Seller In Bankruptcy--how Can We Ensure They Can't Get Out Of Our Contract To Buy Their Home?
Hi,
Thanks in advance for any advice!
We are in the process of purchasing a home as our principal residence. It turns out the seller is going through bankruptcy. Our title company is aware and is dealing with their court-appointed trustee to follow the bankruptcy proceedings. Unfortunately, this will delay our close of escrow by at least a month. We want to ensure that the seller is held to their end of the contract (we are trying to compromise with them to allow them to forgo the $40K of pest repairs by reducing the purchase price by $15K and paying our portion of closing costs, which is $5K, thereby saving them $20K overall.) We really want this house, but we are afraid the seller will try to get out of the contract now that they've seen there is $40K worth of pest repairs that they are contractually obligated to repair. Can we force them to sign an extension of escrow? At what point do we get a real estate lawyer involved on our end?
Grateful for any and all advice!
hummm...This could be a tough one.
When did you enter into the REPC, before or after the owner filed BK?
What kind of Bk are they in 7 or 13?
Hi,
Thanks for taking the time to ponder my post Utah_Bkatty!
We entered the contract on March 1, 2004, and have since found out from our title company that the seller filed for bankruptcy in September 2003. Based on searching these forums for bankruptcy-related questions, I can see that it is a good idea for us to talk to the trustee (I don't know if it is Chapter 7 or 13). From reading bankruptcy-lawyer websites it appears as if somebody in either Chapter 7 or 13 could lose their home to a court-forced sale if they have significant equity in it, which she definitely does. So, my husband is going to try to contact the trustee directly today to see what he can find out. I'm just hoping the court doesn't take over, void our contract and sell to somebody else. I'm hoping that talking to the trustee directly will help dissolve these worries. I'll post back with more info, or hopefully a resolution.
Thanks again!
Just a quick update in case anybody reads this thread for their own education.
We hired at lawyer at $290/hr, who has since billed us $350 to accomplish the following:
1) he spoke with all parties involved, including the seller's lawyer, the seller's RE agent, the bankruptcy trustee, and our title company
2) he concluded that our title company is waiting for the seller to pay $50 to the city to have her garbage liens reported to them
3) agreed with the seller's attorney that the seller will pay the $50 to release her garbage lien record to our title company
and the seller will sign our contract addendum to sell us the home for our compromise price, thereby saving herself $20K worth of pest obligations, and effectively saving us $20K as well
4) we do not need to sign an escrow extension, nor does the seller, because our previous contract is still valid
5) our new close of escrow is expected to be in 45-60 days, after the seller's bankruptcy is closed
So, what we learned is that it can pay to get an attorney involved (we had previously spoken to all the involved parties, and never got the full story from anyone--including our own title company-- that we are paying!)
We are happy that we can still buy this house, and feel good that the seller will walk away with not too many bruises from this experience. In retrospect, we probably could have avoided this long delay if we had gotten our attorney involved earlier, but we "thought" we were being thorough enough.
One final note...our real estate agent, while very nice, has mostly been a bystander to this entire mess. This justifies in my mind why real estate agents can be worth their weight in gold when they're good, but just another bystander when you have more knowledge than they do about the process.
Thanks for reading, and I'll post back if the sage continues.