Bankruptcy! Foreclosure! Huh?
??? I have a VERY motivated seller whom is in a pre-foreclosure situation and has recently filed for bankruptcy! Can this guy sell the home if the home was included in his bankruptcy? (Texas) There is no equity in the home. He’d be a perfect candidate for sub 2 but I don’t know about the bankruptcy situation. His bankruptcy hearing is on 01/11/2005. Anyone know what to do in a situation like this? What would you guys do?
Signed,
Very Motivated Deal Seeker!
I'm curious to see the steps that John Locke and others have to share.
The only time I have been involved with a sub2 and bankruptcy is after the bankruptcy has been discharged (6-8 weeks after the hearing I assume). From there if the trustee has determined that there is no equity in the property, then the homeowner in essence gets it back and can sell to you.
From what I understand, you must get the bankruptcy trustee's approval if you want to purchase the house before the discharge. There should be no problem but I have no first hand experience with this.
Also be aware that most bankruptcy attorneys advise their clients to stop paying on any loan they don't plan to reaffirm..just so you know what the attorney will be saying.
GOOD LUCK and let us know how it goes!
Putting aside the bankruptcy situation, I would be curious as to what your plans are for this property, since you mentioned that there is no equity in it?
Great, we have covered the first step in the deal process a motivated seller!
Since the home is part of the petition of bankruptcy the judge, trustee or referee will have to approve the sale.
Doing a sub 2 deal while the home is covered under the petition of bankruptcy will be most difficult to accomplish.
His hearing can be extended.
Now the big kicker "He has no equity" and you ask what would we do?
I would stop wasting my time on this deal!
If he was facing foreclosure prior to the bankruptcy and stopped it by way of the bankruptcy the legal fees on the lender side have grown greatly.
Convincing the bankruptcy officials of the benefits of a creative deal like sub 2 would just about take an act of congress.
Since there is no equity, what would be the point?
This may seem brash, but to be successful as an investor you will need to determine if a deal is a deal.
You do have the key motivated seller now let's open the door and what do we see no equity now their is no need to go any further because as an investor we need:
Motivated seller + Equity = Profit
[addsig]
The plan was to cash flow the property, wasn’t sure how the bankruptcy would effect the home and whether or not he could sell the home and collect cash after the bankruptcy was final???? Because he has already filed and his creditors have been notified, would this property have short sale potential? So many questions. But like you said John, with all the legalities involved it would be a wash any how. Thanks guys! This is exactly what I needed to hear.
Signed,
Moving on to the next very motivated seller!
:-D
You can do a short sale on property covered under the umbrella of bankruptcy but it will be a vary time consuming process.
If you have never dealt with this process and you are a new investor I would not recommend starting in this direction simply do to lack of experience of dealing with short sales and than on top of that doing a short sale where a property is under bankruptcy simply adds to the complexity of this type of offer.
You will find much easier deals than this type to start with.
[addsig]
Thanks John!
You're great!