Homestead too much equity - experiences?

[Mike7883us]

Hi

Just wondering if anyone has any real life examples of situations with too much equity in property?

As example in Missouri exemption $15k. Mortgage is $101k (from $107k purchase price). With the current market it might be around $130k to sell. Just curious if anyone has any similar situations. Was it advised Chapter 13, did the attorney negotiate or what happened!

Thanks.

[flashoflight]

I had to hire an appraiser recommended by the BK attorney, but the amount of excess equity I had according to Zillow was way higher. I think you probably have other options considering the small dollar amount for the creditors after factoring in closing costs of 8% and the trustee's cut.

[justbroke]

As flashoflight eludes, a professional appraisal is likely the course of action you should take. Since you have equity, you may want to make sure it's as much as you think before putting a guess on your forms. The Chapter 7 Trustees like non-exempt equity in homes because it forces a sale or causes the debtor "buy" the equity from the Trustee. The Trustees love the latter because they don't really need to do anything (doesn't cost them money).

I would try to get some free "automated" valuations. Bank of America has one on their site somewhere, and there are at least a couple which charge money. I don't like using any of them that ask for all your details (email, name, phone) as they'll just bother you. The Bank of America and epparisal ones that I list do not ask for any additional information in order to see the results.

See Eppraisal's site.

See Bank of America's site (https://realestatecenter.bankofamerica.com/). Click on "Home Value" and enter address.

Interestingly, eppraisal listed my example home at $647,725, while Bank of America shows my example home at $649,401. (The site eppraisal also showed a Zillow value of $610,175.) So there may be something consistent with the AVMs (automated valuation models).

I would still recommend the professional appraisal under the direction of your attorney. It's a buyer's market out there, right now.

[bigdog6464]

I would agree with what everyone else has said and that is to make sure what the property is actually worth. If there is a question as to the value once the Chapter 7 is filed, the Court will ultimately want to see an appraisal. You can have a drive by appraisal done for about $250.

Now, how much equity is too much equity? The Trustee will only liquidate an asset if there is a significant amount recovered by the estate for distribution to creditors. In your scenario, it is not just taking the value and subtracting the mortgage and Missouri exemption. You also want to subtract the cost of sale and the statutory fees allowed to the Trustee which is 25% of the first $5K, 10% of the next $45K and 5% for everything thereafter up to $1,000,000. Based on a sale price of $130K, you would first subtract the cost of sale of 7% or $9,100. This brings the total amount of funds to the bankruptcy estate to $120,900. The Trustee would take $9,295 as the allowed statutory fees bringing the amount of funds down to $111,605. Then substract your exemption of $15K and that brings the balance available down to $96,605. Then subtract your mortgage balance of $101K and there would be nothing to distribute to the other creditors of the estate.

If your valuation is accurate, in this scenario, the home would not be liquidated by the Chapter 7 trustee. However, I would strongly suggest the appraisal and seeking advice of a reputable bankruptcy attorney to make sure before you file.

This is NOT providing any legal advice. Just an opinion. Not attorney-client relationship has been made as a result of this post.

[sophieanne]

That’s a good site justbroke. Right now WA State is a seller’s market..houses are selling overnight.

[justbroke]

That’s a good site justbroke. Right now WA State is a seller’s market..houses are selling overnight.

Which AVM site?

[sophieanne]

justbroke - Bank of America.