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Determining fair market value for the property division process

When negotiating a divorce settlement, spouses typically have certain items they are willing to fight for, even if it means going to court. The state's requirement for equitable distribution of the property means the outcome must be fair, but it does not have to be equal. Even so, understanding the actual value of personal property may make a major difference in what fairness entails.

Dividing items based on emotional value rather than fair market value can lead to a very unfair settlement. Hiring an appraiser to place a dollar amount on valuable property can make negotiations more successful, and possibly also less contentious.

Cataloging the property

Before he or she can begin, an appraiser needs to have an exact identification of an object. This includes completing a description, taking photos, listing attributes such as provenance and materials, and noting any factors that make it unique. Spouses will typically take care of the cataloging process and turn the information over to the appraiser. 

Assessing the property

The appraiser then conducts his or her own evaluation of the property. If it is, for example, an oil painting by a well-known artist, the appraiser's goal would be first to examine the artwork carefully to determine its condition. Next is to compare the painting to other pieces the artist created. While most appraisers may agree on the condition, the outcome of the comparison may be arguable. It is typically a good idea to hire a professional who is willing to defend his or her expert opinion in court if a spouse decides to dispute the value and litigate the divorce.

Performing a market comparison

Using the catalog and assessment, the appraiser then performs the market comparison. The market depends on what the item is, of course. A baseball card collection and a living room set of antique furniture would require different approaches and processes, and a separate professional may even be necessary for each type of personal property.

In the case of the furniture, the appraisal typically involves examining several different markets:

  • Private and wholesale dealers
  • Auction houses
  • Retail galleries
  • Liquidators

Here, again, is an opportunity for someone to challenge the appraiser's result. If the professional uses liquidator pricing to determine the fair market value, the dollar amount may be much lower than if he or she were to use the prices on items sold by a private dealer. Thus, a controversial appraisal may send the couple to court, where a judge who knows nothing about the property may ultimately decide how much it is worth.

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