Bankrupt owner, can I still help or is it too late?

Question

I saw at duplex today that I've been spying and upon arrival my realtor informed me the owners are going through a bankruptcy. Being on the market 100+ days it looks like the sale of the property would have helped them. Can I go around the Realtor and contact the sellers directly to try to pay them a low ball cash offer so they can keep themselves up and going? Or is that illegal and immoral? I feel like I would need to still pay the Realtor for services rendered.

Also, what is the process for that bankruptcy. The Realtor informed me the property will go into the hands of an attorney who will then either accept or not accept the offers made? At the very least I should put in a low ball offer with the attorney, correct?

Kim H. · Answer

As a real estate agent, I will tell you that even if you go around the agent, while the property is listed, the owner will still owe the agent a listing fee. Why not just make a low ball offer through the agent? If there is any way to work out the deal and help the seller, the agent will do it. We are obligated to present all offers to our sellers and work in their best interest and sometimes that does mean showing them that a low offer helps reduce future carrying costs and financial issues. So call up the agent.

Matt Devincenzo · Answer

Steven J. it sounds like you think that by dealing directly with the home owner you can somehow score a better deal? I'd advise not doing anything like that, since the seller is in bankruptcy they can't just sell you the house, it needs to go through the atty or you could screw up their entire bankruptcy plan. If you would like to buy the house your best method is to go through the agent and make an offer, just because it's going through an agent doesn't mean you can't get a deal.

Dion DePaoli · Answer

As a function of the BK, the borrower/owner would have either had to reaffirm the debt or surrender the asset. Reaffirming the debt essentially means the borrower agrees they owe and they will have to pay it back. If the home was surrendered, a discharge order will be issued for the mortgage. If the home was selected to be surrendered, the mortgagee may opt to finish the foreclosure to deal with any additional encumbrances on title or a Deed in Lieu can also be arranged along with a directed sale of the property to produce funds to satisfy the lien. Legally the Trustee will become the party who controls the asset and usually moves to work with the Mortgagee to satisfy the lien through disposition. There is no way to know what is happening on this asset unless you ask a knowledgeable party which may or may not be the agent. Do not simply assume, the home was surrendered or seized (due to equity) by the Trustee, it may still be fully controlled by the borrower/home owner. The agent could tell you who they report to, which is the communication line of folks to follow. Careful not to confuse conversation where the owner's BK counsel is referenced versus the actual formal BK Trustee. The borrower could have reaffirmed the debt which caused an automatic stay of the foreclosure. The borrower would then have an obligation to make payments or the mortgagee could file for relief. This may have been what the borrower did, if they and their counsel believed it was best suited in the BK plan. This then means the borrower still has the legal authority to direct the asset. The borrower and their attorney will have to file a motion to sell which is what the Trustee will use to decide on approval and will use to make decisions on the application of any net proceeds from sale related to the BK plan. The moral of the story, you would need to really get to the bottom of who is legally controlling the property. If the Trustee is in charge, they likely already obtained some RE evaluation report, whether a CMA, BPO or appraisal and have a notion of how much they will sell the home for. They are not without their quirks with pricing but can be accommodating if you make a case for a lower market value than perhaps what they initial thought or received from the vendor which delivered the evaluation. If the home is being controlled by the home owner still, then you maybe dealing with pie in the sky ideas of value and sale proceeds which includes emotional attachment. Sometimes those are a little harder to negotiate. I am guessing since it sounds like the property is fairly stagnate in MLS, the property is still controlled by the borrower. If you hit the 120 DOM mark and there has been little price reduction that may be further evidence of the same. Most Trustees look to liquidate the home fairly but quickly and tend to not let the sale extend to much past normal marketing times for the area. They are not confused, like an owner might be, as to the idea, a properly priced listing produces a sale in the normal marketing time for the area. Gaining an understanding of who you are actually negotiating with may affect the strategy you use to negotiate and the offer level you put forward. Good luck.

Brian P. · Answer

Don't give it up yet. First you will need the approval of the bankruptcy court but before you get to that point, ask the agent to set up a meeting with the sellers, the agent, and you. The goal to set up a sale and with face to face and no game playing maybe you can work something out. The agent takes a flat fee for their end. At the present rate they are going to get nothing so if they could pull out say a 2% fee they will likely do a dance. You don't say what encumbrances there are and the price you want to get it at, and etc. If your not greedy you should be able to work out a deal.

Steven J. · Answer

Thank you@Matt Devincenzo I like straight forward thinking so your response is just what I needed. That goes with my gut feeling about it. I appreciate it!

Steven J. · Answer

It doesn't look like that's the case. Is there a way I can legally and ethically contact the seller, hear their predicament, find a deal and still leave a good relationship between me, seller, Realtor(s), and tenant?

Wayne Brooks · Answer

Do you have any idea if the property is upside down? If so, it's going to be a short sale, or foreclosure, anyway.

Steven J. · Answer

Okay, that makes sense. @Kim H., you make a good point. I don't plan on going around the agent, and it seems like a situation that would hurt the relationship (which I'd rather not do). I was mostly just curious as to whether or not this situation would be considered going around the agent and from what it sounds like, it is. I'll avoid that one. Now what about the bankruptcy process in particular? At this point, what is the attorney thinking and how can I help that person out so I can get the property on a low ball offer?

Wayne Brooks · Answer

Why do you think it's so advantageous to go around the agent, when they understand the process better than you.