How Bankruptcy Affects the Short Sale

Question

I'm about to work on a short sale with a seller who's ex-husband has gone through bankruptcy over a year ago to delay foreclosure. Since 2006, nothing has been paid on the property. Two mortgages have been taken out on the property, both from the same lender.

Does this change anything up in terms of how I should approach the short sale?

C W · Answer

Also, I know there are tax liens against the property as well.

What would the first step be in this case? Meeting with them individually and getting their information?

Dave P. · Answer

If there is a court order to lift the BK, then it is back to game on.

Start the short sale process.

C W · Answer

Hi Dan,
            
            It's been a while since I've gotten info about this property. And yes, I would be doing it as an agent. 
            
            It's a Ch. 13 Bankruptcy, but I believe there was a court order to lift the bankruptcy so that the lender could proceed with the foreclosure. Would that change much in terms of the process? Or getting approval before getting liquidated?
            
            What are the steps to get started? It's a divorced couple, so I'm planning on speaking with each of them individually, to get the necessary paperwork and forms. 
            
   I'd like to get this deal figured out, so  thanks in advance everyone

Dave P. · Answer

I am working on three deals where the seller just filed BK. My experience has been similar to Mitch's. For my transactions the deals can go through, however, we will need court approval before anything gets liquidated.
            
            It looks like there is just an extra step in the process, but I'm sure it also varies greatly state to state and depending on the type of BK.

Mitch Freed · Answer

I have a short sale negotiation going right now with Litton.  I started negotiations while the homeowner was in the bankruptcy filing process.  Half way through the negotiations, before the BPO, the bankruptcy went through.  Litton subcontracted to some company called Prommiss to handle the short sale negotiation.  I asked Prommiss why this happened and they stated it was because of the bankruptcy.  They are acting as an intermediary between me, the BK attorney, and Litton...compiling all documentation, ordering the BPO and submitting the package to Litton.  I asked them how the BK affected the sale...they stated it really didn't.  I asked them if anything special would have to happen for the home to be sold...he seemed to think once a price was agreed on the homeowner would have to file a "motion to sell."  I'm not sure what type of BK was filed...but it hasn't frozen anything.

Joe Barnwell · Answer

If the bankruptcy has not been officially "closed" then it will affect a short sale.  Everything "freezes" when in bankruptcy.

Tasha Khoshnood · Answer

From my understanding, this does not change anything.  It should still be the same short sale process.