Saturday, August 23, 2008

query: if you're about to close on a home and you find out the seller has gone through bankruptcy

Anytime you here the word bankruptcy in a real estate transaction consider it a "stop, drop and roll" moment. Don't put off getting to the real status of the transaction. Never assume anything.

The first thing I would do is talk with my title insurer to make certain that they are aware of the bankruptcy. A good title examiner will check the Pacer system, however, there is always the chance that the seller might file for bankruptcy after the Pacer system has been queried. In our business we tie up this loophole by having the seller sign an affidavit at closing indicating that they have not filed, however, this isn't news you want to hear at closing. The wrong answer to that question will stop the closing dead in its tracks.

Now you don't want the seller to lie and you don't want to ignore bankruptcy because if the court hasn't approved the sale of the real estate, the judge can undo your closing and that's a serious situation.

If the bankruptcy is over and discharged before you buy the home, no problem. If it's still pending then make absolutely certain that the title agent has that knowledge and is dealing with the issue and getting court approval before you close.

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