When Can Court Reverse Sale Of Preforeclosure?
I am interested in a preforeclosure, but I have read many things regarding bankruptcy. Is a short sale safer than reinstating the loan (and getting a long lease-option) and try to sell or lease/option the property to a new buyer?
I have read that if the owner files bk, the court can reverse the sale. Is that under Ch. 7 and/or 13? How could I protect myself even if it is not in preforeclosure?
I live in NC.
Thanks for any help.
The bankrupcty court can reverse a sale for up to a year if it gets convinced either of two things have happened.
1) The seller transfered title "in anticipation of bankruptcy" in attempt to protect his equity which would have been given to the creditors in the BK (example, I deed my paid in full house to my son (who allows me to continue living there)in anticipation that the bk court would otherwise order it sold.)
2) there was substantial equity in the house which was wasted in an under-value sale because the seller/bk knew he was going to loose the equity anyway (example I sell my paid for house to you for $15,000 even though it has $150,000 equity just because by not having it my bk will go faster).
Since I assume you are talking more about #2 than #1 the key is not to underpay by more than 20-30% The court is unlikely to overturn in such circumstances. Especially where there was so little equity in the house that the lender accepted a short sale I really wouldn't worry.
So, if I understand this correctly, if the owner is getting nothing out of the deal, and the payoff is, say $165, and the FMV is, say, $175-$180, they probably will not cause any problems? She is filing on Wednesday, and I'm not sure if it's going to be 7 or 13. I really am not interested in bringing her current (approx. $10k) and having the courts reverse it.
Thanks for your very fast reply.
One more question: couldn't this happen with ANY house? If you buy at a great discount, and within a year the owner files, what would happen? If the house has already been sold to an end buyer, how could it be overturned? I must be missing something, because I would think that every investment is a major risk!