Concerned about equity in home - getting all kinds of crazy numbers

[Racking7]

Hi all: I’m new to the forum and haven’t had a chance to introduce myself but have a burning question 😀 Sorry if it’s a little long.

My husband and I will be filing Chapter 7 shortly in PA. We’ve had a consultation with two attorneys.

We own a manufactured home on piers (no foundation) on almost 4 acres (half heavily wooded). We consulted with our real estate agent and at first she suggested a listing price of $115,000 (not good). When I spoke with her and said the 3 comparables she provided did not actually compare and the condition of our home - she provided an email suggesting a listing price of $95k to $100k at the most because the only comparable with land had a foundation with full basement, a large front porch, a new well with reservoir and a small barn on clear land - all of which significantly impact price (that house sold for $142k) and she mentioned the few things our home didn’t have (Section of flooring needed to be repaired and AC section of central air no longer worked).

We also pulled estimate from Realtor.com $96.5k. Her new price and Realtor.com fine for us. Redfin said $111k. The problem is Zillow and Trulia are saying $154k. However, they’re comparing to real homes sold in our area - not manufactured on piers. It was fully appraised at $75k 4 years ago when we bought it! Oh and I used other sites mentioned in other threads and they either said they couldn’t price it or gave a crazy high number.

I’m afraid the trustee will try to use numbers from these other sites. Our mortgage balance is $49,230 and $2,000 in taxes. We’re using $50,300 in federal exemption and $2650 wildcard exemption (I believe I can use that). As long as we stay at $100k we’re good. We can go up to $105k if I can take off sales price (both attorneys said I could but 1 said 10% and other said 7% and neither said if it comes off top or what’s left over). Any higher and we’re out of luck. Both said can’t include trustee fees.

So! My questions are: is her email and Realtor.com enough? Can you take sale price into calculation and when do you take it, can you contest trustee’s estimate if he uses Zillow or Trulia and is comparing apples to oranges?

If you made it all the way through Thank you and God Bless!

[justbroke]

If you want the real value, the only way is to have a full appraisal performed where they look at the condition of the interior as well as the comps in the areas. Even two different appraisers, performing a full appraisal, may come up with different values, but they should be close.

The Trustee may accept your number that you put on the face of the petition. If not, the value could be challenged by the Trustee. Whether your Trustee would question the number is too fact and Trustee specific. I always like to get an actual appraisal because then you know the true value.

No one really trusts Zillow, Trulia, Redfin or any of the other automated valuation methods (AVM). While some banks will use an AVM for a refinance or an equity line of credit, purchase loans require a full appraisal. A full appraisal can cost $150-400 depending on the value of the home. In the end, the value is what a willing buyer will pay a willing seller. In most cases, the buyer wants a full appraisal because the bank will require a full inspection on the premises.

Many people will use Zillow or a paid AVM appraisal (initially I used one called eAppraisal for mine). If the Trustee questions the value, then you would offer a full residential appraisal as the value.

Welcome to BKForum.

[Racking7]

Thank you so much for your response. We cannot afford a full appraisal $400 in my area but 1 of the attorneys mentioned a letter of appraisal from an appraiser for $225 - $250. I can probably squeeze that from somewhere although it would be a hardship right now.

Thanks again!

[justbroke]

Your attorney will likely have you list the value that you believe on the Schedules. The Trustee will likely question the "source" of your valuation at the 341 Meeting of Creditors. If the Trustee thinks that it's worth more, then you can go and get that appraisal. I would not get the full appraisal until I know for certain that the Trustee doesn't accept your initial valuation.

You are welcome!

[Finallyover]

I’m sure every state is different, but I thought I would share with you what happened to us here in Ca. We filed for ch 7, and got 2 appraisals on our house. Once trustee discharged our case, decided to go off comps in our area and valued home quite higher than appraisal. We needed to hurry and file motion to convert to ch 13 or the trustee was going to sell our home. In the end all turned out and we discharged our 13 over a year ago. But those few weeks were quite stressful when trustee notified our atty of intent to sell home. Hope this helps, be very careful.

[Racking7]

Thank you justbroke and finallyover! I spoke with 2 of the highest rated, award winning attorneys in my area today. Both of them advised not to get an appraisal and said we’re going with full initial appraisal since manufactured homes depreciate in value and realtors over estimate price and online valuations are junk. Also there are no apples to apples comparables in my area. The closest sold for $65,000. My full appraisal was for $75,000 and we now need repairs and roof has aged close to 20 year guarantee.

Both have over 30 5 star reviews along with awards as top bankruptcy attorneys. That’s all they do (along with various forms of consumer debt type law). They were the kindest, most knowledgeable of all the attorneys I spoke with. Both said they highly doubted the trustees in our jurisdiction would challenge the figure we’re using (they’ve never had it happen in situations close to mine) and if worse comes to worse we can get an appraisal.

The one we’re going with even listed out the pricing for each item in the home that went for $142,000 that our’s doesn’t have and it came out below the full appraisal of my home. I’m going with him since I felt most comfortable with him, he was most knowledgeable and the only one who said he would get my lawsuit continued until we file. Unfortunately he requires full payment before filing. He’s willing to do all the work before payment in full (including dealing with lawsuit and handling creditors - just not filing). The other wants almost all up front and then balance over 4 months.

I realize this goes against what everyone says but I do trust him. He has over 20 years experience in our area.

[shipo]

Racking7, I don't believe it is at all unusual to demand payment in full before filing; I know I needed to do the same for my Chapter 13 filing back in 2015.

[justbroke]

I realize this goes against what everyone says but I do trust him. He has over 20 years experience in our area.

I think that you may have misunderstood me. I always use the simplest, cheapest and easiest initial valuation, whether it's Zillow, Redfin, Bank of America's AVM, or even eAppraisal. I usually look at several of those free valuations for comparison to see if they're all close to one another. That is the value that I have submitted on my petition.

If the Trustee then challenges the valuation, then we go with the full residential appraisal. It's a strategy and I wouldn't want anyone to waste any money to get an appraisal up front. For a Chapter 13, the appraisal is necessary when using a technique known as "lien stripping" but this is a Chapter 7. (For my Chapter 13, I was performing a lien strip so I needed the true value and an appraisal was necessary.)

Your attorney is doing it the normal way. For Chapter 7s list the value from a well-known source, but realize that you may need to defend the value if the Chapter 7 Trustee "believes" that the value is higher. At that point, and only at that point, I would then go with the full residential appraisal.

[Racking7]

Shipo - I agree. I was just stating that unfortunately he needs payment up front but since he’s the best I’ve talked to by far I have no problem with that. Plus he’s willing to handle putting my lawsuit off unlike the others who just said hurry up and file before the court date and willing to do all the work without being paid in full - just not filing. Sorry if it seemed like I was complaining- we’re just poor 😀

justbroke - I understood you. I think I didn’t word my answer correctly. The online appraisals are ridiculous so my attorney (as did the other top notch attorney I spoke with today) wants to go with the full appraisal from when I bought my house four years ago since mobile homes depreciate and there are now needed repairs - and he has line by line dollar figures for the apples to oranges comparables (items they have my home doesn’t). When you calculate those in and my needed repairs it brings them down to my original appraisal. I hope that makes better sense.

Thanks again - you guys are wonderful!

[justbroke]

Racking7, I don't believe it is at all unusual to demand payment in full before filing; I know I needed to do the same for my Chapter 13 filing back in 2015.

For Chapter 7s this is normal. The problem is that any fees that remained due, after filing, could be subject to discharge. At least attorneys are wary of the fact that a Chapter 7 discharges "all debt" of the debtor which they accrued prior to the filing date.

Chapter 13s are special in that you can "finance" the attorney fees into the plan.

[justbroke]

When you calculate those in and my needed repairs it brings them down to my original appraisal. I hope that makes better sense.

That makes sense to me. As long as the valuation can be "articulated" to the Trustee, which your attorney will do for you at the 341 Meeting, the Trustee will understand how it was reached.

[Racking7]

Thank you so much again justbroke! Yes, he has line by line the value of their extras and how it effects price that he’s fully prepared to explain.

thank you again. I feel much better! 😀

[flashoflight]

Racking7 I went through a similar situation with my attorney and appraiser, and they both said not to put too much stock into needed repairs. Repairs don't decrease the value of the house as much as we'd like. The appraiser was bankruptcy friendly so that tells you something. For example, patio doors that don't work can be repaired for a tiny fraction of the cost of replacement patio doors. It doesn't matter if the doors are otherwise outdated. That's why the appraiser gave me nothing for the broken patio doors. If the ch7 trustee is used to selling real estate, he knows this too and won't give you credit for a lot of the broken stuff in the house. It's going to be based upon comps in the end.

[Racking7]

Thank you flashoflight. Unfortunately there are no comparables. I live in a very rural area and the homes pulled for comparables are worth much more than mine because 1) they’re on full, useable basement foundations (more like a regular house) and mine is up on piers (Like a mobile home). In addition, they have porches, garages, large sunrooms (which significantly raise home prices). Also the repairs I’m talking about are replacing central air AC ($3200) and repairing floor ($1,500 to $2,500). Hope that makes more sense.

[flashoflight]

An appraiser is not qualified to determine that the AC needs replacement instead of repairs or determine how much it will cost to repair. Homeowner may have been tricked by a contractor into thinking AC needs replacement when repair is possible. As far as the roof, maybe it's common neighbors have 85% worn roofs while yours is completely worn past 100%. Doesn't seem like you should get much of a discount on the roof either. The appraiser will use the appearance of the floors, roof condition, and the age of the AC to justify the overall condition rather than give you a specific discount for the list of allegedly needed repairs. That's the best you can do with repair items. Every home needs repairs and looks somewhat worn. As long as condition is common with other nearby homes, you're not getting much of a reduction or even any reduction.

Total lack of substantial amenities can be subtracted vs the recent comps. But it also matters the amenities your neighbors have too even though they're not selling. Sometimes the added value of extra amenities in the recent comps aren't worth as much as you think. If your home has no garage, but every single nearby neighbor has a garage then yeah that's huge. But if a lot of nearby mobile homes don't have garages, then maybe a small haircut is the correct direction for the appraiser.

Don't be shocked if the trustee won't give up on your home.