Question Buying a home? - Seller in chapter 13. Urgent

[newbuyer13]

What is the name of your state (only U.S. law)? North Carolina

Background:
We are first time home buyers are under contract to but a home we liked. We have about 2 weeks left in our due diligence, inspection, my loan application etc are in progressing well from my (buyer side).
Few weeks ago, before we got into contract, we accidentally found out that the seller (back in May) had filed chapter-13 & is going though to divorce. When asked he produced a court document stating there is no stay in selling this home, home is not part of the bankruptcy estate, not a short sale and he (the debtor) is allow to convey this as part of a sale.

Per the seller, Only thing making this sale different would be:
1. We the buyers (though our closing attorney) had to provide him a "preliminary HUD" asap. We should get that soon.
2. He then using his bankruptcy attorney has to apply for a "motion to approve sale" using the signed contract and the preliminary HUD. Once the bankruptcy judge approves this, closing can happen. Per the seller, getting this approval will at 1 to 2 weeks. This seems reasonable to us, we did run it by our closing attorney.

Current state:
1. Last week, my closing attorney office as part of preparing that "preliminary" HUD contacted the sellers mortgage bank to get his "payoff" amount. It's been over 7 work days and the sellers bank is yet to respond back. Apparently because of sellers bankruptcy it's getting delayed/being checked etc.

Now, even if we get the seller this "preliminary" HUD early next week, the 'approval to sell' for their bankruptcy judge is not going to come before out our due diligence that has about 10 days left especially given holidays etc. Closing per contract is 31st Dec.

I requested my buyer agent that it's key for me as the buyer to ensure the seller gets that approval before due diligence ends. Since this delay is related to seller side, they should have no issues approving our request to extend due diligence. (I may have to manage a rate lock extension etc)

However my buyer agent thinks that we as buyers are covered by the "seller delay breach clause" in the NC contract if closing doesn't happen 14 days beyond agreed upon closing date of DEC 31st. I am not sure what it takes to execute/prove seller breach etc and what it will drag me into to get my earnest money back? My thought is I rather be under the safe zone of due diligence...

Any thoughts/pointers appreciated.

 

[justalayman]

When asked he produced a court document stating there is no stay in selling this home, home is not part of the bankruptcy estate, not a short sale and he (the debtor) is allow to convey this as part of a sale.

how can the court know whether it is a short sale or not?

I would have a lot of suspicion regarding that document.

for the first part to be true, the trustee for the BK had to have made the statement. For the second part, same. for the third, the lender of his current mortgage loan, and the last, all of the above plus the court presiding over the divorce so,

what court issued such a document?


but to argue the house is not part of an ongoing BK? Um, just not seeing it since a BK involves the filers entire estate.

1. We the buyers (though our closing attorney) had to provide him a "preliminary HUD" asap. We should get that soon.

Huh? You mean a HUD 1. Seems like an odd request. One that I would not be inclined to provide as it includes information that although not truly sensitive, simply none of anybody else's business than yours.

2. He then using his bankruptcy attorney has to apply for a "motion to approve sale"

so what happened to the document stating there is no stay in selling the home and it is not part of the BK estate? If that were true, then there would be no need to apply to the BK trustee to be approved to sell the property. Seeing where that court document you were shown is looking a bit less than valid?

However my buyer agent thinks that we as buyers are covered by the "seller delay breach clause" in the NC contract if closing doesn't happen 14 days beyond agreed upon closing date of DEC 31st. I am not sure what it takes to execute/prove seller breach etc and what it will drag me into to get my earnest money back? My thought is I rather be under the safe zone of due diligence...

Any thoughts/pointers appreciated.

better safe than sorry.

If the seller wants the sale to continue, they can sign the necessary extensions to extend the due diligence period, for at least the purposes of this issue. A negative action by the BK court would not be a sellers breach as it is not anything in their control. While it would be a basis for the contract to be voided as it not be able to be fully executed and as such, unless there is a valid claim by the sellers that would allow them to retain your deposit and a such, it should be no problem with releasing it to you, I think this is an issue you would want to leave open to allow you to terminate the contract should there be an unforeseen issue that you could not otherwise escape from the contract.


an added bit o' advice:

If the title is held by this one person (of the married couple), you may also need at least a quit claim deed from the wife to ensure she has relinquished all rights she may have in the house as a result of the marriage. Failing to obtain that could end up with you fighting over ownership, or at least some interest in the house, with the wife. Check with your attorney, who has the ability to review the details of the entire situation.

 

[newbuyer13]

Thanks. So when the seller applied for Ch-13, an automatic stay was put on the property. Then later a motion was filed by the wife (movant) to lift stay on the home so the debtor (husband) can convey it as part of a sale. That was approved per the court document shared. Now the way it was explained to me, since the sale changes the assets of the husband/seller (the debtor), he still needs inform & apply for a motion to approve sale (with a preliminary hud-1 that has sellers side numbers filled out & copy of the offer contract).

I too the feel the seller should have no issues to accept my request to extend the due diligence (DD) by X days/weeks, so he can get this approval & show to my closing attorney. It doesn't cost him a dime.
If he is not willing then, I guess I better accept my loss (dd money, inspection, appraisal) before DD last date and pull out (at least save my earnest money, anxiety & time).