Lien stripping strategy

[phigment]

After a consult with a bk attorney we were advised we are eligible for a 7 or 13 with the deciding factor being whether we want/can strip our 2nd. At first thought I did not think the numbers would work but after looking at some online valuations of our home I think we are within $22K of being able to do the strip. We have a $391K 1st and $144K 2nd on a home I am seeing valued at $413K. Obviously I would jump at the chance to strip the second if possible. Besides hoping for further home value declines are there any strategies we can implement to make the numbers work in our favor? Can I see if the 1st mortgage holder would increase our principle up to $413K and pay down the second in the same amount? Even if that was feasible would it set off all sorts of red flags when we file? Thanks for any advice.

[StartingOver08]

Don't use the online valuations - they are usually too high. Get a realtor to give you the comparable closed sales within the past 90 days only for similar homes (CMA). This is a free service. Make sure it is the quick sale value - a closing within 30 to 60 days so they do not inflate the value. Make sure it is not a newby agent either. Then you will have a reasonably accurate number to determine if you qualify for the lien strip.

You can not increase the first mortgage. You need to work on a real value - not the online value.

[HHM]

There is no strategy, per se, that you can implement. The 1st mortgage is not going to increase the principle (that would be a refinance...good luck).

About the only thing you can do to decrease the value of your home would be to completely trash it, but I wouldn't advise such a plan.

[pcn]

I was under the impression an appraisal was required. Are you (startingover08) saying to get the CMA to get an idea if its even possible, then do the appraisal?

[StartingOver08]

Yes, that is what I am saying. An appraisal runs money and when you are tight on funds you want to make sure you are going to at least be in the right ballpark before you spend the $$$

[BigJohn]

You can check with your county assesor as to what homes in the area are worth. You can check local realators but the best bet is to get an appraisal. Thr original poster should get the appraisal below what the first mortgage is worth.

What helped us is I have a lot of projects going on and a lot of them are not finished. For example, we have a garden pool with a 7' waterfalls. When the appraiser showed up, algae had taken over the pool. The waterfalls is not finished. As a matter of fact, none of the projects in the backyard are finished. The doghouse, which is huge, comes with a raised cement bed in the house, covered patio in front, and has cement floors and walls. It is almost done but the flooring needs to be tiled and the final cement work on the outside has to be worked on along with some paint.
When the appraier showed up, I was 'sick'. The garbage hadn't been taken out for a few weeks and the dogs had pooped on the floor. I told her the appraisal was for bankruptcy and she was able to get the appraisal within are target range.

[phigment]

You can check with your county assesor as to what homes in the area are worth. You can check local realators but the best bet is to get an appraisal. Thr original poster should get the appraisal below what the first mortgage is worth.

What helped us is I have a lot of projects going on and a lot of them are not finished. For example, we have a garden pool with a 7' waterfalls. When the appraiser showed up, algae had taken over the pool. The waterfalls is not finished. As a matter of fact, none of the projects in the backyard are finished. The doghouse, which is huge, comes with a raised cement bed in the house, covered patio in front, and has cement floors and walls. It is almost done but the flooring needs to be tiled and the final cement work on the outside has to be worked on along with some paint.
When the appraier showed up, I was 'sick'. The garbage hadn't been taken out for a few weeks and the dogs had pooped on the floor. I told her the appraisal was for bankruptcy and she was able to get the appraisal within are target range.

So there is potential for a 5-6% downward swing from the online valuation I am seeing? Very promising! Never thought I would be hoping for a decline in my home's value though.

[pcn]

JUst had our appraisal 20 minutes ago. We had talked beforehand and he was aware of our financial direction. I did point out that a previous appraiser had tried to "help" us when we were looking at a second mortgage in the past, by "erring" on the up side. I pointed out that we owed "x" and that if there was an rounding we would be better served if it rounded down. I also made sure to point out all the defects I was (painfully) aware of in the house and property. All of those things that you "will fix next weekend" are things that dont need to be fixed before the appraisal. The crawlspace floods in heavy rain - normally I drain it as soon as possible. I didn't because he was coming today after it rained this weekend. The landscaping needed to fix that is scheduled, but wont happen until after all this is completed. The quote for the cost of the landscaping is a subtraction on the appraisal. Just as if you are a car buff and wash your car, and know every paint chip and small defect, you need to point these out to the appraiser. It was very counter intuitive, trying to devalue our home.

[StartingOver08]

So there is potential for a 5-6% downward swing from the online valuation I am seeing? Very promising! Never thought I would be hoping for a decline in my home's value though.

Every area is different, but in our specific area the Zillow prices are off by over 10% (too high).

[catleg]

Possibly you can deduct cost of sale from the appraised value? I have seen this on some ch13 filings in Pacer.

[blindsided]

I would say that in this market Zillow is probably very inaccurate. Even a skilled appraiser might have a hard time, as recent sales may have been depressed by foreclosures, short sales and desperation moves. The market is really hard to gauge right now. But this is probably the best time to get an appraisal (versus one year, or even six months, in the future or past) because the market MAY be beginning to stabiliize as the Obama plan and lower mortgage rates start to affect the market.

[phigment]

There is no strategy, per se, that you can implement. The 1st mortgage is not going to increase the principle (that would be a refinance...good luck).

I really hope to make the lien strip work and have asked our atty for the names of some appraisers who might be sympathetic to our plight. Even if Zillow is only 5% overpriced for Central NJ I am in luck.

I realize a refinance is not a viable option in the current environment but have two related questions:

1. Does a refinanced 1st lose it's priority in the order of secured interests?(e.g. lien stripping the 2nd is now impossible)

2. Since I have an Option ARM (aka Pick-a-pay) and my principle creeps up anytime I do not pay the full interest amount in a given month can I use this to my advantage in any way?

[woeisme]

I told an appraiser that I needed the appraisal done for BK purposes, he got huffy and told me that he'd do an "honest" appraisal, that he didn't care if it was for a refinance or a BK, that the number I'd get would be the number he thought was correct. I was a little nervous after that, that maybe he had something against BK filers, maybe got stiffed by some filing? But he came up with a number almost identical to what we owed on the loan, so it ended up not being an issue after all. Oh yeah, he also told me that if he had to go to court to defend his appraisal to the BK judge, that he'd charge me extra for that. Only went with him after all that because we live in a really rural area and didn't have anyone else who'd come out here for a reasonable price...

[phigment]

I told an appraiser that I needed the appraisal done for BK purposes, he got huffy and told me that he'd do an "honest" appraisal, that he didn't care if it was for a refinance or a BK, that the number I'd get would be the number he thought was correct. I was a little nervous after that, that maybe he had something against BK filers, maybe got stiffed by some filing? But he came up with a number almost identical to what we owed on the loan, so it ended up not being an issue after all. Oh yeah, he also told me that if he had to go to court to defend his appraisal to the BK judge, that he'd charge me extra for that. Only went with him after all that because we live in a really rural area and didn't have anyone else who'd come out here for a reasonable price...

If I can get an appraiser to come in at the right number stripping my $144K 2nd would be worth paying them for their time to come to court.

[pcn]

I told an appraiser that I needed the appraisal done for BK purposes, he got huffy and told me that he'd do an "honest" appraisal, that he didn't care if it was for a refinance or a BK, that the number I'd get would be the number he thought was correct. I was a little nervous after that, that maybe he had something against BK filers, maybe got stiffed by some filing? But he came up with a number almost identical to what we owed on the loan, so it ended up not being an issue after all. Oh yeah, he also told me that if he had to go to court to defend his appraisal to the BK judge, that he'd charge me extra for that. Only went with him after all that because we live in a really rural area and didn't have anyone else who'd come out here for a reasonable price...

Sounds just like yesterday with our appraisal. He was freindly, but also pointed out he would charge if he had to go to court. I think that is fair. It's his time after all. We are also very rural (AL) so "pickins was slim". Did you end up having to use him in court? I read that it is rare to have to go that far if you use a written appraisal. Thanks for your input.