Buying A House Out Of Bankruptcy.
Hello all!! I want to thank everyone here on this site for all the great post. You guys are great. I originally posed a question at the end of last week regarding doing a short sale when the property was part of a bankruptcy estate. The question I have now is can I just buy the property from the owner even if he is in bankruptcy. Not do a short sale just buy the property from him. I know I must get permission from the trustee in charge of the bankruptcy estate. The comps on this property came in a little higher than what I originally thought they would be. Home is worth approx. 185,000 and the owner owes 145,000 which includes a second mortgage of 17,000 from a private lender. I just want to know if it is possible to buy this home and how hard it would be. Thank you all in advance.
Homeshark
all transfers are frozen once bankruptcy is filed
The sell can pitch the off to the BK court, but I doubt the 1st and 2nd will go along if they get a haircut.
Thanks cjmazur
I am still a little confused. If I don't try to short sell the deal, can I just buy the property from the seller while he is in bankruptcy. When you say haircut are you referring to them as losing money because of a short sale. Thanks. So the question is can I buy the poperty from this guy while he is in bankruptcy just as if he was selling it conventionally. Thanks a lot. I appreciate any answers.
Homeshark
You will need the trustee/representative handeling the bankruptcy to release it.
Have the homeowner call the courthouse and tell them they want to sell their house and go from there.
if there are no other creditors involved other than the 2 mortgages, then i would suggest to have their bankrupcty petition withdrawn..speaking from experience it is al ot easier to do it that way then asking the courts approval on the sale. [ Edited by lp1 on Date 06/01/2004 ]
As long as the bankruptcy court is informed and you follow the courts instructions, you will be o.k.
In bankruptcy, the trustee supervises the sale of your customer's real estate. The trustee will attempt to maximize the selling price.
Under the Bankruptcy Code, your customer can exempt a certain dollar amount of equity if a homestead exemption is in place if there are proceeds left over after the secured creditors have been paid off. But some states have no homestead exemption; others allow debtors to protect all or most of the equity in their home.
If the total amount of debt against your customer's house is less than the market value, your customer may lose their house unless a homestead exemption entitles them to all or most of the equity.
Short sales during a bankruptcy can be difficult as many states will have the property apprised and the norm will be around 80% of apprised value.
Using your value would be around $148,000, keep in mind that it is the responsibility of the trustee to maximize the selling price and many will use a broker's price opinion report.
On top of this many require proof of funds.
My big concern is have you added in the lender attorney fees? If not this will eat away at your profit line.
This is based upon my own experience purchasing real estate while the customer
[ Edited by JohnMichael on Date 06/01/2004 ]
by hair-cut I did mean the banks loosing money.
What I'm try to evaluate as another technique, if to buy the note from the 1st trust deed holder.
You're secured other the the homestead exemption, and you just carry the note. I think this is realy cool if the note has a high yield. But, as w/ any paper holding technique, you may have the note for a long time.
I have seen bankruptcies run for >1yr here.
Dont buy a first that is in BK, unless you have the owner under control and they are vacating the property.. If not, you could end up holding that note forever, which is not a very good exit strategy. Instead, focus on the 2nd mortgage position and the homeowner/bk court. If you can get the homeowner under control and get the trustee to allow him to sell the house, it may not be a big problem. The 2nd may deal, depending on the bank and their policy on selling or discounting a position in BK..