Understanding Property Valuation in Canadian Divorces

What Homeowners Need to Know

Property division is a large aspect of divorce. The determination process for the value of any shared assets – especially real estate – has significant implications for the settlement process.

Why Property Valuation Matters in Divorce

The net family property rule governs how assets are divided in Canada. Each spouse’s assets and debts will be assessed which will determine what was gained during the marriage. The family home is usually the largest shared asset considered during this process, and as such it plays a key role in financial settlements.

How Property Is Valued During Divorce

Professional Appraisal – Hiring a certified appraiser provides and accurate and unbiased market value of the home. Courts will often prefer formal appraisals over estimates from say, real estate agents.

Comparative Market Analysis (CMA) – A real estate agent could provide an estimated value based on recent home sales in the general area but is not likely to be seen as precise as an appraisal.

Property Tax Assessments – While tax assessments can provide a base value, they may not reflect the home’s true market value.

Key Factors Affecting Property Value

• Market conditions – Economic factors, interest rates, and demand can influence the value of your home.
• Property Condition – Renovations, damages, or outdated features will affect the value of the home.
• Location – Desirability of the neighbourhood, school districts, and job opportunity can all reflect on the value of the home.
• Outstanding Mortgages & liabilities – The division of equity must consider any remaining debts tied into the home.

Options For Dividing the Family Home

Once the home’s value is determined, divorcing spouses will usually consider the following options:

1. One Spouse Buys Out The Other – If one party would like to keep the home, and the other does not, they may buy out the other’s share based on the appraised value, amongst other factors.
2. Selling The Home And Splitting The proceeds – If neither spouse wants to keep the home, or cannot afford to buy out the other, selling and dividing the proceeds is common.
3. Deferred Sale – When children are involved, there can be situations where the court may let one spouse remain in the home temporarily, with a sale planned in the future.

Tax Considerations and Legal Implications

• Principal Residence Exemption – If the home qualifies as a principal residence, capital gains tax may not apply when selling it.
• Legal Agreements – A separation agreement will likely clearly outline any property division, so as to prevent future disputes.

Finding Clarity in Property Division

Property valuation plays a critical role in making sure a divorce is fair to both sides. The family home is an especially important player in this process. Understanding your options can help homeowners to navigate this complex issue with confidence.

Get Legal Guidance for Property Division During Your Divorce

INB Family Law LLP has a team of dedicated professionals ready to walk you through whatever stage of the divorce process you may be in, or other family law matters entirely. Book a consultation today.