Home Buying in Pleasanton>Question Details

Kim, Home Buyer in Danville, CA

After the seller accepted short saler offer,the seller also filed Chapter 13 bankruptcy, what' the short sell process looks like?

Asked by Kim, Danville, CA Wed Sep 18, 2013

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As stated below, it's been irrevocably lengthened or even possibly terminated. No way of knowing for sure until you get more clarification from the buyer and their BK attorney.
0 votes Thank Flag Link Thu Sep 19, 2013
The seller needs to ask for permission from the Bankruptcy court to proceed. They request a hearing and have to appear in person or have their attorney appear to grant permission to sell the house.
I would not allow them to jerk you around on this. Ask them to file and ask for a copy of the filing and a notification when the court date is sent. You can also attend the court proceeding as it is public. This way you will know exactly what is happening. The reason is that this could effectively stop the process if this is not done. They seller may be trying to see how long they can live for free in the house and they may be using you as a pawn.
0 votes Thank Flag Link Thu Sep 19, 2013
Usually once a bankruptcy is filed everything stops. You can check with a title company (I believe that is what is used for closings like it is here in FL.) and they should be able to tell you for sure.
0 votes Thank Flag Link Thu Sep 19, 2013
If the seller truly wants to sell he can have his attorney request that the bankruptcy trustee allow the sale to go forward. The sale of an underwater house does not yield any cash to the bankruptcy. Truly, an underwater house is a liability and not an asset. The bankruptcy referee knows this and will cooperate but the request must come from the seller through his attorney.

If the seller is not willing to cooperate, move on.
0 votes Thank Flag Link Wed Sep 18, 2013
Hi Kim,
For the short sale to go through, you will need to get the approval of the bankruptcy judge to proceed with the sale (or in legal jargon, lift the stay) before the bank can proceed with approving the short sale itself.
The main question you need to have answered is if the seller is still interested in selling the home. If so, the BK is probably just delaying tactic to stay in the house longer rent free and if you are getting a bargain price for it, it may be worth the wait (although at this point, the bank has not really approved the sales price and could come back and ask for more).
0 votes Thank Flag Link Wed Sep 18, 2013
The bank is not allowed touch it until the BK is discharged, unless the judge and trustee agree to the sale, at that time you can move forward on negotiations with the bank. Does the seller still want to sell? If so, you need to get the agents and lawyers all involved and probably seek an attorney yourself.

J.R. Thrasher
http://www.SanDiegoRealEstateVeterans.com
619-929-0105
0 votes Thank Flag Link Wed Sep 18, 2013
Chapter 13 bankruptcy always buys time for any proceedings. I think it is typically about 3 months, and that's if the seller wants to keep staying. It also helps the seller lessen the burden of any liabilities due to the short sale. You can contact my contact Jen Lee who is a BK lawyer for further clarification, but this is my understanding. Her email is jen@xenixlaw.com. Hope the deal closes quickly for you!
0 votes Thank Flag Link Wed Sep 18, 2013
It will more than likely stop dead in it's tracks.
Good luck,
0 votes Thank Flag Link Wed Sep 18, 2013
Bankruptcy can be a tactic that a seller who is intent upon delaying the foreclosure process can use to further slow things down. Some Short Sellers are only trying to fool the bank into believing that they are serious about cooperating. When they find that the short sale is moving forward the next step a insincere seller could take would be to file bankruptcy.

As a listing agent I've had this kind of seller tell me that they would instruct their bankruptcy attorney to have the home sale removed by the court from that purview of the bankruptcy. The attorney then wouldn't return my calls, then would maintain that they could not talk to me due to attorney/client confidentiality, then say that the seller never instructed them to do anything about removing the property sale from the purview of the bankruptcy court.

If the seller is sincere about the short sale they can have the sale rapidly removed from bankruptcy court jurisdiction. If they don't do this promptly, they very likely fall into the category of an insincere seller. Your best bet would probably be to move on at that point and attempt to terminate your contractual obligation to the purchase of the property.
0 votes Thank Flag Link Wed Sep 18, 2013
Looks like a very LONG process, so if you wish to get out of the deal, fine. If the deal is too good to pass up then move forward plus talk to your attorney(may take 6 months or longer).
0 votes Thank Flag Link Wed Sep 18, 2013
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