It’s not unusual for two valuation professionals to have different opinions about the value of the same assets or interests. If the parties can’t agree on a value and the difference is significant, a third valuation analyst may be brought in to prepare yet another valuation report and perhaps reconcile the difference.
All of this expert input can be expensive and time-consuming for divorcing spouses or business partners in dispute. To speed things up and save costs, in recent years it has become more common for parties to agree to hire one neutral expert to value the marital assets or business interest.
How It Works
Using one neutral appraiser is especially popular in the “collaborative divorce” arena, an alternative dispute resolution process in which the parties agree to settle their case out of court. Each party typically has his or her own attorney, but mediators, attorneys and shared experts are used to resolve and reduce conflict.
The “shared expert” concept can also be useful in the case of business disputes, where a jointly hired neutral valuation analyst renders an opinion that the parties agree to accept.
To make sure the process works, both parties must agree to specific ground rules, which should also be detailed in the valuation analyst’s letter of engagement. For example:
Selection: Both parties must be involved in the selection of the valuation professional. To promote success, both parties must feel confident about the individual they choose—not just the person’s credentials, but also his or her character, communication style and ability to be neutral.
While there’s the possibility that one party will not be happy with the valuation opinion rendered, joint selection reduces accusations of bias.
Disclosure: The valuation analyst and both parties must have full access to documents, data and information related to the case—tax filings, interview notes and other input essential to the valuation.
Communication: All parties must be copied on all correspondence to ensure that no one is having privileged conversations with the appraiser. Consider requiring that all communication be in writing.
Scope of work: What exactly is the neutral expert expected to produce? For example, do the parties want a formal valuation report or just a calculation of value?
Process: How will the expert gather information? What is the timeline for the work?
Payment: Both parties should contribute to the valuation professional’s costs. Payment in advance might be suggested, which eliminates the possibility that one party might be dissatisfied with the outcome and balk at paying his or her share.
The goal of hiring one expert is to streamline the valuation. It may also facilitate a potentially less contentious outcome because the parties agree to discuss their differences out of court.
However, hiring one analyst doesn’t guarantee that all will go smoothly, and if that is the case, the door is still open to start over, hire different experts and take the case to court. While hiring one neutral expert won’t work in all situations, it’s a viable and less expensive option for many disputes.
Interested in a neutral appraiser? Fill out the form below to speak with our valuation team.
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Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal or other competent advisors. Before making any decision or taking any action, you should consult a professional advisor who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability and fitness for a particular purpose.