Real Estate Solutions Provider · Baltimore, MD · Member since 2014 · 571 posts · 452 votes
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
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.!
@Eric H. I'm not familiar with bankruptcy procedures here, but I'll be following this topic to see what others say. In the meantime, could you clarify a couple things so it's more clear to me as I follow along?
What is a contingency cash contract? Why would the seller want this?
What is the seller's offer? If the seller owes $100k more than you would offer, it must be a very good offer for you to be considering it.
@Matt PowellI am not sure what a contingency cash contract is. Breaking it down word by word I assumes it means a contract to purchase using all cash contingent upon court's approval. The seller didn't provide asking price. She just wants me to make an offer.
Generally, any property that is subject to the Court's control is going to require the Court's approval to sell. If there is a secured creditor, they may (probably) also have to approve. I would have a lawyer look over this deal to see if it is possible. You might start with the seller's bankruptcy lawyer as they will know what can and cant be done. Just remember that attorney does not represent you. If you go forward, you should get your own legal counsel.
You never know what's going to happen. I got a great deal for a commercial property under bankruptcy. It took about a week to get everyone to sign off on it.
I wouldn't hesitate to put in a contract contingent on court approval. As long as it was at a price that worked for Me and I was in a position to pull off the deal. It wouldn't be something that I would expect to assign the contract on.
I wouldn't hesitate to put in a contract contingent on court approval. As long as it was at a price that worked for Me and I was in a position to pull off the deal. It wouldn't be something that I would expect to assign the contract on.
@ Ned just for clarity, why wouldn't you possibly assign such a deal?
Bankruptcy lawyer; not enough information to make a determination. A lawyer licensed in your jurisdiction* will need to review any proposed contracts for legal sufficiency. Generally speaking, you must have Trustee approval for the sale of any property that is part of the bankruptcy estate. Generally speaking, these kinds of contracts may or may not be enforceable in your jurisdiction. It depends.
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.!