Realtors need to know this about bankruptcy

Realtors may be asked to sell a house that is underwater; the amount owed on the mortgage is less than the value of the property. What is the best approach? First, find out everyone involved in the transaction and what they are doing – who is working on for the bank, does the bank have a release price, will the bank agree to allow enough time to market the property, or is the bank getting ready to do a foreclosure sale? Who is representing the homeowner and is the homeowner in bankruptcy?

If the homeowner is in bankruptcy, call the bankruptcy lawyer to find out whether a sale is possible and, most importantly, do not do any work unless and until the Bankruptcy Court approves your employment. Brokers that sell a house for a client in bankruptcy will not be paid unless the Bankruptcy Court has first reviewed and approved the sale contract. One other important consideration in bankruptcy – what happens if the client you get to buy the property is outbid in a bankruptcy sale? (more on bankruptcy sales in my next post.) Do you still get a commission even though your client did not buy the home? You can protect your commission in the event that the home is sold to someone other than your buyer by including a provision in your contract that your commission is earned so long as the property is sold for a sum in excess of the amount of your client’s bid. However, you may have to share your commission under these circumstances but that is far better than no commission at all. one other thing to think about in bankruptcy sales – what if the debtor is the winning bidder (i.e. perhaps the bidder has family members that will front the money necessary to buy the property)? Good drafting of your employment agreement can protect you in these circumstances as well. Being careful and informed are the keys to being successful when selling distressed real estate.