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Rules of thumb for buying a home in bankruptcy court

My wife and I are considering buying a home that's currently in bankruptcy court.  Our broker mentioned that bankruptcy purchases are MUCH more involved than just about any other type of real estate transaction.  I've researched some of the basic issues around a bankruptcy-related purchase, but what are some good rules of thumb to consider?  By the way, we own our current home and we have cash (and time) to work with.

Here's the short list of things I've learned.  What else should we think about?

* Not a good option for 1st time buyers
* Must be willing to be patient (could take 2-3 months...or more)
* Cash is King WRT to the bank; loan pre-approvals can help, too
* Potential upside is good
* Very little feedback (if any) from bank or other 'interested parties', so you're operating "In The Blind"
* When the price is right, be willing to make a solid offer rather than try to low-ball
* Once again, patience is a virtue
  • April 20 2010 - Sammamish
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Answers (2)

Well I think you have answered your own question. If you need to be pre approved for any loan you should do so now. That process can take a while. I would find out what form your offer must be in. Questions of what from of earnest money should your offer include? Just who will hold the money and will the check be cashed? I assume that the court will post what proceedings and such publicly so you can follow what is happening that way. If you have any more questions please feel free to contact me anytime.
  • April 23 2010
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You have a good idea what you are getting into and the patients to see it through.

I'd like to mention to you that in a bankruptcy deal the court will appoint a trustee, aka another decision maker in the process.  This has been a problem because you the buyer don't have a relationship with the trustee and they seem to have their own timelines.  I've even had the trustee come back with an increased counter offer after the bank and seller were already in agreement. The trustee has duties to the seller's other debts and that is an agenda you don't have control over.

Best of luck to you on the transaction, and get as much back ground as you can before starting the adventure

  • April 23 2010
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