Many people attempt to purchase real estate from a bank sale in order to get a better price.If you buy at such a sale, you may be able to pay a price that satisfies the bank's debt, but could be substantially lower than the fair market value of the property.The sale of property in bankruptcy is a special category of sale.Special procedures must be followed in the sale of bankruptcy assets.Your purchase comes with additional protection in the form of a bankruptcy court order.
Step 1: You can hire a real estate agent.
Buying any other property is the same as buying a property through a bankruptcy case.You might have better results if you work with a real estate agent.An agent can assist you in drafting and reviewing the paperwork throughout the process, and they have access to property listings that you may not have.
Step 2: Newspaper advertising for sale notices.
Real estate that is going to be sold as part of a bankruptcy case must be advertised in order to maximize the price.If you look in your local newspaper or large city newspaper, you're likely to see a section dedicated to listing bankruptcy sale notices.
Step 3: You can use online search features.
Some commercial real estate companies on the internet offer search features that allow you to search for properties that are either in foreclosures or bank owned sales.You can set daily e-mail notifications that show such properties.You can use these features to find properties that are near you.
Step 4: You should consult with an attorney.
Buying a property from a bankrupt estate has different concerns than buying it directly from the owner.It is a good idea to talk to an attorney.The attorney can help you understand the sale procedures.Whether the property is sold free and clear of all debts is one of the legal issues that arise from a bankruptcy purchase.
Step 5: Pre-approval is required for financing.
When a property is advertised for sale in a bankruptcy case, the procedure tends to move quickly and you are not likely to be able to slow it down to get financing.There are many interested parties in a bankruptcy sale, including the debtor, the court, and the mortgage holder.The people are waiting for the outcome of the property sale in order to find out if there will be any money left in the case.The court isn't likely to delay a sale to accommodate you.
Step 6: Determine who is the legal owner of the property.
The legal owner of a property may not be the individual debtor in a bankruptcy case.You will need to investigate the court records to find out who the legal owner is.If the debtor has filed a Chapter 7 bankruptcy, the property will be transferred to a Trustee.The person with authority to negotiate the sale of the property is the bankruptcy Trustee.You can find out the identity of the Trustee by contacting the Bankruptcy Court.If the debtor has filed a Chapter 11 or Chapter 13 case, they retain legal ownership of the property and have authority to negotiate the sale.
Step 7: You can attempt to view or inspect the property.
When a property is sold through a bankruptcy case, it is usually sold as is.If you want to get permission for a more thorough inspection, you should try to contact the debtor.If you choose to hire a professional home inspector, you will be responsible for the cost of your own inspection.An open house can be advertised in the newspaper when the property for sale is listed.You should view the property in more detail if you see this.These properties are considered distressed.If you buy the as-is property, be aware of the risks.
Step 8: Determine the fair market value of the property.
Internet sources can help you with some of the work, but a real estate agent should be able to help.The property needs to be compared with other properties of similar size, function and location.Find out if similar properties have sold recently in the area.The property you are considering should have the same fair market value.This process is very easy to do on some online websites.You can simply type in the street address of any property and the site will find it on a map, identify nearby sales, and present you with a range for the property value.Some websites offer this feature, such as zillow.com.If you work with a specialized foreclosure agent, you can get a professional inspection done to find liens on the foreclosed property.
Step 9: There are outstanding debts on the property.
If the property is being sold as part of a bankruptcy case, you can go to the court and research the obligations that the debtor reported.The debtor's schedule C is the list of secured debts.To see the total amount of mortgages on the property, review it carefully.You may need to look at the other documents as well.It is possible that the debtor left a creditor off of his Schedule C report, and that they might file a notice of secured claim.If you work with a specialized foreclosure agent, you can get a professional inspection done to find any liens on the foreclosed property.
Step 10: Determine your offer amount.
Knowing the amount of debts on the property can help you figure out a purchase price.You don't want to exceed what you believe is the fair market value of the property, but your offer will probably need to surpass the amount of outstanding loans.The creditor can object to a sale price that they consider too low.Consider a home that has a first mortgage of $150,000 and a second loan of $70,000, for a total of $220,000.The first mortgage would only get partial payment if you submitted an offer of $100,000.It is not likely that such an offer would be accepted.If you have the same data, you can estimate the value of the property to be $300,000.You can make an offer of $220,000.You would have the house for 70% of its value if both mortgages were paid in full.The mortgages exceed the value of some properties.You wouldn't be expected to bid more than the fair market value of the property.The mortgage holders are likely to lose money in such a case.Most lenders with first and second liens will enter a bid equal to the loan amount to ensure they receive the property and can dispose of it in a separate transaction.
Step 11: Purchase price can be negotiated.
You can make an offer after you have decided what you think is a fair price for the property.As you try to reach an agreement, you should be prepared for some back-and-forth communication.You can either reach a common price or give up on the purchase.
Step 12: A purchase and sale agreement should be reviewed.
A purchase and sale agreement is likely to be presented to you by the debtor or owner.If you want an attorney or real estate agent to help you, this is the stage.The terms of a standard purchase and sale agreement may not apply to a bankruptcy sale.A standard sale may be made contingent on obtaining financing, but a bankruptcy sale will usually demand that you have that pre-arranged.You should check the following details about the agreement: accurate description of the property, accurate representation of purchase price closing costs, and special stipulations closing date.
Step 13: There is a hearing in the court.
This is the biggest difference between a private property sale and a bank owned foreclosure sale.The sale of an asset in a bankruptcy estate must be approved by the judge.The estimated fair market value of the property and outstanding loans will be reviewed by the judge.The main purpose of the judge is to make sure the procedures are followed and that the sale is in the best interest of all parties.
Step 14: Be prepared to bid.
The purchase of a property through a bankruptcy case is not final until the court orders it.Signing a purchase and sale agreement is subject to final approval of the court.Depending on the value of the property, the court can turn a private sale into an open auction.Consider an earlier example of a property with a mortgage of $220,000 and an estimated fair market value of $300,000.The two mortgage holders will be satisfied if you negotiate a sale price of $220,000.The rest of the debtor's debts would not receive anything.The judge can order an auction to sell the property at a higher price.A price between $220,000 and $300,000 would still be a bargain for the buyer, and would generate money to pay off the debtor's other debts.
Step 15: A court order is needed for a free and clear sale.
The judge will approve the sale if you buy the property through your own negotiated agreement or through a bankruptcy auction.An order that states that your purchase is free and clear of liens, encumbrances or other claims to the property can be used to complete a sale in bankruptcy.The free and clear order means that you don't need to worry about other mortgage holders demanding payment for your loans.The only thing they can do is to be a creditor in the bankruptcy court.