Short sale in Chapter 13 bankruptcy

Asked by Kim, Danville, CA Wed Dec 4, 2013

We have made an offer on a short sale and the seller has accepted the offer. However, less than two weeks after accepting the offer the seller filed Chapter 13 bankruptcy. We were told that the short sale can move forward once the bankruptcy is confirmed by the court. Now the seller’s bankruptcy has been confirmed and we want to continue to move forward with the short sale. But the seller’s agent has difficulty to get all necessary documents from the seller to move the short sale forward –My questions are (1) who is paying the commission? (2) What can we do to get the short sale to move forward? We have been waiting for 6 months. Since then the house prices have been going up. By the way: (1)Our buyer agent has communicated with the seller bankruptcy lawyer. The lawyer is aware of that we were waiting the bankruptcy confirmation to move the short sale forward.(2)There is a clause in the contract. If the seller files bankruptcy, they need to petition the court to exclude the house

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Dan Tabit, Agent, Issaquah, WA
Wed Dec 4, 2013
I don't have good news. I want to echo what Trevoln has suggested, start looking for another house. I'm not saying this won't happen, I am saying that the road to making it happen won't be easy, fast or predictable.
You've added a layer of complexity to what is already a complicated situation. Negotiations stop at the lien holders once the seller files BK. Once the court approves they are starting over from scratch. If the seller is not cooperative, it may never happen. Their motivation, preserving their credit largely went away with the BK. Now, the longer it takes to resolve, the longer the seller lives rent free.
Whatever chances you have will be uncertain and full of frustration. My last BK Short Sale took over 1 year. Not all do, but there are other homes you can purchase without the headaches, hassles or pain.
1 vote
The Hagley G…, Agent, Pleasanton, CA
Wed Dec 4, 2013

First of all, the lender pays the commission on the short sale - so you do not need to worry about that! There is nothing that you or your agent can do to move the short sale forward. Do you happen to know who the lender is? And how many lenders are involved? It is the listing agents job to stay in touch with the bank and make sure the process moves forward.

Is it possible that the seller filed BK to stay in the home longer? That would be a question for your agent to ask the listing agent.

As far as how long sort sale approvals take, it depends on the lender, how quickly the seller responds to requests for documentation, and the follow up from the listing agent. I have had approvals in as little as 45 days - and I had one that lasted 11 months!

I am sorry you are in this situation.

Cindi Hagley
The Hagley Group
1 vote
JR Thrasher, Agent, San Diego, CA
Thu Dec 5, 2013
Sounds like you are seeing a great deal slip through your fingers. If there is going to be that much of a benefit to you, talk to a lawyer and see if you can make the seller preform. Although, if prices have gone up a lot the sellers bank may not approve the short sale.
0 votes
Trevolyn Hai…, Agent, Highland, CA
Wed Dec 4, 2013
Ugh. It kills me when a seller does that (go BK) especially since it only delays the inevitable for them & messes up their credit even more. Unfortunately it also screws the buyer & both agents.

Cindi is correct, the commission comes out of the sales proceeds so no sale, no commission. The seller's lender also gets to decide how much they want to pay in commission.

Cindi is also correct that there is nothing you can do to get the sale to move forward if the seller or/and their lender is not cooperating.

6 months is not unusual; and if the prices have been going up, the seller's lender will be aware & will probably ask for more money (the seller's lender not the seller determines what they will approve as a sales price & for terms)(and sometimes they don't ask for more money & just decline the sale).

While you are waiting to see what goes on with this one, my suggestion would be to look for another home.
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