Posted by B.L.Renfrow on February 24, 2004 at 17:50:48:
I agree that could be a concern. Once the stay is lifted, the lender would be free to proceed with foreclosure and sale, assuming the default wasn’t cured.
However, if the lender had a reasonable short sale offer in front of them, would it make sense for them to ignore it and continue with the foreclosure? Some of the things I’d factor into my decision-making process would include the amount of equity, the amount necessary to cure the default and reinstate the loan, whether you have funding immediately available, the length of the foreclosure process in your state (i.e. would the lender be looking at a year or so before they would get title, or could they complete the foreclosure quickly), and the lender’s history with the borrower (if the lender has been repeatedly jerked around and/or lied to, they may be less likely to cooperate).
I would also try to have the seller get a written release from the trustee’s office indicating that it’s OK for the lender to discuss the borrower’s loan with you. That might be enough to ease their concerns.
Ultimately, if the lender won’t cooperate, your seller will have to make a choice. I would advise him to discuss it with his attorney, and to do whatever he felt was in his best interest.
short sale a property under bankrunpcy? - Posted by grace
Posted by grace on February 23, 2004 at 23:41:27:
I am creating a possibility to
short sale a house with the bank.
The owner told me he is in chap13
bankrupcy to delay the foreclosure
for the last 3 months.
Do I sign the sales agreement with
the trustee or the owner?
I understand that under bankrupcy
the trustee owns the property and
is it true that the attorney needs
to bring it to the judge to release
the property from bankrupcy?
Please advice. I only have a few
days to provide all docs.
Re: short sale a property under bankrunpcy? - Posted by B.L.Renfrow
Posted by B.L.Renfrow on February 24, 2004 at 24:17:44:
Your understanding is essentially correct, but the trustee doesn’t actually own the property, but does control it while the owner is in bankruptcy.
Therefore, the seller cannot contract to sell the property without approval from the trustee.
A motion would have to be filed with the court asking the judge to lift the automatic stay before the owner could sell.
If you are trying to negotiate with the lender, make your purchase agreement contingent on the lender’s approval of a short sale and the trustee’s agreement.
The seller’s bankruptcy attorney should be able to prepare and file the motion for relief of stay.
Re: short sale a property under bankrunpcy? - Posted by John
Posted by John on February 24, 2004 at 12:00:23:
I am facing this same situation with a property I’d like to purchase via short sale. I have a large concern for the seller, however. Even with a Purchase Agreement contingent upon lender’s acceptance and trustee’s approval, what if the lender decides not to accept the net proceeds after the trustee’s release of the property. The lender I am talking to will not even discuss a short sale or send out a package until the property is released from the Chap 13. Doesn’t this then accelerate the lender’s foreclosure with the automatic stay removed? How can the seller be protected if the lender rejects the short sale offer and a happy medium is not reached? I could use some help here. Thanks