The only thing they're doing by filing BK at this point in your short sale transaction is maybe buying another month, Maybe 2, to live in the house for free before they're going to have to move out & go rent somewhere.
My suggestion would be to write an "agreement" with them & offer to buy their breakfast table for $2,000-3000. Have the listing agent pitch in. Tell them they can rent back from you for free for 1month while they look for a rental, move out & close on the short sale.
The short sale CAN still be closed even though they've filed BK.
I am not an attorney, these are my creative opinions on how to get the seller to still allow the short sale to close.
Hi, I'm sorry if my message doesn't reach you in time! It sounds like you could have really used some expert advise. Most of my short sales take place within the context of a Bankruptcy. It can be a very positive step to help the homeowner achieve a truly new beginning and help the buyer obtain the property through a successful short sale.
I 100% agree with the Seller's new Attorney that the BK should be filed 1st. Especially if there is a 2nd/3rd or liens involved. The liens will still have "hostage" value on the chain of title, but your short sale offer becomes their only means of repayment after a BK, since the personal obligation to repay the debt is vanquished. Talk about a great way to pull the teeth from a roaring Dragon!
Further, HOA arrearages, through the date of discharge are eliminated. What a great help, especially if you are really having to work to pull both sides together on the negotiation.
Show a humble and cooperative spirit and help everyone understand how you can help benefit them! Think Judo, not Boxing! Use the other person’s strength, softly!
Many Trustees will give pushback and not allow a short sale during the BK. In most cases, this is not a disaster at all. I am closing one like this on Friday. It went smooth as silk! As soon as the ROS was filed, we pre-marketed the home, obtained our buyer, built out our short sale file and the short sale was presented to the bank right after discharge, and the case was closed 3 days later by the Clerk. So, now the property is the Seller's to sell, and they are doing just that through a harmonious and successful short sale.
The Bank benefited greatly with the highest and best loss recovery through my expert marketing and knowledge of how to successfully navigate these waters, and the Buyer will be the proud and happy new owner of his dream home on Friday! From short-sale submittal to approval took me 7 days.
Debts discharged through a BK are exempt from Taxes under Federal Law. So, that's a huge win for the Owner, especially if the nature of the Debts was not Purchase money.
It's a great win for you, and you have a chance to help a family in need and obtain your dream home all at the same time.
If your Realtor/Broker and or the Seller's Realtor/Broker on the short sale do not have expertise in this area of practice, they should not be practicing in it.
I am a frequent keynote speaker on the subject of short sales, for Chase, Wells Fargo, AAREA, NAREB, CDPE. I am also published on the subject of short sales through ezinearticles.com. I actively sell BK (and regular) short sales throughout Southern California and have never lost a home to Foreclosure. It is not a simple process to explain, but I find it to be a very gratifying area of Real Estate Practice.
Sometimes the timelines between case closing on a BK and the Foreclosure can be a bit hairy - I've seen 3 days! This is the fundamental issue with this type of transaction. So, again, this area of practice should not be entered into by an Agent who does not possess the knowledge or relationships to make it happen. I am considered a though-leader in my field, and have given back to the Real Estate Community, as a key-note speaker training hundreds of Agents.
As to the comments regarding "coffee table monies" - it is agains't the Law to commit short sale fraud and pass monies to Short Sellers outside of escrow. So, please use caution when considering "advise" that could land you in serious trouble.
Most of my short Seller's receive lawful Relocation monies from their Short Sale Lenders, on the HUD. This is a great motivator. There is nothing in this world worth breaking the law over. Sellers also gain invaluable time to get back on their feet, find a job or take care of other family emergencies. It's a win, win, win, win win!
I hope this really helps!
And, remember! You are building a lifetime of memories - and those memories will be about your HOME! Why not make this a memory about helping someone and learning how to navigate the uncharted waters through the expert negotiations of a seasoned Short Sale Veteran!
Now more than ever, who you work with in Real Estate Matters! ™
1(714)342-1978Julie Boyd, CDPE, SFR,CIPS
Founder, REThink Short Sale Solutions
Cal BRE # 01051535
Feel free to call me for a FREE, 1 Hour, No Obligation Consultation & Let's see how we can help make a difference in your lives, beginning today! Julie Boyd 1 (714)342-1978
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Ask your agent to prepare a mutual release so that any earnest money deposist you've made are returned before they are possibly added to the BK sellers assets Move on and if you decide to write an offer on another short sale property try to locate one that has already been pre-approved, which are becoming more common.
Frank J. Helderle
St. Louis, MO Realtor
CDPE, SFR, FSSSC
ANY "side deal" with the seller is not allowed and you will likely be required to sign an "Affidavit of Arm's Length Transaction" which states the seller will receive no money outside of escrow for "anything" and the Seller may NOT remain in the property after the close of escrow for any reason.
In my opinion, allowing a former owner who has filed BK top remain in a property after close of escrow is a DISASTER just waiting to happen.
All of my comments should not be interpretted as legal advice, I am not an attorney. You should continue to seek legal advice from appropriate professionals.
Again, Best of Luck !
There are almost 100 answers to your other question here on Trulia and many of those respondents are anxiously awaiting your feedback: http://www.trulia.com/voices/Home_Buying/Short_Sale_Agents_C
Now, to answer your new question.....
At the end of the day, this sale is very likely not going to close. The sellers have no money and unless they close the current escrow prior to filing BK, it cannot close without the BK Trustee releasing the property from the BK and the lienholder has to petitiion the court to have it removed - both of these activities are going to take MONTHS to get resolved.
Unless this property is so "spectacular" that you are willing to wait for months, you need to cut your losses and move on. Others have said to get the costs you've already incurred from the seller - NOPE - they have no money and are filing BK.
Get the sellers to sign a cancellation and get your deposit back from escrow before it becomes part of the seller's assets in the BK!
I have the exact same situation right now on a transaction and we've been waiting more than 9 months, the sellers filed BK just prior to closing and now the BK Trustee is going to sell the property at Auction because (he belives) it will bring more money than what was agreed in the contract. My buyer is walking away - upset - but walking away.
Best of luck,
Broker / Owner & Certified HAFA Specialist
Thom Colby Properties
Newport Beach, CA
Moving Lives Forward (TM)
We NEVER DOUBLE-END Transactions in our Brokerage. There is NO benefit to the Seller or Buyer and only benefits the Agent. Also, NEVER use your RE Agent / Broker as your Lender or vice versa. Also, be careful when using Real Estate Broker-owned Escrow and Title Companies - they can be loads of trouble.
888-391-5245 Direct Cell
I can not give u any solutions due to the fact that you are being represented by an agent and also in a transaction. And we as Realtors are not to give solutions to clients that are being represent by a Realtor. This is in the Realtor's Code of Ethic.
There is a good reason to NOT do dual agency, but to always have your own representation.
Listen to your attorney and good luck.