Be Aware When You Work with Short Sales

That's good to know because I was about to make 25-30 offers in the next couple of days and a few are on short sales. Thanks for the heads up!

WHEW!!!! good bit of news to share with the family. Wow it seems if this money goes back to the bank, Right? Sounds one sided to me. They were the ones the helped create this mess, and they will keep their fingers in it till the end. Am I saying this right?? Anyway, very valuable bit of news...Jan

Are there any new forms to go along with the short sales besides informing everyone of your intent as an investor? If so, are they supplied on this site?

People and property are two different things!If they can not lien the property then they have no right to come after the funds from someone else.Short Sale is a legal sale!

I recommend that you disclose this information on the addendum that you attach to your short sale offers. YOu may need to include some additional state forms.

I am not sure of what documents they are going to use just yet, but I am sure we will find out soon enough. At least they will be consistent throughout the industry.

I understand what you are saying, but the bankruptcy court has different rights when the property was originally part of the bankruptcy filing versus if it was never included in the bankruptcy filing. It owuld not be included if it was sold prior to a bankruptcy being filed versus after a bankrutpcy is filed.

If the property is liquidated and was originally part of the bankruptcy, then they have more rights to pursue funds. If you disclose what your intentions are as an investor and it is accepted and the proeprty is liquidated, it diffuses their arguement and ability to go after additional funds after the fact.

Thanks for the heads up, I am a newcomer and things like this are very important before the ball starts rolling!):):

Thanks for the headsup. If this is the case, how can we possibly make money in shortales. Maybe the Dean Admin will do something about this....dom

Doncar1023 you can make money with short sales still, but you jsut need to make sure you disclose what you are doing and or talk to a well versed real estate attorney who has experience with investor related deals and short sales. They may know what is occuring in your local area. You may not see the same trend as we are seeing here.

derling

In what areas are you seeing banks pursuing the investor to try and recoup their loses? Do you know if short sales require seasoning? It is my understanding as banks agreeing to short sales will not agree to an assignment of contract. Do you know if there are guidelines or is it up to the individual institution until 2012? I am in Colorado.

Just be sure there is total transparency from start to finish period and if there is a BK looming anywhere be sure to consult an attorney. Also you need to suggest to every client to consult their own attorney as well. And remember

“Mr. and Mrs. Jones I want to be clear, this is not a nonprofit company it is a for profit company.”

SPIShortSales is right that bankruptcy does not stop foreclosure...it will prolong it. When a bankruptcy is filed on a property in foreclosure it will place a "stay" on the collection efforts of all creditors for a period of time, but the lender could move forward with the process if they can get that "stay" to be removed, so it does prolong the foreclosure process and offer the homeowner a bit more time to deal with the situation.

Here is a link to the basics of different types of bankruptcy filings: http://www.uscourts.gov/bankruptcycourts/bankruptcybasics.html

In fact in the chapter 7 section of this website it states "Filing a petition under chapter 7 "automatically stays" (stops) most collection actions against the debtor or the debtor's property. 11 U.S.C. § 362. But filing the petition does not stay certain types of actions listed under 11 U.S.C. § 362(b), and the stay may be effective only for a short time in some situations. The stay arises by operation of law and requires no judicial action. As long as the stay is in effect, creditors generally may not initiate or continue lawsuits, wage garnishments, or even telephone calls demanding payments. The bankruptcy clerk gives notice of the bankruptcy case to all creditors whose names and addresses are provided by the debtor."

If you are pursuing a proeprty that is entering foreclosure and the sellers have just filed for bankruptcy, here is some additional information to know about the process. Just remember, you don't ever want to offer legal advice to the homeowner unless you're an attorney. There are two typical types of bankruptcies that the seller may enter into.

Chapter 7 - Liquidation
Chapter 13 - Reorganization

With either type, if you are going to buy the property, you are going to have to contact the Trustee of the Bankruptcy to get the property released. You will need to get a letter called "Affidavit of Abandonment for Real Estate & Asset" This letter will allow you to obtain clear title so you can close on the property with your seller. Bankruptcy puts a hold or "stay" on the foreclosure process or any other debt collections period. This will continue until it is completed or a "release of stay" is issued by the judge for the lender or lender's trustee to proceed with the foreclosure.

If you try to do anything with the homeowner while they are in bankruptcy it can be considered "fraudulent conveyance" since the asset (the property) you want to buy legally isn't in the owners control at that time. In fact, their's a Federal Law that states that ANY conveyance while the property is in the bankruptcy will not be valid! The bankruptcy has control over it. You see when a person files for bankruptcy the Bankruptcy Court will assign a Trustee/Attorney to manage the debt situation for the homeowner until it is discharged or dismissed.

The only way you can get the deed legally is stop the bankruptcy or get the Trustee of the Bankruptcy Court to agree to release it. You will need to contact the Bankruptcy Court Trustee or Attorney and tell them you have interest in buying the property. Most of the time if they deem the property has equity, they WILL NOT release it. That's why it is vital to communicate with them about doing a short sale and the property is not worth what is owed on it. Therefore it essentially has negative equity. It IS NOT EASY...but it is a doable process. You will need to have all your contractor reports, appraisals, supporting documents ready to send to the Bankruptcy Court Trustee at a moments notice proving the lack of property value.

It usually takes a minimum of 20 days before you get an answer. That is of course if they are not backed up with other files in front of yours. Before attempting this make sure the property you're dealing with has a significant upside to it. I'd say at least $30,000 profit or you're probably wasting your time. It can be profitable, but you must pick and choose your battles. Be sure and keep a pulse on how much time you have before the sheriff sale too, becasue once the property is release from bankruptcy the lender has a right to resume the foreclosure proceedings immediately.

Hope this helps!!!