faq for bk trustee short sales - loopnet · 15. submit offer to [email protected] documents needed...

FAQ For BK Trustee Short Sales

1) What is a short sale? A short sale transaction is one in which the net sales proceeds from a property are less than what is owed to pay off all of the lien holders in full. Lien holders may include, but are not limited to the following: first mortgage, second mortgage, third mortgage, homeowners associations, judgments, IRS liens, mechanics liens and/or water softener liens, etc. Once the seller accepts a buyer’s offer, the sale is contingent upon approval of the purchase price, settlement statement and all other terms of the Purchase and Sales Agreement by all lien holders. The sale is considered “approved” once all lien holders provide written acceptance of the amount they expect to receive from the sales proceeds in order to release their lien against the property.

2) What is a Bankruptcy Trustee Short Sale?

The short sale process follows the same format, except that in this scenario, the bankruptcy estate is the seller. The borrowers have filed for Chapter 7 Bankruptcy and have elected to surrender their ownership interest in the property to the bankruptcy estate. The bankruptcy estate is on title to the property pursuant to 11 U.S.C. § 541, and is acting as the seller of the property. The bankruptcy estate Trustee will sign the Purchase and Sales Agreement and all closing documents, including a Trustee’s Deed. A purchase and sales contract with a Bankruptcy Trustee will usually contain a Trustee addendum requiring inter alia that the sale is contingent upon final bankruptcy Court approval. In most cases, the court approval is obtained prior to short sale approval, but sometimes it is obtained after short sale approval.

3) If the bankruptcy estate accepts our offer, does that mean that our offer has been approved and we can move forward towards closing?

No. As with a traditional short sale, the offer MUST be submitted to all of the lien

holders for review and approval.

4) How long does it take to negotiate a short sale?

The seller requires 120 days to submit the short sale package documents to all of the lien holders and obtain written approval from each lien holder. Once the short sale documents are prepared and submitted, a negotiator is assigned to the file. The senior lien holder will order a Broker Price Opinion (BPO) or appraisal or both to verify the market value of the property in its “as is” condition. Once the property has been evaluated, the negotiator will review the offer and terms, together with the appraised value, and make a determination whether to accept the offer amount or negotiate a higher sales price. The junior lien holders must also negotiate what will

be acceptable as payment to render their approval of the sale. Once the sales price has been approved, all of the lien holders will furnish a letter noting their approval for the specified amount. For this reason, the Short Sale Addendum to the Purchase and Sales Agreement provides 120 days.

5) Is the listing price on the MLS a “bank approved price”?

Unless the listing specifies “bank approved price” or “short sale approved price,” the listing price is simply the asking price as determined by a market analysis in its “as is” condition.

6) Why does the buyer have to pay a surcharge to the bankruptcy estate? The buyer surcharge is applicable when the property is being sold as a short sale. With short sales, there is no equity for the bankruptcy estate, as the sales price is less than the total outstanding balance to all of the lien holders. The estate will not liquidate any assets unless there exists some benefit for the estate. As such, the buyer surcharge is implemented to cover attorney fees and court expenses related to the bankruptcy estate facilitating the short sale transaction, and to net a distribution to creditors in the bankruptcy case.

7) Can the buyer finance the bankruptcy surcharge? Can the buyer add the surcharge to the purchase price to include it in his/her loan amount?

No, the bankruptcy surcharge must be paid at closing as a settlement cost to the buyer

on the closing disclosure similar to the buyer paying for an appraisal, home warranty, etc.

8) Why do you require a letter from the buyer’s lender affirming their permission for the buyer to pay the surcharge as a buyer expense at closing?

Different loan types (Conventional, FHA, VA) have different stipulations with respect to

what they will permit the buyer to pay for at closing. For example, a VA loan will not permit the buyer to pay for a WDO inspection. Given that the surcharge is a required element of the transaction, the estate needs confirmation that the buyer’s lender will permit the surcharge to be paid by the buyer.

9) Why is the seller only accepting cash offers? Why is the seller only accepting conventional financing?

The seller’s acceptance of cash only or cash/conventional financing is dependent upon the overall “AS IS” condition of the property. Given that the seller will make no repairs, the property’s condition may not qualify for certain loan types or the property may not be financeable in its “AS IS” condition. The seller cannot entertain offers that fall outside the established offer instructions.

10) Why is there no seller’s disclosure?

With the bankruptcy properties, the bankruptcy estate/Trustee acts as the seller in the transaction. There is no seller’s disclosure furnished because the “seller” has no factual knowledge regarding the property or its condition, as the Trustee has never occupied the property.

11) Why does the Purchase Agreement exclude the appliances and fixtures? At the time the property is listed, the bankruptcy estate cannot guarantee which items the borrowers have claimed as exempt in the bankruptcy case to be excluded in the sale of the real property and retained by the borrowers as personal property. Bankruptcy law does provide that the borrowers may amend their scheduled list of exemptions during the course of the case.

12) Can the buyer select the title company/closing attorney?

No. The bankruptcy estate has established a relationship with Attorney Larry Bernard and his Associates, who are extremely experienced with respect to bankruptcy law and the complexities related to these types of transactions.

13) When is the binder/earnest money due?

Within 1 business day from the executed date of the Purchase Agreement.

Buyer Date

Buyer Date

Buyers Agent Date

�

Offer Instructions for Bankruptcy Cash Sales

*** Must Follow All Instructions or offer will be DECLINED ***

1. All offers that don't follow the offer instructions and the FAR BAR contract template uploaded to the MLS will bedeclined by the seller.

2. Seller is accepting Cash and Conventional.3. At least $10,000.00 Binder in the form of a cashier's check will be due one day after acceptance by

the sellers and made payable to Bernard & Schemer, P.A. (480 Busch Dr., Jacksonville, FL 32218 (904) 751-6980),closing agent. Can also be wired. Attached are wiring instructions.

4. Buyer has completed all of their inspections prior to making this offer, and buyer accepts the property"AS-IS" condition, and seller will not make any repairs. Binder is non-refundable, except if lien holder does notapprove the short sale, if buyer is unable to obtain financing, or if seller is unable to provide buyer with a clear title..

5. Buyer agrees to pay $7500.00 or 5% of the purchase price (whichever is greater)as surcharge to the bankruptcy estatefor facilitating the short sale

6. Closing shall occur 30 Days after short sale approval date.7. Buyer will supply to seller all inspections, appraisals, and surveys done on the property within 2 days of receipt.8. Buyer agrees to make ALL lender required repairs before closing.9. Buyer's lender MUST submit lenders packet to Bernard & Schemer, P.A. 72 business hours before closing.10. Principles will not be paid a commission.11. Please have buyer initial by lines 100, 125, 147, 214, 218, and 225.12. Wet signatures only! No digital signatures.13. Please have your buyer print their names under where they sign.14. We will let you know via email if your offer has been accepted. Please allow 4 business days for seller to sign thecontract.15. Submit offer to [email protected]

Documents needed with offer in one PDF file1. Buyers information sheet2. Offer - PASA3. Short Sale Addendum4. Trustee's Addendum5. Proof of funds for down payment, closing cost, and bankruptcy surcharge6. Buyers' pre-qual letter or proof of funds for cash purchases7. If buyer is getting financing, buyer needs a letter from the lender showing that the lender will allow the buyer to pay the

surcharge to the bankruptcy estate8. Articles of organization and LLC docs must show the members of the LLC along with their percentage of ownership,

if buyer is an LLC

1) Facilitate communications and documents with the bankruptcy Trustee

7 Star Realty Responsibilities in a Short Sale

2) Facilitate communications and documents with the bankruptcy Trustee's counsel

3) Attend hearings in the federal courthouse as needed by the bankruptcy Trustee or counsel

4) Facilitate communications and documents with Debtor's counsel

5) Facilitate communications and documents with the Debtor

6) Review Debtor’s bankruptcy petition and case, and monitor the bankruptcy case for the lender's motion for relief from automatic stay and when the

order granting relief is in effect

7) Facilitate communications and documents with lender's bankruptcy attorney, and negotiate a delayed relief from automatic stay to give us time to

facilitate the short sale

8) Facilitate communications and documents with lender's foreclosure attorney

9) Review and continue to monitor the foreclosure case and request the bankruptcy Trustee’s counsel to file a motion to cancel any scheduled foreclosure auctions

10) Attend hearings in the county courthouse concerning the foreclosure case as needed by the bankruptcy Trustee or counsel

11) Facilitate the short sale with the first mortgage company

12) Facilitate the short sale with the second mortgage company, if one exists

13) Facilitate the short sale with the third mortgage company, if one exists (yes, some do have a 3rd mortgage)

14) Obtain HOA ledgers, if applicable

15) Negotiate a settlement with the HOA's counsel with the master association and sub-association, if applicable

16) Negotiate a settlement with any judgment holder's counsel, if any are on title (our record is 8 judgments against one property)

17) Resolve any city liens or code violations against a property

18) Obtain an IRS release of lien, if applicable

19) Assist Trustee’s counsel with filing a motion to sell in the bankruptcy case to obtain the order authorizing the sale

20) Inspect and secure vacant properties as needed

21) Review title commitment, request needed affidavits, and facilitate their execution as needed

22) If residents are uncooperative in showing the property, request the Trustee’s counsel evict them. Monitor the eviction process and inspect the property when vacated

Being the buyer’s agent, I understand that I will earn the commission being offered on the MLS. 7 Star Realty will earn more than 3% commission because of all the responsibilities that are listed above. I can file a complaint with NEFAR if I am not happy with the commission being offered. I agree to not call,

email, text, etc. to complain to 7 Star Realty, the closing attorney, or anyone else about the commission that I will earn for representing the buyer in this

transaction.

______________________________ ____________________________________ ___________________

Print Buyer’s Agent Buyer’s Agent Signature Date

______________________________Company Name

7 Star Realty, Inc www.7StarRealtyInc.com

9951 Atlantic Blvd, Ste. 130 Phone: (904) 425-8280 Jacksonville, Florida 32225 Fax: (904) 677-7866

Information sheet for Bankruptcy Sale

We will need information for each person on the purchase and sales agreement.

Property Address: ___________________________________________________________________________________

Buyer’s agent full name: ____________________________________________________________________________

Buyer’s agent company name: ______________________________________________________________________

Buyer’s agent phone #: ______________________________________________________________________________

Buyer’s agent email: _________________________________________________________________________________

Buyer’s full name: ___________________________________________________________________________________

Buyer’s phone #: _____________________________________________________________________________________

Buyer’s address: _____________________________________________________________________________________

Buyer’s Loan rate: ___________________________________________________________________________________

12375 SAN JOSE BLVD. JACKSONVILLE, FL 32225

WIRE INSTRUCTIONS BANK NAME: BBVA COMPASS 1036-2 Dunn Ave

Jacksonville, FL, 32218

Jacksonville, FL, 3(904) 564-8140

ROUTING NUMBER: 062001186 ACCOUNT NAME: BERNARD & SCHEMER. P.A.,

REAL ESTATE ESCROW IOTA ACCOUNT

ACCOUNT NUMBER: 6745592404 Should you require any additional information, please contact our office. Thank You

480 Busch Dr. Jacksonville, FL 32218

1

30 Days after SS Approval

904-751-6980

NONE

BERNARD & SCHEMER, P.A.


SEE EXHIBIT "B"

CRYSTAL CLEAR AUTO WASH INC.

Duval

X TRUSTEE DEED

XX 5X

1

7 Star Realty Naji Hassan9951 Atlantic Blvd Suite 130 Jacksonville, Florida 32225 904-425-8280 [email protected]

court order

X

XX X

Buyer accepts the property in its "As is" condition, and seller will not make any repairs.

X TRUSTEE ADDENDUM

Binder is non-refundable except if lien holder does not approve the short sale, if buyer is unable to obtain

Buyer will supply to seller all inspections, appraisals, and surveys done on the property within2 days of receipt.

Buyer has completed all of their due diligence prior to making this offer and buyer accepts property inits "AS-IS" condition.Buyer will pay $7500.00 OR 5 % of sales price, whichever is greater, as surcharge to the bankruptcy estate.

AND SHORT SALE ADDENDUM

financing, or if seller is not able to provide buyer with a clear title.

MICHELE DRUHL, AS PRESIDENT

SEE EXHIBIT "A"

Date:

Date:

Date:

Date:

CYNTHIA G. DRUHL

ARTHUR T. DRUHL

TRUSTEE’S ADDENDUM TO CONTRACT FOR SALE AND PURCHASEBETWEEN ALEXANDER G. SMITH, AS CHAPTER 7 TRUSTEE OF THE BANKRUPTCY ESTATE OF DAVID DRUHL AND MICHELE DRUHL, DEBTORS IN THAT CERTAIN BANKRUPTCY CASE PENDING IN THE UNITED STATES

BANKRUPTCY COURT IN THE MIDDLE DISTRICT OF FLORIDA, JACKSONVILLE DIVISION, CASE NO. 3:18-BK-03974-PMG, AND WHICH DEBTORS ARE THE PRINCIPALS AND 50% OWNERS OF CRYSTAL CLEAR AUTO

WASH, INC. (SELLER) AND

___________________________________________________________________________ (BUYER)

1. This addendum supersedes any provision contained in the Contract for Sale and Purchase (the “Contract”) to the extent it

conflicts with any terms or conditions in the Contract.

2. This sale is contingent upon the following:

(a) The Seller (Trustee) filing a motion to sell the subject property (the “Motion”) in the bankruptcy proceeding now

pending for the Debtors, David Druhl and Michele Druhl (the “Debtors”), which case is styled as In re; David Druhl and Michele Druhl United States Bankruptcy Court, Middle District of Florida, Jacksonville Division; Case No.

3:18-bk-03974-PMG (the “Bankruptcy Case”); and

(b) No objection to the Motion being filed in the Bankruptcy Case; or

(c) If an objection to the Motion is filed, a final Order overruling said objection or other consent Order on the Motion

being entered in the Bankruptcy Case; and

(d) No other Order preventing the sale being entered by the Bankruptcy Court in the Bankruptcy Case.

3. The Seller (Trustee) at his sole option, has the right to terminate this agreement in the event that the net proceeds do not net a

minimum of 10% of the purchase price for the bankruptcy estate, exclusive of the realtor’s commission.

4. This sale is of the bankruptcy estate’s right, title and interest only. The bankruptcy estate’s interest is derived from the

Debtors’ interest on the date of filing of Chapter 7 pursuant to 11 U.S.C. §541. Specifically, the Debtors were the 50%

owners of Crystal Clear Auto Wash, INC., which in turn owned the real property which is the subject of this addendum to

Contract. The Trustee therefore owns the Debtors’ interest in Crystal Clear Auto Wash, INC and can force the sale of its

assets as of the Petition Date pursuant to 11 U.S.C. §§ 541 and 363, including but not limited to its interest in the subject real

property, though the Debtors have consented to the sale of said property by the Trustee. The subject property will be

conveyed at closing by Trustee’s Deed only.

5. The Seller (Trustee) can only execute an owner’s affidavit regarding facts of which he has personal knowledge.

6. Buyer and Seller will bear their own costs and expenses incurred under and in connection with the sale. In the event it

becomes necessary for either party to employ counsel to enforce the terms of the Contract, the prevailing party in such effort

shall be entitled to the recovery of its reasonable attorneys’ fees and costs, including fees and costs incurred in connection

with any appeal or further bankruptcy proceedings. The parties consent to the jurisdiction of the United States Bankruptcy

Court, Middle District of Florida, Jacksonville Division to adjudicate all claims arising out of or related to the Contract,

including but not limited to this addendum.

7. The sale is contingent on the bankruptcy estate obtaining an Order from the Court authorizing the Trustee to sell and transfer

to the Buyer, the furniture, fixtures, and equipment located in and about the property, free and clear of liens, claims,

encumbrances, and interests, to the extent the Contract provides for the sale of such items.

__________________________________ _______________________________________

Buyer Date Seller, Michele Druhl as President Date

_________________________________ _______________________________________

Buyer Date Seller, Alexander G. Smith, as Trustee of the Bankruptcy

Estate of David Druhl and Michele Druhl

__________________________________ _______________________________________

Seller, Cynthia G. Druhl Date Seller, Arthur T. Druhl Date

SHORT SALE ADDENDUM

COPYRIGHTED BY AND SUGGESTED FOR USE BY THE MEMBERS OF THE NORTHEAST FLORIDA ASSOCIATION OF REALTORS®, INC.

SSA Page 1 of 3 4.16.12 Rev

This Addendum is made by the undersigned BUYER and SELLER and is incorporated into and made a part of the Purchase and Sale Agreement and Deposit Receipt between BUYER and SELLER (the “Purchase and Sale Agreement”). Where this Addendum is in conflict with the terms of the Purchase and Sale Agreement, the terms contained in this Addendum will govern. This Addendum is referenced in the Purchase and Sale Agreement and pertains to the following Property:

________________________________________________________________________________

________________________________________________________________________________.

This transaction is referred to as a Short Sale because the Purchase Price is less than or “short” of the amount(s) owed for SELLER’s closing costs and prorated items and to pay off encumbrance holders.

1. SELLER represents that the purchase price may be less than the amounts owed for SELLER’s closing costs and to holders of outstanding mortgages and other liens affecting the Property(“encumbrance holders”). SELLER’s obligation to close the sale of the Property is contingent on the agreement of SELLER’s encumbrance holders and/or court consent to:

(a) accept a payoff which is less than the balance due under the encumbrances;

(b) accept the HUD-1 settlement statement; and

(c) furnish a recordable satisfaction or release of the encumbrances.

NOTICE: IN A SHORT SALE TRANSACTION, SELLER MAY HAVE A CONTINUING FINANCIAL OBLIGATION TO SELLER’S ENCUMBRANCE HOLDERS AFTER CLOSING INCLUDING, BUT NOT LIMITED TO, EXECUTION OF A PROMISSORY NOTE IN FAVOR OF THE ENCUMBRANCE HOLDER(S) OR LIABILITY FOR A DEFICIENCY JUDGMENT. SELLER IS ADVISED TO SEEK COMPETENT LEGAL AND FINANCIAL ADVICE CONCERNING SELLER’S LEGAL, TAX AND FINANCIAL OBLIGATIONS.THE FACT THAT THIS SHORT SALE MAY BE CONSIDERED OR APPROVED BY ENCUMBRANCE HOLDERS DOES NOT AUTOMATICALLY MEAN THAT ANY FORECLOSURE PROCESS HAS BEEN SUSPENDED OR DELAYED.

2. SELLER shall within 5 days from the date of the Purchase and Sale Agreement initiate the process to have this short sale approved by all encumbrance holders and request in writing a delay of the foreclosure sale date if the foreclosure sale date is scheduled to take place before the date of closing. SELLER shall provide all information and documentation required by the encumbrance holders within 5 days after receiving the request(s).


SHORT SALE ADDENDUM continued


3. If this short sale is not approved in writing by all encumbrance holders within ________ days (60 days if left blank) from the date of the Purchase and Sale Agreement (“Approval Deadline”), either BUYER or SELLER may terminate the Purchase and Sale Agreement by giving written notice to the other. If neither BUYER nor SELLER has delivered such termination notice within 5 days after theApproval Deadline then the Approval Deadline shall be extended automatically by 30 days. BUYER and SELLER agree to cooperate in good faith without delay to achieve approval. SELLER shall deliver to BUYER a copy of the approval or denial letters of all encumbrance holders within 2 days after receipt by SELLER. Short sale approval means that all encumbrance holder(s) shall agree to reduce their respective payoff amount(s) by an amount sufficient to permit the proceeds from the sale of the Property to pay the encumbrances and SELLER’s closing costs and prorated items.

4. SELLER hereby authorizes and directs the following parties to freely communicate and share information with each other regarding the current status of the SELLER’s application for short sale and of the approval or denial of same: encumbrance holders, Brokers to this transaction, closing attorney/settlement agent and short sale facilitator(s).

5. BUYER acknowledges that SELLER’s encumbrance holders are not parties to the Purchase and Sale Agreement and are not obligated to consider or approve the Purchase and Sale Agreement within any specified time period. BUYER further acknowledges that SELLER and Brokers are not liable for encumbrance holders’ delays, failure to approve this short sale or failure to complete this short sale after approving the Purchase and Sale Agreement.

6. Notwithstanding paragraph 11(B) of the Purchase and Sale Agreement, if this transaction does not close because the encumbrance holders do not approve this short sale, SELLER is not responsible for BUYER‘s loan and sale processing and closing costs incurred.

7. The date of acceptance of the Purchase and Sale Agreement shall be the date on which the Purchase and Sale Agreement is last executed by BUYER and SELLER and the fact of execution is communicated to the other party in writing (not the date of encumbrance holders’ approval).

8. Time Periods: (Check one)

(a) Except for Approval Deadline and payment of binder deposit(s), all time periods for inspections, contingencies, loan application and loan approval shall begin from the date BUYER receives a copy of approval letters from all encumbrance holder(s). The date of closing shall be on or before ______days (45 days if left blank) after approval by the encumbrance holder(s) unless extended by other conditions of the Purchase and Sale Agreement.

(b) All time periods under the Purchase and Sale Agreement shall begin from the date of acceptance of the Purchase and Sale Agreement by BUYER and SELLER.

If neither box 8(a) nor 8(b) is marked, then 8(a) shall apply.

9. All prorations shall be final at closing.

120

X30

SHORT SALE ADDENDUM continued


10. After BUYER’s offer has been accepted by SELLER, SELLER may:

continue to market the Property as active contingent in the Northeast Florida Multiple Listing Service (NEFMLS); or

not continue to market the Property and hereby instructs the listing Broker to change the status of the Property to pending in the NEFMLS.

Regardless of which of the above is marked, SELLER has the right to accept other offers as back-up contracts.

If SELLER receives subsequent written offer(s) to purchase the Property, whether accepted or not, which SELLER intends to submit to encumbrance holders, SELLER must deliver to BUYER written notice of SELLER’s intention within 24 hours after receipt of such other written offer(s) (the “Notice”). BUYER will have 5 days after delivery of the Notice to terminate the Agreement. If BUYER elects to terminate the Agreement, BUYER must notify SELLER of BUYER’s election in writing within the 5 day period.

11. Unless otherwise directed in writing by SELLER’s encumbrance holder(s), SELLER has an obligation to inform them in writing of all subsequent higher written offers, whether accepted or not, until SELLER has received written approval by encumbrance holder(s) of this short sale.

SELLER acknowledges that failure to inform Seller’s encumbrance holder(s) in writing of all subsequent higher written offers prior to receipt of written approval by SELLER’s encumbrance holder(s) of this short sale may be construed as mortgage fraud. THIS PARAGRAPH SHOULD NOT BE DELETED OR MODIFIED.

___________________________________________ ____________________________ BUYER DATE

____________________________________________ ____________________________ BUYER DATE

____________________________________________ ____________________________ SELLER DATE

____________________________________________ ____________________________ SELLER DATE

X

EXHIBIT “A”

ALEXANDER G. SMITH, AS CHAPTER 7 TRUSTEE OF THE BANKRUPTCY ESTATE OF

DAVID DRUHL AND MICHELE DRUHL, DEBTORS IN THAT CERTAIN BANKRUPTCY

CASE PENDING IN THE UNITED STATES BANKRUPTCY COURT IN THE MIDDLE

DISTRICT OF FLORIDA, JACKSONVILLE DIVISION, CASE NO. 3:18-BK-03974-PMG, AND

WHICH DEBTORS ARE SHAREHOLDER OF CRYSTAL CLEAR AUTO WASH, INC(SELLER)

EXHIBIT "B"