Buying A Property from Owner in Bankruptcy?

Question

So, I have been researching a house for over a year that had been vacant, and finally tracked down the owner through a skiptrace company. He told me the house originally mortgage was free and clear, but he took out a home equity LOC. He then filed bankruptcy and left the house pending foreclosure.

Deed is still in his name, but when i asked about possible shortsale, he said he wanted nothing else to do with the house and didn't want to pursue anything further. Of course the bank holding the note,(BofA) says they have no record of the property(probably because they never processed and acquired the deed)

Is there any way to get to make an offer on this property or will it probably just sit in limbo forever? Maybe speak to a bankruptcy attorney who may know the process? I've noticed this scenario with a few other vacant properties i have found.

He also mentioned there may be unpaid taxes on the house. i'm wondering if buying it as tax lien may be a way to "force" the bank to take action, as they will either pay the lien or forfeit the property.

Thanks!

Jean Norton · Answer

Find the trustee that is in charge of the bankruptcy and offer to buy it.

Ben Skipworth · Answer

what happened with this?

Morris Lucas · Answer

thanks k. Marie!

I'm going on the site now!

Good idea on getting a title company

I'll let you all know what I find out!

Thanks again everyone for your help!

Account Closed · Answer

The BK file is public info at pacer.gov.

I think most foreclosures in GA are non-judicial as it's a trust deed state?  So has there been a notice of default or sale notice recorded (with the county recorder)?

Call a title company and ask for a property profile. It should include the lien amounts and the recorded foreclosure docs.

Morris Lucas · Answer

Wow, a lot of information to take in! I just left the courthouse looking up the liens which was no help, couldnt find anything on pending foreclosure or recent deed changes. I plan on going to the bankruptcy court this week to do more research on this property.

I'll contact the owner once more and dig a little deeper, it seems

I am getting close! Thanks you all for your help!

Wendell De Guzman · Answer

I work with sellers in bankruptcy all the time. When a BK is discharged, the owner's OBLIGATION to pay the debt is discharged but NOT the property ownership. What this means is that the bank cannot go after the owner for deficiency judgment (if any). This is true primarily for Chapter 7 BK. Chapter 13 is a different animal and more complicated.

But here's the thing: the owner still owns the property so he has something to sell even if the BK is discharged.

Bottomline: you need to do your research and find as many details as possible like...

1. Is it Chapter 7 or Chapter 13 BK?

2. Is the property included in the BK filing (I've seen a case where the owner thought the property is included but it was actually NOT)?

3. How long will it be before the BK is discharged? While a property is in BK, technically, he can't sell it to you unless he gets the trustee to agree to remove the property from the BK.

4. Are there any second mortgages on the property? In IL for example, 2nd mortgages become unsecured debt in a Chapter 13 BK

5. What about other liens (mechanics liens, HOA liens, etc)? Are they included in the BK filing?

6. In your state, are municipal liens wiped out in BK or not? (talk to a BK attorney in your state)

Account Closed · Answer

There are many threads on this topic here on BP already.  Sorry I don't know how to find them. :)

Owners who have had their house debt eliminated in BK are typically totally unmotivated to participate in the short sale.  If it were me (and it has been, I love  BK/foreclosure leads), I'd get an authorization to release information from the borrower so you can talk to the lender about what is actually going on with the loan.  My strategy is getting the deed and then negotiating a discount with the lender.  It's important to know the entire title and debt picture.  Property taxes, HOA fees/liens, any code compliance or abatement issues.  Take a look at the BK file to see what type it was and if it was completed and what debts were eliminated.

I'd forego contacting the BK trustee until you have more details. If the BK was already discharged, the trustee doesn't have anything to sell.

Morris Lucas · Answer

Im not sure i didn't ask, he just told me he "gave up the house in a bankruptcy", and didn't want to get into trouble by pursuing any deals.

I like the idea of finding the Bankruptcy trustee, not sure how i would find the trustee, gonna go to the courthouse today to research.

The homeowner seemed like he didn't really want to be bothered further, so i didn't want to push too much.

I know house needs rehab, all off copper has been taken, as well as anything else of value. Maybe a good buying edge to get a deal.

Wendell De Guzman · Answer

@Morris Lucas , what type of bankruptcy was filed by the owner? Is it Chap 7 or Chap 13?

Buying A Property from Owner in Bankruptcy?

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