People don’t always protect themselves effectively during divorce. They are so eager to finish the process as quickly as possible or to limit conflict that they make unnecessary concessions and sacrifices.
For example, instead of pushing for an appropriate and fair property division outcome, they might agree to terms that are truly imbalanced and unfavorable. Particularly when people settle outside of court, there is reason to worry about unfair terms in the property division settlement.
One of the more common mistakes that people make during property division negotiations relates to what may be their most valuable shared asset. Spouses negotiating terms for their marital homes during divorce need to be careful to properly protect themselves. What mistake can potentially cause years of financial regret?
Undervaluing the home is common
People generally believe that they know what their homes are worth. After all, they may have had to bid aggressively to acquire the property. They have a mortgage in most cases, which means that they can quickly calculate their equity based on the price they paid and how many payments they have made since the closing.
While deferring to the purchase price for the home might seem reasonable, doing so can leave one spouse at a disadvantage. If the goal is to have one spouse buy the other out of the property, agreeing to an inappropriately low value for the home means that the spouse leaving receives less equity than they deserve.
Home values change rapidly, and they have appreciated substantially in the last few years in many markets. As such, the amount paid for the home is likely not an accurate representation of what it is worth in the current market. Homeowners often choose to hire appraisers when they divorce.
Other times, they may talk to a listing agent who can help estimate the fair market value of the home. Either option is likely to produce a more realistic fair market value than simply referring to the purchase price for the property years ago.
People who know what their assets are worth are typically in a stronger position to negotiate fair property division settlements. Cooperating with the right professionals, including financial specialists, lawyers and even real estate professionals, can help people optimize the outcome of property division proceedings during a divorce.