Everything went well including obtaining a contract (within 30 days).

 

It was about 2 weeks into mid-December when I found out that Mr. Seller filed for bankruptcy. He has a Dont Ask, Dont Tell attitude. It is something he violated because the terms of the divorce states he will short sale the house as well as not make any major changes on his finances.

 

Nevertheless, we are where we're at today.

 

Something went wrong (relationship between Mr. & Mrs. Sellers) during the holidays and now Mr. Seller does not want to file for Bankruptcy petition to release the property in bankruptcy so we can proceed. He's insisting he doesnt care anymore (most likely to get back at Mrs. Seller because he knows she wants to short sale it).

 

Is there anything else Mrs. Seller and I (listing agent) can do?

 

FHA Short sale with Wells Fargo.
BPO in. Offer well within range.

Now, pending negotiator's review.

 

But seems that it's now in the Bankruptcy Dept (on hold) until the Bankruptcy Petition is filed.

 

 

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I like the BK most of the time ,as the lender has to give the seller the chance to sell ,and as long as it's in the price  range they  approve it  ,you just have to wait for it to be discharged

It depends on how important this short sale is to Mrs. Seller.  She can go back to the divorce court and have it issue an order, ordering him to file for a release of stay (because you say by not doing so renders him in violation of the terms of the divorce agreement).  I would also think that he is in breach of the sales agreement, which has an implied (if not specific) term that he will not prevent the closing of the sale of the house, which he is effectively doing.  

 

And if I'm right about that then you and the other agent have a cause of action against him for breach of contract for the loss of your commission.  I have never sued a client nor do I ever intend to and would advise against it - I'm just laying out some options. 

 

You should also have in place a contract (separate from the MLS agreement) with the sellers.  It should explain upfront the pitfalls of the short sale procedure and should also contain a clause obtaining their written agreement to cooperate in circumstances such as these.  

 

However the best way to deal with this problem is by obtaining the willing cooperation of Mr. Seller, and one way of doing that is to ask the lender if it will pay sellers walk-away money.  There's nothing like self interest to gain co-operation!  

 

My best advice I'm saving for last:  talk to a competent attorney.  Because I have had so many bankruptcy issues with short sales I have done 2 things: (1) I found a closing attorney who also actively practices bankruptcy.  She now acts as go-between between me and the client's bankruptcy attorneys. (2) I sat down with a bankruptcy attorney and conducted an hour interview on the ins and outs of bankruptcy and how to deal with various short sale/bankruptcy issues that seem to crop up.  I will be publishing my blog on this subject on activerain soon. 

I typically do not deal with short sales where the owners are divorced or in the middle of a divorce. I'm not going to waste my time for 6-12 months just to have one of them try to hurt the other by not showing up for closing. This is not to say I haven't done a few divorce/short sales but if they tell me they can only meet me at different times because they can't stand the sight of each other I move on to another deal. 

 

As far as a solution I agree with Neil: Politely remind Mr. Seller he signed a contract that has legal consequences.  

 

Good Luck!

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