What happens when buyer files for bankruptcy???

7 Replies

Been trying to do some research on this specific topic and I've had no luck finding any answers.  If anyone has any information or incite on this i would greatly appreciate the help.

What happens to the investment group when a buyer files for bankruptcy???

Like... What happens to funds?  (money owed), how long do funds get tied up for? does this even effect the investment group? or does this cause any problems for the investment group?

Thank you ahead of time to anyone who has any information to share.  

What's the relationship between the "investment group" and the buyer?

Originally posted by @Jon Holdman:

What's the relationship between the "investment group" and the buyer?

 No relationship.   Just a flip.  maybe investment group is the wrong term.  as a business to buyer sense.  i apologize i'm very new to this.

So let me guess, because you aren't telling things clearly.  Somebody you call a buyer bought a property, and you were part of an investing group that funded the purchase or renovations of that property.  And now that buyer is in bankruptcy.  Is that an accurate summary of the situation?

Originally posted by @Steve Babiak:

So let me guess, because you aren't telling things clearly.  Somebody you call a buyer bought a property, and you were part of an investing group that funded the purchase or renovations of that property.  And now that buyer is in bankruptcy.  Is that an accurate summary of the situation?

actually not at all.. i'm just getting into the real estate business.. and just doing some research to prepare, so if the situation ever arises there will be so surprises. I am starting to guess that i did not word what i am looking for properly. i am with a group and we are starting a LLC and i would like to know what would happen if we as a business sold a property to someone and what would happen if they were to claim bankruptcy. thanks for the help i appreciate it and i do aplogize for taking up your time

Originally posted by @Jonathan Kono:
Originally posted by @Steve Babiak:

So let me guess, because you aren't telling things clearly.  Somebody you call a buyer bought a property, and you were part of an investing group that funded the purchase or renovations of that property.  And now that buyer is in bankruptcy.  Is that an accurate summary of the situation?

actually not at all.. i'm just getting into the real estate business.. and just doing some research to prepare, so if the situation ever arises there will be so surprises. I am starting to guess that i did not word what i am looking for properly. i am with a group and we are starting a LLC and i would like to know what would happen if we as a business sold a property to someone and what would happen if they were to claim bankruptcy. thanks for the help i appreciate it and i do aplogize for taking up your time

If they filed bankruptcy before closing then likely they aren't buying, right... of course there are various types of bankruptcy but if they were in a financial bind within 30 to 90 days of the group listing the property; they would've known before entering into an agreement of sale with your investment group, imo. 

Kudos,

Mary

@Jonathan Kono  Either I'm misunderstanding the situation or this isn't really an issue.  I think your "investment group" (i.e., you and your partner) are wanting to fix and flip houses.  Your question is "what if a buyer of one of our rehabbed houses declares bankruptcy?"  If that happens after they complete the purchase, its irrelevant to you.  After you sell, you're out of the picture, unless you're offering seller financing.  If they declare bankruptcy before the purchase closes, but after they sign a contract then they very likely aren't closing.  So you find another buyer.  This seems like a very rare situation, though.  Someone on the verge of bankruptcy wouldn't be out looking at real estate and signing contracts to purchase.

Now, if you're offering seller financing and someone declares bankruptcy, you're going to be treated like a creditor.  But residential real estate loans are not usually eliminated by bankruptcy.  More generally, if you sold with seller financing and the buyer defaults you would go through the foreclosure process.  That would result in the house either being sold at auction (in which case you would be paid what you're owed) or you taking possession of the house (if nobody bids.)

thank you very much Mr. @John Holdmann.  that's exactly what i needed to know.  i again appreciate and apologize for taking your time to help me out.

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