Buying a property in bankruptcy

2 Replies

There is a property on MLS I have seen which apparently has a trustee handling negotiations. The home needs some work, but we are interested in bidding on it.

In researching this type of sale, I read elsewhere that paying the trustee may come out of the buyers pocket -- does anyone has experience with these types of sales? Is that true and if so, is there a way to calculate their cut so I don't over-bid? Is there anything else to know or look out for?


@John Schnyderite I regularly buy bankruptcy assets (but never real estate, admittedly) and have never heard of the trustee's commission being paid by the buyer. Typically, the trustee is separately compensated with a percentage cut of any assets recovered for the estate which includes the proceeds from the sale of the property. Unless the trustee is also a real estate broker, I don't see how he could directly take a commission. Practices differ across the country, of course. I would specify in the offer that the seller pays any commissions and closing costs and see what they say.

The main issue in bankruptcy sales is that any agreement that you reach with the trustee will be subject to court approval and over-bidding. I would recommend including a provision for a 3-5% "breakup fee," so that you receive some compensation for your time if another bidder comes in higher than your contract.

Just suggestions, not legal advice.

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