Home Owner Filing Chapter 7
I talked to a home owner this morning. His home was appraised at 340k he owes 280k. The home is going to auction on aug 6. He is in default. He is in the process of filing a chapter 7. Can I get him to give me a warrenty deed or quit claim? Then turn around and flip it. I would want the property to sell before the auction. I don't think I would have a problem selling it before the auction. What kind of legal pitfalls are there if I do this? He doesn't want any money, he just wants out of the situation. Could I do this without using any of my own money even for closing costs, or use the money that I get after the sale of the property for the holding and closing costs?
Thanks
Daryl
I doubt a conveyance would survive bankruptcy......
If you are trying to structure an acquisition... it would be best to
do this before the mortgagor seeks bankruptcy.
If he does seek a Chapter 7, (or any chapter for that matter), he would need Bankruptcy Trustee's permission to enter into a contract to sell... and the Bankruptcy would have to approve &/or abandon it's interest in the real estate.
If there is plenty of equity.... and other creditors... then the BNK TSTEE would probably want to liquidate the property at it's FMV to payoff the other creditors.
[addsig]
ShortsalePro. your answer is dead on!
The Trustee would likely reverse this transaction as a fraudulent transfer (unless the state has an unlimited homestead exemption.) I'd say the deal is toast, If there is non-exempt, realizable equity in the property the Trustee will liquidate it for the benefit of unsecured creditors.
(we seem to deal with this type of question/scenario alot... aren't people using the 'search' feature?)
I talked to the home owner again tonight. I tiold him that since he is filling a chapter 7 that there was nothing that i could do and the the bk people were going to sell the house to pay off some of the debt. He said that to go ahead and get the numbers from the bank on the home then if I could do something he would pull it out of the bk. Can he do this? What will happen if he tries to pull the home out of bk?
What about purchasing a home at the trustee's sale in which the owner has an open Chapter 7 filing? More complicated than its worth?
filing a chapter 7 only slows things down. IF he files a chapter 7, he must make regular monthly mortgage payments again. On top of that, he has to make arrearage payments to a bankruptcy trustee. During this time frame there is a "stay" on the customer and banks can not contact him in regards to his arrearage or prior default.
However if he does not make a regular monthly mortgage payment after filing a chapter 7, the bank proceeds with a "relief from stay" and then "proceeds to judgment" .
So filing a chapter 7 doesn't do anything if he has no cash flow, If he DOES then this saves his house, if he DOESN"T, then its just slows the sheriff sale by about 3 months
Also from lending standpoint, appraisals are often biased to get the mortgagor financing. In this case, it could have been appraised at more, to avoid PMI.
Also keep in mind - Who cares what it was appraised at back then. WHat does the market dictate its current value is NOW? Markets fluctuate about every 6 months. The appraisal is worth nothing now. Also What is it city assessed at.
The appraiser could have picked comperables in a better area of town to inflate the value. You need your own appraisal, from a reputable and conservative appraiser