For any attorneys in California: What are risks of short sale during bankruptcy?

Asked by Bill Gross, Los Angeles, CA Mon May 24, 2010

I am a real estate agent with a prospective client in Chap 7 bankruptcy and losing her house which is way over-encumbered. What legal risks, if any, does she face by listing the house and trying to sell it short after the BK clears. Reasons she may be better off with a short sale would be possible cash for keys compensation, shorted negative credit period, and input into the ultimate buyer of the property in a community where she knows many of the neighbors.

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Harold Sharpe, Agent, LAKE HAVASU CITY, AZ
Thu May 27, 2010
Hi Bill,
I'm no attorney and this is not legal advice.
Banks do not accept short sales during bankruptcy.
it is usually better for the client to short sell then bk if possible.

I would not take the short sale if the person has any intention of B K til short sale is done.

Harold Sharpe - Broker
So Cal Homes Realty
(951) 821-8211
California Department of Real Estate License # 01312992
1 vote
Ramin Lavi, , Los Angeles, CA
Mon May 24, 2010
Hello Bill, your client would need to wait until the BK is cleared or she can obtain a letter for the lender. She has no legal risks unless she refinanced, or has a 2nd lien as far as recourse. Most lender with the exception of Bank of America will write in writing paymetn in full however. I am not an attorney, however I list and negotiate many short sells throughout the country and they are very similar. Best of luck.
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