Real estate properties, which would otherwise have sat on the market for months or years, are now being sold in a matter of days and/or weeks at top dollar and many times over asking price, with many properties subject to bidding wars among multiple potential buyers. Many people who lived in the city have moved to the suburbs or out to the country or to the shore to escape these dense and overpopulated areas during the COVID-19 pandemic. This has been the trend after the initial Pennsylvania stay-at-home orders were lifted (which at the time essentially left the real estate market at a stand still) and seems to be on a continuum, which at some point will likely burst.
How does this uptick in real estate values effect marital real estate subject to division as part of a divorce action? For the most part, marital assets are to be valued as close to the date of the time of the distribution of the asset as possible, which means, as close as possible to the time of the hearing to divide the marital estate. Often times as part of the “discovery” of a case (the fact finding and information sharing part of a case), a party will hire an appraiser to determine the fair market value of marital real estate, such as the marital residence or a couple’s house at the beach. The fair market value is the value that a willing buyer would pay a willing seller. That appraisal may be completed but the actual hearing to divide the assets may not occur for some time after that. This was certainly the case in 2020 when the courts were closed to litigants (except for emergencies, for custody matters, and for support), and most issues regarding equitable distribution of assets were put on hold and deferred and are just now winding their way through the courts.
If your appraisal is prior to 2021 and your client is not retaining the home, then an updated appraisal should be done to bring the fair market value of the property in line with the current real estate market. However, if your client is the party keeping the house, you should consider making the argument that the increase in value of the property is simply an over reaction of the market due to COVID-19 and at some point the bubble is going to burst and the property is actually overvalued and not what a willing buyer would actually purchase the property for in the regular market. An expert opinion from a qualified residential appraiser would fortify this argument.
It will be interesting to see how long this “bull” market sticks around for and how masters and judges will determine the values of marital real estate post COVID-19.
