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Hollie, Home Buyer in Tracy, CA

The seller filed bankruptcy

Asked by Hollie, Tracy, CA Mon May 21, 2012

We are purchasing a short sale. The seller filed bankruptcy. We are going to close within two weeks. If the seller don't move before closing, what should we do?

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Thank you. The dual agent told me if we don't allow the stller to stay after closing, they would cancel the contract.
She said they have a backup offer which is a cash offer.
0 votes Thank Flag Link Wed May 23, 2012
My personal opinion is I would not allow the seller to stay after closing. If they do, you can have them evicted. The bankruptcy does complicate things and the seller is probably having difficulty finding a place to rent because of their situation. Talk to your attorney if you are using one. Talk to your realtor. I am sure things can be worked out.
0 votes Thank Flag Link Wed May 23, 2012
The dual agent said the seller filed it long time ago and would not be a problem.
the seller only has two weeks to move out. The dual agent said that the seller may rent back two weeks or so. should we allow it? We prefer the seller move out before closing.
0 votes Thank Flag Link Tue May 22, 2012
Thank you all.

I will talk to the listing agent tomorrow.
0 votes Thank Flag Link Mon May 21, 2012
You are not closing until a bankruptcy judge signs off on the deal, good luck,

Jim Simms
NMLS # 6395
JSimms@cmcloans.com
Financing Kentucky One Home at a Time
0 votes Thank Flag Link Mon May 21, 2012
Hi Hollie,

You should definitely consult an attorney as a bankruptcy will put a stay on any legal action. And of course, talk to your agent.

Best regards,

Elva A. Wormley
C2 Financial Corporation
2845 Moorpark Avenue, Suite 209
San Jose, CA 95128
NMLS #331981
0 votes Thank Flag Link Mon May 21, 2012
The sellers participate in a short sale and may even get paid money for closing the sale. They may have some incentive to vacate that is stronger than their desire to live rent-free in the property. You should be able to tell during your pre-closing walk thru whether the sellers are leaving and if the deal is ready to close.

The title company is used to sellers who have filed bankruptcy. Look at your binder to determine if you have coverage available to take care of a slow-moving seller.

Do you feel like you need additional assurances from the sellers that they will vacate at closing? If so, directly ask them for it.

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0 votes Thank Flag Link Mon May 21, 2012
I agree with Taj's answer. You will need the advice of an attorney. The bankruptcy filing will more than likely stop the short sale process.
Good luck,
0 votes Thank Flag Link Mon May 21, 2012
If the transaction does close and you become the owner your option for removing the seller if they don't move out is similar to removing a tenant that hasn't paid their rent. You would need to evict the seller. I suggest you retain an attorney immediately if the seller doesn't voluntarily move out at close.

A better solution would be to required the seller to move out prior to close. If they don't move out then you don't close. You can do this even if you have already signed you loan documents. If you are going to stop the closing you want to do it before your loan funds. Once your loan funds you are liable for interest even if you never actually buy the property.

Your agent should be able to help you with this.
0 votes Thank Flag Link Mon May 21, 2012
Consult an attorney.Bankruptcy complicates matters because there is an automatic stay on all legal action.
0 votes Thank Flag Link Mon May 21, 2012
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