I was just asked to help with a short sale where the seller filed bankruptcy over a year ago and tells me that the mortgage on her property was discharged. First, I didn't know one could have a mortgage debt discharged. So, she says that she owes BofA nothing and the only reason she has to do a short sale is because she is still the deeded owner and she wants her name off the deed and be done with this property.
I am very naive about bankruptcies and how they function and have planned to pay for a bankruptcy attorney to sit with me and explain it but in the meantime I just don't know if I need to handle this any differently. If there is no debt, then why is it a short sale? Is that a stupid question?
**********************************
like buttons
Replies
The short answer is because there are still liens on the property. The homeowner is not responsible for the debt, but in order to sell the home, the liens must be removed and if it's underwater the way to do it is a short sale.
Hi Julissa,
I deal with this situation all the time. It is not a "stupid" question. What J Douglas said was right. It should not cost you anything to sit with a bankruptcy attorney. Most of them do not charge for the initial 30 min consiltation. Basically say that you needed more information, they can explain at no cost to you.
Your file is handled just like any short sale, the difference being that you do not have to provide the extensive financials that most short sales require. Your lender will still ask for (among other things) the listing agreement, MLS sheet, contract, disclosures, etc. They will also ask for a copy of the discharge (even though they already have it) ;-) .
The deficiency with respect to the loan has been discharged, however, the bank still has rights to pursue the collateral. (home). Their efforts are not against the seller but the property she pledged as collateral.
If you need any help navigating, feel free to contact me directly at shortsale@tropicaldreamrealty.com. I will be happy to assist.
Best of Luck!
Carmine R Biello, Jr.
Hi Julissa,
It is a good idea to sit down with the bankruptcy attorney just to hear what he/she has to say. I had one last year where the seller had filed and the debt was discharged in bankruptcy. The seller is correct, a bankruptcy does not remove seller as owner, it just relieves the debt. Eventually, BOA will file for foreclosure to regain title so a short sale may be the best option for the seller. It is/may be a short sale as the bank will be trying to minimize the loss and will have to approve the deal after the seller accepts an offer.
In my non legal opinion, it is better for the seller to now help the bank sell the property, not just for the financial incentive the bank may throw at the seller but to also prevent a double whammy of bankruptcy and foreclosure on seller's record.
I am not a lawyer, but did deal with this situation last year.