In today's current economic conditions, bankruptcy has become a decision for many individuals. While this cannot be avoided by many, if there is real estate involved in the bankruptcy usually a valuation report is required. This is true for chapter 7 and chapter 13 bankruptcy.
The market value of your home should be based upon current market conditions and recent comparable sales within your immediate neighborhood market area. It should not be based upon a computer model or what the neighbor thinks it is worth.
The Most Common Definition of Market Value for Real Estate:
The most probable price that a property should bring (will sell for) in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: (1) buyer and seller are typically motivated; (2) both parties are well informed or well advised; (3) a reasonable time is allowed for exposure to the open market; (4) payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and (5) the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.
The Report Must Be Credible (Worthy of Belief)
Some of the possible valuation reports for a court proceding are a traditional appraisal report with complete inspection, a exterior only appraisal (Drive By Appraisal,) Desktop Appraisal Report, Broker (or Agent) Price Opinion, or a free or low cost online value report.
If you attempt to utilize a lower cost valuation report, you might pay your lawyer for another day in court if the report is not accepted by the Judge. The time and cost really might not be worth it. While lower cost valuation reports are performed and brought to court, creditors have rights and well and a credible appraisal report is needed for court proceedings. Understand that your valuation report must be accepted by the court and the discretion belongs the Judge.
Proper appraiser licensing must also be considered. In Missouri, a Licensed Real Estate Appraiser is authorized to appraiser one unit residential properties. A State Certified Residential Appraiser is authorized to appraise one to four unit residential properties. While a State Certified General Appraiser is authorized to appraise all properties which he/she is competent to appraise.
Appraisal reports for this type of proceding should have subject exterior photographs, subject interior photographs comparable sale photographs, interior sketch, location map, plat map (if possible,) ariel photograph, and be detailed and explain reasoning within the valuation process.
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