In re Strever, 468 B.R. 776, 781–82 (Bankr. D.S.C. 2012) (Waites)

Second lien was not wholly unsecured and could not be voided because, after eliminating distressed property sales, the competing appraisals favored valuation that left some value for second lienholder. First lien was $129,000. Debtors’ appraiser valued property at $105,000, including in this analysis two recent foreclosure sales of comparable properties. Second lienholder’s appraiser valued property at $136,000 using comparable sales that excluded foreclosures. Court determined that fair market value was “over $129,000” after eliminating foreclosure sales. “[I]f a Chapter 13 debtor intends to retain a principal residence and is attempting to strip off a second mortgage, then that property’s fair market value should be determined without relying on foreclosure sales when evaluating a secured party’s status under § 506(a)(1). The fair market value best represents what a principal residence is worth to a debtor because it is the price that the residence would likely sell for in an arm’s length transaction. . . . [F]oreclosure sales are not the most reliable indication of market value . . . . [Section] 506(a)(1) directs the Court to not rely on foreclosures for valuation when a debtor intends to keep his or her principal residence. Comparing the sales of similar homes sold in arm’s length transactions between two individuals, adjusted for the material differences from the property being appraised, is the proper way [to] determine a property’s market value for the purposes of § 506(a)(1) and § 1322(b)(2).”

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