Quick Help: Can a homeowner sell during bankruptcy before foreclosure?

Question

I received an interesting call today from someone responding to my first batch of letters sent as a RE Investor  :wink:. The home is going to be sold at foreclosure auction soon, and the homeowner chose bankruptcy as her option. My letter happened to outline all of her options (highlighting selling her home quickly to me) and she realized that she'd jumped the gun by choosing bankruptcy. She said she just paid $100 to get started and the process (which I'm not familiar with) is just beginning.

My question is, is it still possible for her to sell her home now?

If so, this leads to my next question. She owes more than her home is worth as a result of a 80/20 loan, I read somewhere that there are options for investors to successfully invest in homes such as these, however, I can't quite remember where I saw it. I didn't pay much attention to it, because my main objective as a wholesaler is to stick to obviously profitable properties (as a newbie) but perhaps some other seasoned vet investor might have a suggestion.

Time is of the essence here, anything I can do?

Ophelia Nicholson · Answer

I feel like almost a horrible person saying this but this is not a deal. I feel really bad for this lady and hope everything works out for her but from your point of view- you should pass on this and move to something else. Again its bad but you cannot save everybody. The foreclosure sale is soon- You could try short sale but that of course takes time and you'd need to do a short sale on the first and the second.  There is obviously no equity in the house and the poor lady seems to want to stay- since she filed bankruptcy to stay instead of listing the house to sell. If she wanted to leave she would have put the house on the market and tried to do a short sale. 
As a newbie I know your heart goes out to her but this is buisness and in reality not a good business deal. Sorry I may come off brash and harsh. :cry:

Melissa Bolling · Answer

Portia - a homeowner may sell at any time before a foreclosure sale and they may opt to sell in bankruptcy as well - this may be the best recovery option for the creditor(s)!!  However, if the offer is less than full price, the bankruptcy trustee must approve the offer and the distribution of the proceeds.  In addition, in a short sale, it is expected that everyone takes cuts - so you could expect a much smaller commission percentage.

She can also opt to have her BK dismissed - this will happen automatically if she does not submit her complete package of documentation to the court by the specified date.

Hope this is helpful!