The Best Way For Realtors To Deal With Properties Held By The Court As A Result Of Bankruptcy Filings
Some 775,578 business and non-business bankruptcies were filed and recorded in June 2018 at the United States Courts. Of these cases, 45% were tied to unaffordable mortgages and foreclosures forcing property sales, according to CNBC records. Professional real estate agents or brokers should understand how to facilitate to completion of the sale or purchase of properties involved in these cases without wasting time and money. To do so, you will need to thoroughly study the cases beforehand. Adequate knowledge of such cases gives you an upper hand and also helps you to know how to advise your clients on the best way to move forward should they be interested in such properties. Additionally, it helps you avoid falling into pits, maintain your credibility, and close deals fast without wasting any resources.
Dealing With Bankrupt Home Sellers
Real estate transactions involving bankruptcy are sensitive, and need a keen eye to evaluate the depth of trouble involved parties may go through legally and financially to complete them. Those who file for bankruptcy are protected by the bankruptcy law, which gives them a fighting chance to have a fresh start without being overburdened by their previous debts. A liquidation bankruptcy, also known as Chapter 7 Bankruptcy, for instance, requires that the debtor surrenders all non-exempt properties to the trustee for liquidation to compensate his creditors. For the real estate professional listing the home or property, this means having to sell it for less than its mortgage debt worth. This is known as a short-sale. In such cases, you as the realtor may have difficulty disclosing details about the situation to prospective buyers, as they make take advantage of the home seller’s financial distress and desperation, and put in low offers.
You may also be tempted not to disclose details about defects the property has so as to avoid tanking the value of the property even further. This can, however, has dire consequences. To close a short sale transaction, the real estate broker or agent needs to follow a certain process to make sure he or she isn’t breaking any federal, state or local laws. In some cases, failure to disclose known defects about the home from buyers could result in a lawsuit against the home seller. Furthermore, you as the agent have the responsibility to quickly disclose these details to avoid compromising the seller’s best chance to get the best price for their home.
Home Sellers With Equity
As a real estate agent representing a seller who has equity in his home, you will have to work with the debtor’s trustee and attorney, and sometimes have to hire your own attorney in order to continue with the listing. Bankruptcy trustees usually tend to keep the real estate in the bankruptcy estate if the property is not the debtor’s homestead. This also happens if the property has value in it above the homestead exemption. Here, you as the listing broker need to try and have the bankruptcy court reaffirm the listing agreement. You should also seek to become the broker for the property’s new owner.
It is difficult to maneuver such deals since the home is no longer in the possession of the property owner. Obtaining full information about such properties becomes challenging since even the lender may have very little information about the physical state of the property. Usually, information out in the public on foreclosure properties helps the agent but may not be complete. Agents are, however, required to make all known defect disclosures by their state’s laws. Along with this, you should encourage buyers to have a thorough inspection of any property before purchase so as to protect yourself from any liability afterward.
As a real estate broker, you are in a position to ask for any relevant permits, repair receipts and inspection reports from a homeowner. Those who remain residents in their homes should forward these documents to enable you to work within the laws to enable a successful transaction. You should also have recent pictures of the current state of the property, have copies sent to the lender, and acquire a receipt. In addition, inquire about past-due condominium assessments or homeowners’ association dues that might create a lien.
The state of title is important in order for you to know whether you require the use of any special powers to maneuver the sales process. These include the addition of costs to fix up the property before the sale, which may need court approval. Usually, this happens because the lenders who extend credit towards these costs will need to know that payments treated as an expense of administration will be made ahead of debts filed. Getting these approvals delays the entire process, and some liens can be avoided entirely if you as the agent had prior knowledge and therefore filed for approval early on.
Approval For Sale Go-ahead
Once everything is settled and you have approval and end of escrow, notify all involved creditors. Creditors are entitled to information on the terms of sale of the property and a 21-day notice of the sale of the mentioned property. You ought to avoid any delays in the process that would deter closing the deal. This happens when you make the mistake of appealing for a reduction in the notice time when court hearings take place on certain days of the month.
Whenever time is a factor to be heavily considered, you should only work with the bankruptcy attorney to help deal with it. The entire process is long, tedious and requires a series of court hearings and approval before the sale of properties involved in bankruptcy cases can push through. Creditor disputes, avoiding liens and court approvals on the sale of the property take up more time to solve, and when they do, an extra 14 days is given for any appeals.
You may also experience clients who want to make sales after bankruptcy, which can potentially bring up further issues. This includes the information left online indicating past bankruptcy cases. The property, which would be subject to ownership by the bankruptcy estate pending a full effective discharge in records, could also be subject to the debtor abandoning the property. The debtor’s bankruptcy attorney should be in a position to help you solve these issues so you can go ahead with the sale of the property. Your decision as a realtor to take on any of these cases should, however, be made carefully and with proper knowledge of the law on bankruptcy so as not to hurt your career and deliver the best terms to your financially distressed client.