I was recently approached by a fellow agent to process a short sale for her client who is going through bankruptcy. I have heard in the past to stay away from short sales when client is going through bankruptcy. Can I still help these sellers or should I avoid it?
You need to be a member of Short Sale Superstars to add comments!
**********************************
like buttons
Replies
On another thought . . . is it possible that you will be processing this short sale as an effort by a homeowner thinking that they are prolonging the foreclosure process until they can complete their bankruptcy? When I am processing a short sale, I have to provide the financials or I provide the bankruptcy documents which show the property in the discharge of debt. If you are processing a short sale and the bankruptcy is not finalized, you will be requested to provide the financials. Then, if BOA, you have their request for the 4506-T at initiation - that is a financial document. I haven't come across that one, yet, but have an image of uploading the bankruptcy in lieu of the 4506-T to satisfy that upload with an explanation.
Do the short sale first. The client can always file bankruptcy POST short sale if needed.
Per HAFA and the Settlement Terms, a borrower can not be denied consideration for a short sale while in bankruptcy. You can find the extact verbiage in the MHA guidelines (GSE) and the National Settlement Consent Judgement for the 5 big banks (non-GSE) and make it part of your negotiations with the lienholder(s). You will need to provide an authorization from the debtor's attorney, if in an active bankruptcy. Normally the Ch. 7 takes about 4 months to be discharged and the Ch. 13 is designed to stay open for 5 years. If you don't want to wait for the Ch. 7 to be dismissed, or if the client is in an ongoing Ch. 13, you will need the attorney to file a Motion to Sell. You will need to work with your client's attorney and wait for determinations by the bankruptcy court. I use PACER to check history of bankruptcy. It is at least twice the work of a regular short sale. Most loss mit departments think they can't do a short sale while in bankruptcy, so you have to escalate. The borrower is supposed to be assigned a SPOC that is familiar with bankruptcy, but those are few and far between. It is more accurate to say that the distressed homeowner can not be denied consideration for a short sale or other foreclosure alternatives, but the final approval has to also be approved by the bankruptcy court, if in an active bankruptcy. It's nothing but a good time!
Takes longer and you have to be patient, but when the court releases the property you should be able to continue with the sale so long as the court is on board.
I dont believe the client has even filed. So you're saying I should wait until the bankruptcy is complete?