Seller wants contingency contract for bankruptcy court

[Eric H.]

Greetings BP Fam,

Motivated seller wants a contingency cash contract for bankruptcy court.  Seller owes mortgage that is at least $100,000 higher than what I would offer. Is seller just using me to provide contract for court or is this a potential deal? Anyone familiar with bankruptcy court operations? I'm assuming court would have to approve cash sale. I don't think they would approve a cash sale of $100,000 lower than mortgage without exploring other options (short sale, auction). Where does mortgage company come into play here? Baltimore, Maryland, taxes, bankruptcy

Thanks in advance!

Sincerely,

E. Harris

[Brian Tome]

Bankruptcy is nothing more than a process whereby a debtor's assets are sold and the proceeds distributed to his/her creditors (assuming it is a liquidation vs. a reorganization).  A trustee/receiver is appointed to review and approve the sale of any real or personal property subject to seizure under the code provisions and will make recommendations which the court will usually approve.  It can take a lot of time for a trustee to assess the value of an offer and form an opinion.  It can also take time for the court to approve the trustee's recommendations.

I am sure @Ned Careyrecommends only making an offer if you are sure you can close and not assigning the deal because you could cause serious delay and inconvenience to the court and the debtor if you make an offer that doesn't close very soon after the deal is approved.  Therefore, a good reputation, a cash offer with no contingencies supported by proof of funds, and a quick closing date will make your offer much more attractive.

As far as the price, the trustee and court will likely approve significant loss on the asset if the secured lender approves it.  When there is no equity in a property, the only debtor that will be effected by its disposal at below market value will be the secured lender, and they are often times more motivated by external market conditions and available money.  In other words, a bank or mortgage lender will sometimes approve a ridiculously priced deal because they need the cash on deposit for a purpose that is totally unrelated to the property or the debtor.

No matter how this deal goes, I wish you the very best of luck @Eric H.!