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Need advice...fell in love with an apartment, bid was accepted. After the contract comes back we find out that the delay in getting it back was the seller declared bankruptcy. Should I walk away now? Should the seller's broker been a little more aware, don't they have to disclose that info?
I would immediately call you own lawyer (assuming you have an excellent real estate attorney handling your end of the equation) and have them take you through all the specifics.
In a case like this, each individual transaction will vary, and so without all the specific details no one here can be of much help.
If your attorney only specializes in real estate, they may need to converse with a bankruptcy specialist as well.
seems if the transaction didn't go through, the asset could be used to settle owner's debt.
The concern here is that the seller's title to the apartment would be clouded by liens making it impossible for the seller to deliver the property to you at a closing. This could really gum up the works. Definitely a time to be speaking with your attorney.
I would guess the apt would be an asset to go through bankruptcy court, with the contract holder being first in line to acquire, if he still wants to do so? But wtf Im no lawyer.
I am sure that if we go through with this, we won't be legally able to find out all that we would want.
On the other hand, why would a broker take on a listing when there was a bankruptcy involved? When we looked at the place a second time there was no mention of it whatsoever. And there was no mention of it in the listing as well.
> On the other hand, why would a broker take on a listing when there was a bankruptcy involved? When we looked at the place a second time there was no mention of it whatsoever. And there was no mention of it in the listing as well.
depends on the timing. probably the seller was on financial distress to begin with w/out the realtor knowing 100%. the seller was trying to sell at a lower price to speed liquifying assets "gambling for resurrection". but he might have been too deep in debt though to pull it through.
Howard: Did your attorney see anything in the minutes that this unit owner has been in arrears?
That would have been a sign.
Nothing about being in arrears, Truth.
I don't think you can look to the broker for blame, there are plenty of other things brokers do badly or improperly but nobody can predict when someone will file bankruptcy. Even if they are in trouble, someone could spend 2 years warding creditors off before this option.
It's just bad luck.
I would walk away though if there is a receiver assigned to the bankruptcy I dont see why you couldnt re-contract with him.
All our advice is nice but talk to a real lawyer.
Howard: Amazing how a person headed for bankruptcy still paid the cc bills.
and of course talk to your lawyer because you already have one.
We had a similar situation with a seller who was in arrears with everyone -- IRS, State of New York, mortgage company, and the co-op. Neither we nor the dual-agent broker had any idea until a couple of days before settlement when the title search came back. (In fairness, we closed quickly -- the co-op wanted this guy out.)
The broker seemed honestly surprised and briefly afraid that the liens could sink the deal. There was less than $10k payable to the seller when all was said and done. I don't think the broker would've spent as much time on the deal as he did if he had any idea that a seller who stood to make no profit based on sale price was also hiding six-figure liens.
We and the broker had known that the seller and the co-op had various issues regarding house rules and unresolved damage allegedly caused to a neighbor's apartment, but were never informed of arrears. To this day, I'm not sure how much the board knew and wasn't telling.
The co-op board was VERY afraid of a situation like your seller's - especially in a small building that can't afford to operate without maintenance from a unit with 18% of the shares. We had a date for a board interview before the contract was even signed, and we were cleared to close one week later.
It sounds like your seller didn't get out in time.... as others have said, you need a lawyer. And co-op title insurance might not be a bad idea in this case if you move forward.
A sale approved by the bankruptcy court is likely to take care of most/all of the lien issues noted above. If this is your dream apt, I would hang in there as the BK court/trustee may be interested in liquidating assets, including the apt. As most noted above, though, you need an atty to guide you through all of this. It could be that your real estate atty has been through this before and can handle, but if you have any doubts, you should insist that the atty involve a BK colleague or consult a BK atty separately.
RUN THE OTHER WAY--FAST!!! The brokers will make it sound as though this deal would go through smoothly, but you should note that, at this point, they have nothing to lose, even if the deal doesn't happen because they aren't paying legal fees--you are. The attorney might also tell you that you will probably get the apartment eventually...and they may be right. However, they don't tell you that you may end up spending tens of thousands of $$$ in legal fees, and, in the end, the sale may never happen. You must pay the legal fees, regardless of the outcome at the end.
Once the seller has actually been declared bankrupt, nobody is really in control. These things can take years to resolve, especially multiple creditors are involved and/or there are title disputes. The courts move VEEEERRRRRYYYYYYYYYY slowly, especially regarding these cases because they aren't considered urgent. Also, the courts, lein holders, etc. aren't really concerned about inconveniencing you, either. They will take their time, working things out--to please the creditors (NOT you). By the time you realize down the road that the sale won't happen anytime soon--or at all, you would have wasted tens of thousands in attorneys fees. These cases are complicated, and the attorneys WILL charge you A LOT. RUN AWAY.
lad: the board omitted the arrears info. I'm not surprised.
Good luck, Howard.
i think what you could use is to find our who the sellers' mortgage is with and ask them -- them might love to close this and get the mortgage repaid as the title transfers
look at the bankruptcy docs --
if you were paying current market -- sale could be best outcome for creditors.
Your escrow needs to be confirmed as safe..
PLEASE DON'T LISTEN TO PEOPLE WHO ARE NOT ATTORNEYS!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
Not a difficult transaction, just an additional party (bankruptcy court) and potential extra work for the attorney. The Judge will give an order to sell the apartment free and clear of any creditors.
Get an attorney who know what they are doing. Make sure title is clean after the order, but your attorney should know this.
If you like the apartment, don't be scared.
The bottom line is your attorney should be able to handle this. They will help you and advise you on everything (including any potential additional legal fees).
Millions of apts in NYC.
I'd GTFO unless it's the steal of a lifetime.
Dealboy, you a broker?
The contract and rider should have something about bankruptcies or judgments too. If this seller is just starting in bankruptcy, it may take a little longer to get to closing. But if you like the apartment, don't be scared of more work.
Are you sure he has declared bankruptcy? If so and you know where, you can just look it up to see whats up in the filing. If he has, he sure aint allowed to just start selling assets
If it is done right, you won't have any problems as the bankruptcy court will issue an order that will make the sale free and clear of all liens. It may take some extra time b/c you now have to deal with the bankruptcy court. IF you are willing to be patient and really want the apartment, I would stick with it. Note that when a debtor files for bankruptcy, it has the ability to reject any contract it previously entered into. Thus, if the debtor wanted to, he/she could walk away from the contract. Doesn't sound like they want to, but they could. Just something to be aware of. If your real estate lawyer does not have a bankruptcy background, I would find one who does. As long as you are patient, you should be fine.
That isn't true Kyle. He can sell his assets after an order from the judge.
IMO A broker may say stay away but my guess is more because they don't want to wait as long for a commission check.
Thanks everyone. Wifey wants to stick it out so we are sticking it out.
no pain no gain
Interesting how no one here has mentioned to you that, if you are in contract, his filing for bk doesn't necessarily give you a free pass to walk. In fact, the automatic stay may mean you need to get a court order if you want to walk and that, perhaps, you could be sanctioned for trying to do so without getting permission, as a lot of people have inappropriately and unwisely urged you to do.
The court could well force you to buy the thing and the fact that you might be inconvenienced by the process would be absolutely and completely irrelevant.
You need to get advice from a lawyer, but my guess is that you are on a road that has no turns.
Howard35, You are correct to stick it out if you have 2 things. #1 Below market offer in contract in a rising market. #2 A Lawyer.....who will seek a speedy closing!
He will be sure to point out
A.That your funds are not "risk capital" and any unusual delay in the process will cause you harm.
B. That your loss of Access to your Pvt Property (be they funds or real property) Will subject you to further harm.
Also, the sellers Broker has no duty to you! His only duty is to his client , the seller! It does not matter if he was informed of the facts in question or not. He is charged with only one simple duty. ACT IN HIS CLIENT'S BEST INTEREST EVEN ABOVE HIS OWN! That is the main reason why you should always use a buyer's agent Vs A Seller's agent!
I forgot to mention that a sale through the BK court could be free of transfer taxes. At least it would be in a commercial deal (see the Alex and Flatoetl BK's last week). I assume your seller was paying the transfer taxes, but if the contract is renegotiated, keep that in mind. Your attorney should know about this. Could be the same case with the mansion tax.