Many New York bankruptcies involve debtors’ houses. A house’s value in bankruptcy can play a crucial role in a number of ways, notably homestead exemptions, discharging underwater junior mortgages, and even choosing between chapter 7 or 13. It’s a big deal.
But how do you know how much the house is worth? And just as important: When should you know the house’s value?
The answer to the second question should be intuitive: As soon as possible. Understandably, that might not be a satisfying response, but to specify, you should have a reasonable figure to point to before you talk to your New York bankruptcy lawyer. For that, it’s not unreasonable to use the city or county’s assessment of the property. That figure might be far off, but it’s a start. After the initial consultation, a more precise appraisal will be conducted. One benefit of this approach is it can help the lawyer advise you on which chapter you should file in based on how much equity you have. (Debtors usually know their mortgage balances better than their properties’ values.) Usually, if you have more equity that can be protected by New York’s exemptions, then you’ll want to consider chapter 13. Otherwise, chapter 7 might be better.
As to formal appraisals, debtors are free to hire a licensed appraiser to do one before going to the bankruptcy lawyer. In many instances debtors already have an appraisal on hand after a refinancing or loan modification. However, the more recent the appraisal is, the better, because property values can shift dramatically in a few years.
Hiring an appraiser is the most expensive yet also most thorough option. The appraiser will inspect the property, research nearby homes (sales figures, layouts, etc.), consider factors (e.g. recent renovations, repairs, etc.), and then produce a clear report on your property. One advantage is that the appraiser can provide a more accurate estimate than the city or county assessment.
Alternatively, you could hire a licensed realtor to just provide you with comparable sales figures of nearby houses that have sold recently. If these are well justified, they can provide a good figure, but if there are reasons you’d suspect your house is more (or less) valuable, like if it has some unusual feature, like solar panels on the roof, then comparable sales estimates might not be so helpful.
Finally, you can always sleuth on the Internet yourself for comparable housing values. This might sound error-prone, but the closer the properties you find are to your own, the better the value. Beyond that it’s just a question of making a good case. Convincing a trustee or creditors might take something more. One thing to avoid is a house sold in a foreclosure auction or bankruptcy as those are often worth less than the market value of the property.
It’s possible that a poorly conducted assessment, whether by you or a licensed assessor, can result in a dispute with the adverse parties in the bankruptcy. Preventing that is a compelling reason to hire an experienced New York bankruptcy lawyer to handle your case and help you get a good assessment.
For answers to more questions about home values, bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced landlords rights in bankruptcy Bruce Weiner for a free initial consultation.