seller in pending bankruptcy

I think you just have the bankruptcy court bless the sale. Make sure the order approving the sale provides you are a good faith purchaser and you are purchasing free and clear of any liens, encumbrances, etc.

gatinha1:

1. the hearing has been scheduled under Bankruptcy Code section 363(a)
2. by law the trustee must advertise your offer to seek higher ones

3. do not be shocked if you end up in a bidding war
4. there remains the question of Coop board approval of condo right of first refusal

5. a bankruotcy court MIGHT have the poeer to set those powers aside
6. go look at Bankruptcy Court Reporter online and sift the 363(a) sale and coop/condo decisions
7. or 15 or 16 Collier's on Bankruptcy section 363

I guess the other thing to consider is that if all this delays the closing (assuming everything leads to that point), it may be just far enough into the future that your mortgage commitment expires. With rates ticking up, you have to be ready for that unpleasant and possibility which could end up costing you some money.

Thanks everyone. I'm aware of the inherent risks of the process and the timing but was wondering if anyone has ever been through a similar proceeding and if so what the outcome was. The seller's attorney insists the court's approval is a "mere formality" but my attorney and I think this is highly unusual.

"The seller's attorney insists the court's approval is a "mere formality""

Everything is a "mere formality" ... until it's not.

Purchased a co-op where the seller was in Bankruptcy, our lawyer was sure to use language in the contract that made sure we were protected from any debts the seller was dealing with. We did have a small scare as our deal was moving along slowly and we were informed that we had x amount of time before the apartment went to auction, luckily our deal went through and well before.

We did not, however, have to get approval from any courts regarding the deal. Our seller had both a bankruptcy attorney and a real estate attorney who were in contact with our attorney. It does sound a little odd that you'd have to get approval but I'm not sure there is anything wrong with it.

architecta:

1. court approval for the sale is mandatory if it's the debtor's main or substantial asset
2. both kylewest and gatin are correct

3. approval of the sale could be delayed past the expiration date of a loan commitment
4. and court approval is not a mere formality

5. I have participated in 363(a) auctions
6. if other bidders show up and offer to pay nore, you either have to outbid them or you lose your deal
7. just like a foreclosure sale held on the steps of a courthouse

BEST ADVISE:

8. treat the sale hearing as a highest and best bidding process
9. be prepared to have to pay more and have a ceiling bid
10. but do not telegraph that you are willing to add a premium to your accepted offer

rb345, were the BK sales free of transfer taxes? How about the mansion tax? Obviously only the mansion tax is typically buyer paid.

W67 is sure there is a price at which someone would buy apple if it was headed to bk.

Thanks everyone this is great advice. Architecta - it sounds like the property you purchased was not included in the bankruptcy estate therefore the seller did not need the court's approval to dispose of it. Unfortunately we confirmed that this property is part of the bankruptcy estate and sale is subject to the court's approval. The coop has a right to purchase the shares per its bylaws. I also checked Pacer and did not find any record of a request for approval of the sale or a scheduled hearing date (which could be b/c of a delay in updating the docket but it's been a week since I made the offer).

Timing isn't much of an issue for me but I'm not inclined to enter a bankruptcy court bidding process under 363(a) if I don't have to. And frankly I'm also professionally offended by the flippant behavior of seller's attorney. I am an environmental and construction attorney with years of due diligence and contracting experience and I would have been much more forthcoming about a significant issue in what should otherwise be a simple transaction, instead of burying it in a rider provision and providing no information except the case number and an unsubstantiated hearing schedule. Surprisingly (or not) the attorneys are with a very reputable bankruptcy firm. Maybe this is a legal tactic in a bankruptcy but I don't want to be their pawn. Thanks again everyone!

gatinha5:

1. I think that 363(a) motions need to noticed at least 30 days in advance + extra time for mailing
2. why dont you call one of the judge's law clerks or the court's calendar clerk to ask about your purchase

3. the sale will be free and clear of all liens
4. taxes and Coop fees that would normally apply will likely still aply