Bankruptcy and Short Sales: Case Study
I have a home listed for short sale in Fort Walton Beach, Florida. The property was a primary residence, and the seller lost his job and relocated to another state to find work. He is also in the midst of divorce proceedings. During the listing period the seller was advised by his attorney to file for bankruptcy. Subsequently, we received an offer for the property. During the time period, the seller was unclear about the status of his property.
I called Citi, the short sale lender, to find out if they would entertain a contract even though the seller was going to file for bankruptcy. Citi said, “Yes”, we could proceed, and he could still sell his property. Citi assigned the file to a negotiator, ordered the BPO, and requested further documents from my seller.
A few weeks later, Citi abruptly emailed me and said they could not take further action, as the house was now part of the bankruptcy proceeding. I found it odd that initially Citi said to “go forward” with the short sale, then several weeks later mysteriously said they could not help. I made numerous phone calls through the Citi phone loop, and finally got a department who told me that they needed an “order by the bankruptcy court” stating they could proceed. So, I called my seller who called his attorney. The attorney provided the contact information for the court-appointed Bankruptcy Trustee.
I called the trustee, who was a magnificent help. He said that since the property had no equity, the court did not want it- there was nothing to divvy up amongst the creditors. He said that after the bankruptcy the property would go back to my seller, anyway, and he would be happy to help me and release it now. So he is sending me paperwork to proceed with “Abandonment”of the property from the bankruptcy court. If there is no objection to the abandonment within 15 days, the property will be free to short sell. Otherwise when case closes it will be deemed abandoned by law, anyway, and go back to my seller. The trustee also mentioned that Citi could have asked for “abandonment” to continue foreclosure, and had started to do so, but had “dropped the ball”. Perhaps that is why Citi initially started the short sale, then stopped in the middle.
The happy ending is that the young lady who has been waiting to purchase her new home will likely be rewarded for her patience, and my seller will have prevented a foreclosure.
It’s Wendy!
Wendy Rulnick, Broker, CRP, CRS, GRI, ABR Rulnick Realty, Inc.
Fort Walton Beach FL Real Estate
