning post-divorce.
For instance, if one party keeps the family home with significant appreciated value, they need to be aware of potential capital gains tax implications should they decide to sell later.
Compile all relevant documents related to the property. This includes deeds, titles, recent mortgage statements, property tax bills, and any home improvement records. For businesses, gather financial statements, tax returns, and operational documents.
Be familiar with the specifics of your property, such as:
Just like preparing for a sale, make sure the property you’re having appraised looks its best. This might involve minor repairs, landscaping, and decluttering to present the property in a positive light.
If it’s a piece of jewelry, you’d do something similar. But of course, when it comes to your business, depending on what it is, most of the value will be determined by documents.
Document any renovations or improvements made to the asset during the marriage, as these can significantly affect its appraisal value.
Select an appraiser with experience in divorce appraisals, ensuring they understand the nuances and legal aspects of this type of valuation. We’ll go into exactly how to make your choice in question 7.
The cost of a divorce appraisal is usually split between the parties, but the arrangement can vary based on agreements or court orders.
Costs can range widely, from a few hundred dollars for simple real estate appraisals to several thousand for complex business appraisals.
At Eton, we specialize in conducting valuations for businesses owned by you or your spouse.
The main goal is to ensure that the court (and the individuals) understand and agree upon the value of the entire marital estate. Only then, this value can be divided through negotiations between the spouses or some other division method decided by the court.
This kind of business valuation is different from real estate appraisals, which we do not offer.
At Eton, fees range from $5-$10k per business valuation. Note that these fee estimates are for reports only. On occasion, business valuation experts testify in court or are deposed by the other party, and those fees are separate.
Choose your divorce appraiser based on their:
Anyone you hire for this service should hold a valid appraisal license and have professional designations from recognized appraisal organizations.These licenses include:
Choosing a single, mutually trusted appraiser simplifies the process, reduces expenses, and can help facilitate a more amicable asset division.
The key is selecting an appraiser who is perceived as neutral and impartial by both parties.
You may want separate appraisers if there’s already contention between you and your spouse or if there’s significant disparity in the perceived value of complex assets, such as businesses or unique real estate properties.
Having separate appraisers allows each party to feel more confident and represented in the valuation process. Yet, it’s important to consider that this can lead to discrepancies between appraisal values, potentially complicating negotiations and increasing costs.
If there is disagreement on the appraisal value, parties can seek mediation, request a second appraisal, or, ultimately, have a court decide based on the evidence presented.
In some cases, parties might opt for arbitration, where a neutral arbitrator makes a binding decision on the disputed value. Arbitration can be faster and less costly than court proceedings, but it requires both parties to agree to abide by the arbitrator’s decision.
The goal is to reach an equitable solution that reflects the fair market value of the assets involved.
If you’d like to learn more about valuations during a divorce, we recommend you check out these resources:
If you’re looking for a professional to guide you through the divorce appraisal process, we’d be happy to help. Please get in touch with us and we’ll get back to you soon.
Schedule a free consultation meeting to discuss your valuation needs.
Chris co-founded Eton Venture Services in 2010 to provide mission-critical valuations to venture-based companies. He works closely with each client’s leadership team, board of directors, internal / external counsel, and independent auditor to develop detailed financial models and create accurate, audit-proof valuations.
