Facts: Husband and Wife divorced after approximately three years of marriage.

At trial, each introduced an expert appraiser to testify about the current value of the marital residence. Husband’s expert testified the house was worth $535,000. Wife’s expert testified the house was worth $505,000.

The trial court averaged the two appraisals to reach a value of $517,500. The trial court then deducted 6% of the value to cover a broker’s commission and closing costs that the parties would have to pay if the home were sold. The trial court found the marital home had a mortgage balance of $301,300, which the parties did not dispute. After deducting the 6% commission and the mortgage balance, the trial court determined the equity in the house was $185,150.

Husband appealed.

On Appeal: The Court of Appeals reversed the trial court.

Tennessee trial courts are charged with placing a “reasonable value” on marital property when dividing the marital assets in a divorce case.

When the parties present conflicting evidence of valuation, the court has discretion to value the property at issue from the range of values presented by the parties and their witnesses.

After reviewing the record, the Court concluded:

The parties submitted no evidence that they were planning to sell the marital home. Therefore, Husband argues, the trial court erred by deducting 6% of its value to cover closing/transaction costs before determining the value of each party’s interest in the residence. Wife agrees. Because both parties agree that the trial court should not have reduced the value of the house by 6%, and because we are aware of no factual or legal basis for this reduction, we reverse this aspect of the court’s ruling and revise the value of the parties’ equity in the house from $185,150 to $216,200 ($517,500 – $301,300 = $216,200).

Accordingly, the trial court’s valuation was reversed.

K.O.’s Comment: This result is consistent with several cases holding it is error to deduct the cost of selling an asset unless the proof shows a party intends to dispose of the asset in the near future. See, e.g., Gaither v. Gaither. Perhaps that is why Husband and Wife agreed.

I wish Wife instead had advocated Judge Susano’s concurring opinion in Gaither where he expressed his view that “it is sometimes appropriate to take into account the cost of selling an asset even though there is no present intent to sell.” I would like to see the appellate courts explain when it is appropriate to discount the present value to reflect the cost of sale when there is no present intent to sell.

Yates v. Yates (Tennessee Court of Appeals, Middle Section, February 24, 2016).

Information provided by K.O. Herston: Knoxville, Tennessee Divorce and Family Law Attorney.