As home prices rapidly increase in Austin, taking into account the cost of sale of a home is becoming a bigger deal in divorce settlement agreements and judgements. As an example, in a divorce trial Spouse A wants to keep the marital home worth $500,000 but only once the cost of sale in the future is deducted. The cost of sale is usually 6% – 8% of the home’s value. In our example this would be $30,000 to $40,000 which is not peanuts. In short Souse A wants the house valued by the Court at $470,000 to $460,000.
Unfortunately, there is not a great deal of case law to assist in this. In Pelzig v. Berksdale, 931 S.W.2d 398 )(Tex.App.–Corpus Christi 1996) the appellate court discusses closing costs, but neither party was contesting their use in the matter. Otherwise the only direction is the general principles of valuing community property, specifically fair market value. Fair market value is not the only means of placing a value on community property, but is usually used for real estate. The Texas Pattern Jury Charge PJC 203.1 defines fair market value as “the amount that would be paid in cash by a willing buyer who desires to buy, but is not required to buy, to a willing seller who desires to sell, but is under no necessity of selling.” The argument to include cost of sale is essentially that the amount paid in cash by the buyer will be less the cost of sale, therefore the cost of sale must be calculated.
Practically speaking, my experience is this is a fact sensitive issue. Most Judge’s will include cost of sale if the property will in fact be sold in the near future, but are more hesitant to include it for homes that will be held long term. Regardless, it’s something family law lawyers should consider and be ready to argue.