Property valuation in family disputes Pages

All that glitters is not gold

Property valuation in family disputes

care not to get drawn into trying to assist with matters outside our scope.

It is not unusual for the parties to seek agent appraisals to influence the settlement outcome and this may be before a valuer is engaged, or to obtain appraisals to “check” a valuation and potentially to use them as evidence to challenge it. Agents need to be aware that their appraisals may be passed on to a valuer for follow-up. It is essential that appraisals include the market evidence and other details on which the agent relied.

Valuers are regularly appointed as expert witnesses to give professional advice in the settlement process. They might be instructed directly by the parties or by one or both legal representatives. Valuation reports must contain clearly explained rationale with sufficiently detailed supporting evidence and those for Family Law matters must be prepared in accordance with the Family Court or Federal Court rules. Valuers must be impartial and adhere to practice standards and Codes of Ethics.

Valuers undertake detailed inspections, secure relevant documentary evidence and speak to other relevant people including agents. All documents, including agent appraisals are reviewed and considered carefully. As in much of life, the devil is in the detail.

Most agents will become involved in a family dispute at some point and it could be at any stage of the dispute settlement process. We have to be neutral, not pass judgment and remain professional. Jan Hancock FAPI, CPV, CEA (REIV) is a 40-year REIV Member, a Certified Practising Valuer, an Expert Witness and a member of the Valuers Chapter Committee. Jan shares some insights, cautionary tales and suggestions.

Every day agents provide potential clients with property appraisals and do so in good faith, using available property data and their knowledge of local market conditions. Vendors may volunteer that the reason for the potential sale is a family dispute – divorce, separation of long-time partners, or deceased estates. Sometimes agents are completely unaware of the existence of such circumstances.

The disposal of property arising from a family dispute always requires sensitive handling, even when relations appear amicable. When relations are not amicable, extra care and caution is required. Information provided to the agent may not be complete, an appraisal inspection may not reveal serious defects, information provided to a vendor may be used for other purposes and the dispute settlement process may take months, if not years.

Where a dispute has progressed to the point where there are Orders, a Deed of Settlement or other formal agreement, we must be advised of the property related clauses so that we can and do act in accordance with them. However, the existence of such agreements doesn’t necessarily mean that it will be plain sailing. The parties’ legal representatives should be called upon by their clients to help resolve issues in accordance with the agreement. Where they aren’t represented, it is really important to take

Agents need to be aware that their appraisals may be passed on to a valuer for follow-up. It is essential that appraisals include the market evidence and other details on which the agent relied.

Cautionary tale #1

A circa 1950s weatherboard dwelling, brick veneered before undergoing major owner-builder extensions to the ground and first floors and addition of a garage. A solid fence with horizontal slatted gates across the frontage.

The valuer’s inspection was on a very wet day. There were no plans. The property was measured, there were roof and wall leaks to the garage/living space, plus some first floor movement and an associated water leak. Insurers had declined to pay out for previous roof repairs. The external timber deck around the pool was built – without permission – over the drainage and sewerage easement containing active assets. On top of the deck above that easement was an operative ablutions pod.

Given the issues, the valuation was qualified accordingly and the rationale clearly set out and backed up with detailed evidence, including information provided by local agents.

Three months after report submission, one of the solicitors provided an agent’s very brief market appraisal for comment. The agent’s curb side inspection had been on a sunny day, the price range applied was several hundred thousand more than the valuation. No sales in the surrounding area were cited in the appraisal.

The valuation was defended and deficiencies in the agent’s appraisal were highlighted. Rises in the market in the period since the valuation inspection were acknowledged and the valuer was happy to take instructions to update the valuation on being provided with a structural report on

the improvements. CONTINUED ON PAGE 19

Cautionary tale #2

In late 2021, a valuer was instructed by a solicitor to provide a “shadow” valuation of a property in a tourist location and was provided with four market appraisals prepared by two agents. Part of the property was subject to a telco lease and the infrastructure had been erected. Agent No.1’s first appraisal was prior to the late 2020 market surge, the second was eight months later. Both included the owner’s address and some recent sales. The agent verbally advised that there had been limited, if any, price movement rise over the second half of 2021 and mentioned the telco tower effect. Agent No.2’s first appraisal had been delivered at the same time as Agent No 1’s second appraisal, gave a lower value and briefly referred to the telco tower. Their second appraisal four months later increased value by 30 per cent based on a strong market. Neither appraisal included the owner’s address (postal or email) nor any supporting sales evidence.

Agents should ensure that evidence supporting their appraisal is provided and where there are specific issues impacting the appraisal, these should be clearly identified.

Cautionary tale #3

A valuer became a shadow expert for the wife for one of two properties on which the valuer had some time previously been jointly appointed as a single expert witness. The dwelling looked impressive. The valuation inspection was long owing to building defects. It was a downward sloping block and the dwelling has been owner built with corners having been cut in its construction. The structural report required the loose fill in the rear courtyard, on which the swimming pool and surrounding terrace were built, to be removed and replaced with engineered fill before the pool and terrace could be replaced. The sub-floor walls supporting this fill were single skin brick veneer. The only pedestrian access to the rear was via the two rear garage doors and a 70-lot subdivision was about to begin on the rear land. Some time later, one agent contacted during the valuation advised that his office had been approached to sell the property, but had declined to take on the listing because of its building history. A wise move where adequate information is not provided by the vendor.

Valuation vs appraisal

Valuations and appraisals are different beasts and each has its place. Valuers may be regarded as “conservative”, but what we really are and have to be is thorough - in our detailed inspections, the questions we ask, the people we speak to, the information we require, how we evaluate it all and our resultant reports. Family disputes can be lengthy and an appraisal, just like a valuation, has a shelf-life. Valuations are always qualified. The usual duration is three months from the date of inspection, but during the pandemic, valuations included significant valuation uncertainty statements. The parties relying on a valuation are always encouraged to review the valuation periodically.

Agents are encouraged to add disclaimers to their appraisals too. Agents should exercise professional caution when involved in family disputes. Including disclaimers and sales evidence with your appraisals, noting unusual property features that may affect value, speaking to valuers, ensuring familiarity with your professional indemnity insurance and, when in real doubt, encouraging vendors to secure formal valuations, will all help you, your clients and valuers.

We are all in this together and REIV Valuers are here to help.