How the House Is Valued and Divided in a Georgia Divorce

For many couples the house is the largest thing they own, and in a Georgia divorce it goes through three questions: whose is it, what is it worth, and who gets what. This post walks through how Georgia courts approach each of them, based on the decisions of the Supreme Court of Georgia. It is written by an appraiser, not a lawyer. Your attorney is the one to apply it to your case.

If your question is what an appraisal for a divorce costs, that is covered in what drives the cost of a divorce appraisal.

Key Takeaways

• Two steps. Property is first classified as marital or separate. Only then is the marital property divided.
• Fair, not necessarily equal. The Supreme Court of Georgia has said an equitable division is not necessarily an equal division, but a fair one.
• Separation is not the cutoff. Assets acquired up to the final divorce decree can be marital. The Supreme Court of Georgia rejected the date of separation as that cutoff.
• A house owned before the marriage can be partly marital. When marital money paid down the debt on it, part of the equity can be divided under the source of funds rule.
• Value is a question of evidence. In the Supreme Court decisions discussed here, the court worked from values as of the trial or the divorce, and the division itself is for the judge or jury.
• A transfer between spouses is generally not a sale for federal tax. The spouse who keeps the house also keeps its tax basis.

Step One: Is the House Marital or Separate?

The Supreme Court of Georgia describes property acquired as a direct result of the labor and investments of the parties during the marriage as marital. Property one spouse brought into the marriage starts out as that spouse's separate property. So is property one spouse received during the marriage by gift, inheritance, bequest, or devise from someone other than the other spouse.

Those labels can change with what the couple does. In one case, a husband inherited property but had it deeded to himself and his wife together, and the Supreme Court upheld a finding that it had become marital, treating the joint deed as evidence that he had turned his separate property into a marital asset. Whether a particular asset is marital or separate can be a question of fact for the judge or jury.

The date of separation does not end the marriage's acquisitions. In Friedman v. Friedman, the Supreme Court considered using the date of separation as the last day an asset could become marital and rejected it, because the date is uncertain and either spouse could manipulate it. The cutoff is the date of the final divorce decree, and the Court reaffirmed that in 2016.

A House One Spouse Owned Before the Marriage

This is where appraisals do the most work. Georgia uses what the Supreme Court calls the source of funds rule. A spouse who put separate money into the house is entitled to an interest in the ratio of that separate investment to the total separate and marital investment. The rest is marital and is divided.

Two related rules come from the same line of cases:

• Market appreciation on separate property stays separate. If separate property rises in value during the marriage solely because of market forces, that increase is not marital. If it rises because of either spouse's efforts, the increase is marital. Which one happened is a question of fact.
• Paying down the debt with marital money creates a marital share. In Hubby v. Hubby, the husband made the down payment with his own money, but the payments on the debt came from marital funds. The Court held that the resulting share of the increase in net equity was marital and subject to division, and that the house did not have to be sold for that gain to be divided.

Applying the rule takes numbers. In Horsley v. Horsley, the Court reversed because the trial court never determined the home's fair market value at the beginning and at the end of the marriage. A premarital home can therefore need two values: one as of the date of the marriage, and one current. The first is a retrospective appraisal, which reconstructs the market as it stood on that earlier date. In Maddox v. Maddox, where no one had valued a property at the date marital money first went into it, the Court accepted a figure calculated from the evidence by spreading the appreciation evenly across the years of ownership. A retrospective appraisal supported by the sales of that time is another way to put that number in evidence.

Step Two: What Is It Worth, and as of When?

In the Supreme Court decisions discussed above, the court worked from figures as of the end of the case: the net equity "at the time of the divorce" in Hubby, the "present fair market value" in Horsley, and the value "at the time of trial" in Maddox. What a home is worth is proved with evidence, and in Georgia that evidence does not have to come from an appraiser. Under O.C.G.A. 24-7-701(b), a witness does not need to be an expert to testify to value if he or she has had an opportunity to form a reasoned opinion. A spouse can testify to what the house is worth.

Which date governs your valuation is a question for your attorney. What matters for the appraisal is that the date is settled before I begin, because it decides which sales are evidence and which are irrelevant. A past date is routine work. Changing the date after the report is written is a new assignment.

The number that gets divided is usually not the value alone. It is the equity: the value minus what is owed on any debt secured by the house. An appraisal supplies the value. The payoff balance comes from the payoff statement.

Step Three: How the House Is Divided

The Supreme Court of Georgia has said the division of marital property is committed to the discretion of the trier of fact, whose discretion is broad and who should consider all of the relevant circumstances. In Georgia that can be a jury: O.C.G.A. 19-5-13 directs the court to carry a jury's verdict dividing property into effect.

The house itself can be awarded to one spouse even if it is titled in the other's name. The Supreme Court approved that kind of award as equitable division in Stokes v. Stokes in 1980. In practice the common outcomes are:

• One spouse keeps the house and the other receives other assets, or a payment, to account for the equity.
• The house is sold and the proceeds are divided.
• A settlement sets its own terms, which the parties negotiate with their attorneys.

A Tax Point to Raise With Your CPA

Under 26 U.S.C. 1041, no gain or loss is recognized when property is transferred to a spouse, or to a former spouse incident to the divorce, and the spouse receiving it takes over the transferring spouse's tax basis. In plain terms, the spouse who keeps the house also keeps its tax history. Two houses with the same appraised value can carry very different built-in gains, which is worth knowing before you trade one asset for another. Your CPA can tell you what that means for your numbers.

Where an Appraisal Fits

An appraisal is evidence of value, and a neutral one can take the value off the table as something to fight about. It will not decide what is marital or how the equity is split. Those are legal questions for your attorneys and, if it comes to that, the court.

My divorce and equitable distribution page explains how I handle these assignments, including when one appraiser is enough and when each side hires its own.

Questions to Ask Whoever You Hire

In a divorce the report is read by someone who would like it to be wrong. Two things decide whether it survives that reading: what the report is, and who built it.

What it is comes down to whether the reasoning is on the page. Some appraisals are a form with boxes checked and a conclusion at the bottom. What I deliver is a narrative report that shows its reasoning, sale by sale and adjustment by adjustment, so whoever reads it next can follow how the number was reached rather than take it on faith.

Who built it is harder to see from a quote, so ask. Ask whether the appraiser has done your specific type of assignment and how many. Ask whether they have been deposed or testified. Ask whether they will personally perform the inspection. Ask what the effective date of value will be and why. And ask whether the fee depends in any way on the outcome. That answer should be an immediate no.

Ask me the same questions, then check the answers. I have been in the field since 1997 and licensed as an appraiser since 2000. I spent years in the review chair deciding whether other appraisers' work was defensible, and served as Chief Review Appraiser at Act Appraisal and at eValuation ZONE, both national appraisal management companies, where value disputes and the complex, high-risk, and unusual files were mine to settle. I built and ran a wholesale appraisal desk at 1,700 orders a year, ran appraisal management operations, and performed FHA field audits. Georgia classifications are searchable through the Georgia Real Estate Appraisers Board, and every certified appraiser in the country appears on the ASC National Registry, which is free and public. Look me up, and look up anyone else you are considering.

One more thing you can only judge in person. I talk with the owner at the property rather than photographing the house and leaving. You should come away from that visit knowing what I was looking at and why it moves the number.

FAQs: Valuing the House in a Georgia Divorce

Is the house automatically split 50/50 in Georgia?

No. The Supreme Court of Georgia has said an equitable division is not necessarily an equal division, but a fair one, and the judge or jury has broad discretion over it.

I owned the house before we married. Is it still mine?

Your separate investment stays yours, and appreciation from market forces alone on separate property stays separate. But if marital money paid down the debt, or either spouse's efforts added value, part of the equity can be marital under the source of funds rule. Your attorney will need values for the house at the start of the marriage and now.

Is the house valued as of the date we separated?

Not as a rule of Georgia law. The Supreme Court rejected the separation date as the cutoff for what counts as marital, and in the decisions discussed in this post it worked from values as of the trial or the divorce. Ask your attorney which date applies in your case, and settle it before the appraisal begins.

Can my spouse just testify to what the house is worth?

Yes. Under O.C.G.A. 24-7-701(b), a witness who has had an opportunity to form a reasoned opinion can testify to value without being an expert. How much weight that gets is up to the judge or jury.

What should I ask an appraiser before hiring one for a divorce?

Ask whether they have done divorce assignments and how many. Ask whether they have been deposed or testified. Ask whether they will personally perform the inspection. Ask what the effective date of value will be and why. And ask whether the fee depends in any way on the outcome, which should draw an immediate no.

About the Author

Scott D.W. Wiley is a Georgia Certified Residential Real Property Appraiser, CR432840, and is FHA approved. He was formerly licensed in six other states: Illinois, Kentucky, Michigan, Minnesota, Missouri, and Ohio, all now inactive. He has been in the business since 1997 and licensed as an appraiser since 2000, coming up through the Midwest as a field appraiser and then as a review appraiser, and serving as Chief Review Appraiser at Act Appraisal and at eValuation ZONE, both national appraisal management companies, where he was the final technical authority on disputed values and on complex, high-risk, and unusual property. He also built and ran a wholesale appraisal desk at 1,700 orders a year, ran appraisal management operations, performed FHA field audits, and works as an expert in litigation. Today he runs Go2Appraiser, serving metro Atlanta and Northwest Georgia with estate, divorce, bankruptcy, tax appeal, pre-listing, land, and investment property valuations. He inspects every property personally and writes his reports the way he spent his career demanding other appraisers write theirs.