Need Advice - Buying a house from Bankruptcy Sale

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Topic Author
investor2018
Posts: 91
Joined: Thu Nov 29, 2018 5:23 pm

Need Advice - Buying a house from Bankruptcy Sale

Post by investor2018 »

Hi,

I understand that we need to seek advice from an attorney on this topic and we are going to find one. But thought of leveraging Bogleheads power of knowledge and experiences. :)

Context: We are interested in buying a house that is on sale through Bankruptcy chapter 7. The selling agent asked to first make an offer using a simple one page document.
  • We made an offer for $X. There was another offer lower than ours.
    Selling agent disclosed (verbally) the offer amounts to both parties and asked to raise offers if we like.
    Next day, other party raised their offer to beat ours.
    We raised our offer to beat their.
    This verbal bidding went on for few days before we backing out when other party beat our offer of $X+Y.
    After few days, selling agent reached out that other party has backed out so they are not signing the formal purchase agreement.
    Given this, they asked if we would like to sign the contract at our last max offer $X+$Y
We immediately realized that other party was bidding without their skin in the game. They backed out from this bidding process without any consequences (e.g., without losing earnest money). With this in consideration, we said that all the bidding happened to raise the offer to $ X + Y is not legit hence we are back to our original offer of $X. But the selling agent is NOT budging and give us only option to sign at our max offer of $X + $Y.

What do you think of us reverting to our original offer and nullify the verbal bidding? We feel that we are logical but we do not know how verbal bidding is legit in such case.
Will you suggest to make an offer at $X+$Y? We feel that we competed with ourselves if we make this offer.

PS: We do understand that it is Bankruptcy sale and anyone can beat the max offer until court approves it.
Kobinator
Posts: 51
Joined: Thu Feb 01, 2018 7:33 pm

Re: Need Advice - Buying a house from Bankruptcy Sale

Post by Kobinator »

There is no "going back to previous steps" in negotiations. You make an offer, they either accept or decline. Once an offer is declined, it is gone. This agrees with your logic to make your next offer be "$X". Then, they can accept or decline as usual.

They can't make you sign an offer you don't want to make...

Edited to add: they rejected your offer of $X+$Y and they can't go back and accept it/force you to re-offer it.
Kobinator
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Re: Need Advice - Buying a house from Bankruptcy Sale

Post by Kobinator »

If you really want to turn their heads...offer 0.9*X.
mkc
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Re: Need Advice - Buying a house from Bankruptcy Sale

Post by mkc »

investor2018 wrote: Tue Jan 18, 2022 6:03 pm
This verbal bidding went on for few days before we backing out when other party beat our offer of $X+Y.
After few days, selling agent reached out that other party has backed out so they are not signing the formal purchase agreement.
Given this, they asked if we would like to sign the contract at our last max offer $X+$Y
[/list]

We immediately realized that other party was bidding without their skin in the game. They backed out from this bidding process without any consequences (e.g., without losing earnest money). With this in consideration, we said that all the bidding happened to raise the offer to $ X + Y is not legit hence we are back to our original offer of $X. But the selling agent is NOT budging and give us only option to sign at our max offer of $X + $Y.
Has it crossed your minds that the other party was possibly just there to run the bids up?
Topic Author
investor2018
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Joined: Thu Nov 29, 2018 5:23 pm

Re: Need Advice - Buying a house from Bankruptcy Sale

Post by investor2018 »

Kobinator wrote: Tue Jan 18, 2022 6:37 pm If you really want to turn their heads...offer 0.9*X.
Yes, we said that our new offer is what other party made in first place. That is lower than our original offer of $X. They head is turned and they have been looking for another buyer.
Topic Author
investor2018
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Re: Need Advice - Buying a house from Bankruptcy Sale

Post by investor2018 »

mkc wrote: Tue Jan 18, 2022 7:08 pm
investor2018 wrote: Tue Jan 18, 2022 6:03 pm
This verbal bidding went on for few days before we backing out when other party beat our offer of $X+Y.
After few days, selling agent reached out that other party has backed out so they are not signing the formal purchase agreement.
Given this, they asked if we would like to sign the contract at our last max offer $X+$Y
[/list]

We immediately realized that other party was bidding without their skin in the game. They backed out from this bidding process without any consequences (e.g., without losing earnest money). With this in consideration, we said that all the bidding happened to raise the offer to $ X + Y is not legit hence we are back to our original offer of $X. But the selling agent is NOT budging and give us only option to sign at our max offer of $X + $Y.
Has it crossed your minds that the other party was possibly just there to run the bids up?
We don't know. Our move now is to wait for few more days to see if another buyer signs the contract and make a final decision. Our current offer is less than our original offer of $X.
makingmistakes
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Re: Need Advice - Buying a house from Bankruptcy Sale

Post by makingmistakes »

investor2018 wrote: Tue Jan 18, 2022 7:32 pm
mkc wrote: Tue Jan 18, 2022 7:08 pm
investor2018 wrote: Tue Jan 18, 2022 6:03 pm
This verbal bidding went on for few days before we backing out when other party beat our offer of $X+Y.
After few days, selling agent reached out that other party has backed out so they are not signing the formal purchase agreement.
Given this, they asked if we would like to sign the contract at our last max offer $X+$Y
[/list]

We immediately realized that other party was bidding without their skin in the game. They backed out from this bidding process without any consequences (e.g., without losing earnest money). With this in consideration, we said that all the bidding happened to raise the offer to $ X + Y is not legit hence we are back to our original offer of $X. But the selling agent is NOT budging and give us only option to sign at our max offer of $X + $Y.
Has it crossed your minds that the other party was possibly just there to run the bids up?
We don't know. Our move now is to wait for few more days to see if another buyer signs the contract and make a final decision. Our current offer is less than our original offer of $X.
If you really want the house, consider offering a price that you’d be happy to buy it for. I’d try to remove emotion from it, and disregard what’s happened already. Offering what the other party bid to start seems odd to me.
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Watty
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Re: Need Advice - Buying a house from Bankruptcy Sale

Post by Watty »

investor2018 wrote: Tue Jan 18, 2022 6:03 pm The selling agent asked to first make an offer using a simple one page document.
......
This verbal bidding went on for few days before
I am not a lawyer but this has red flags all over it.

If something is not in the original one page document you signed then it is not in the purchase contract. Verbal offers for real estate are not binding so they don't really mean anything.

I think you should to walk away from this.

If you want your still try to get the house then you should have your lawyer give them a written offer.

If you are dealing with a short sale then be prepared for significant legal fees and you still may not get the house.
retire2022
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Re: Need Advice - Buying a house from Bankruptcy Sale

Post by retire2022 »

makingmistakes wrote: Tue Jan 18, 2022 7:40 pm
investor2018 wrote: Tue Jan 18, 2022 7:32 pm
mkc wrote: Tue Jan 18, 2022 7:08 pm
investor2018 wrote: Tue Jan 18, 2022 6:03 pm
This verbal bidding went on for few days before we backing out when other party beat our offer of $X+Y.
After few days, selling agent reached out that other party has backed out so they are not signing the formal purchase agreement.
Given this, they asked if we would like to sign the contract at our last max offer $X+$Y
[/list]

We immediately realized that other party was bidding without their skin in the game. They backed out from this bidding process without any consequences (e.g., without losing earnest money). With this in consideration, we said that all the bidding happened to raise the offer to $ X + Y is not legit hence we are back to our original offer of $X. But the selling agent is NOT budging and give us only option to sign at our max offer of $X + $Y.
Has it crossed your minds that the other party was possibly just there to run the bids up?
We don't know. Our move now is to wait for few more days to see if another buyer signs the contract and make a final decision. Our current offer is less than our original offer of $X.
If you really want the house, consider offering a price that you’d be happy to buy it for. I’d try to remove emotion from it, and disregard what’s happened already. Offering what the other party bid to start seems odd to me.
+1

This happened to my friends who put in a sealed bid for ghetto brownstone in Brooklyn, the bids disappeared afterwards. My friend's situation was a HUD auction early aughts (2003-2004).

Since this is a bankruptcy sale, they probably have debt on it, and the judge will review the sale to see if they are able to recover as much of the debt as possible.

Also are you in over your heads? could you spot what is wrong or how much capital to rehab the house in question?
adamthesmythe
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Re: Need Advice - Buying a house from Bankruptcy Sale

Post by adamthesmythe »

If you really wanted the house you would make an offer at, say, X+Y/2.

The seller will be thinking that they will easily get another offer at lest as high as X.

You're buying from a bankruptcy sake- this might just be the beginning of the difficulties.

Usually people buy this way because they are not in a hurry and think they are getting a bargain. If this doesn't apply to you you should pass anyway.
andypanda
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Re: Need Advice - Buying a house from Bankruptcy Sale

Post by andypanda »

I'd ask to see all of those other written bids. If they weren't written I would ask the seller why they weren't in writing.
But I can be a difficult person when it comes to people wanting my money.

"You're buying from a bankruptcy sake- this might just be the beginning of the difficulties."

That's the truth.
Topic Author
investor2018
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Joined: Thu Nov 29, 2018 5:23 pm

Re: Need Advice - Buying a house from Bankruptcy Sale

Post by investor2018 »

retire2022 wrote: Tue Jan 18, 2022 8:02 pm
Also are you in over your heads? could you spot what is wrong or how much capital to rehab the house in question?
Yes, we have done research on how much money we need to put to make this house really nice one. Structurally a good house but it requires flooring, painting, and remodeling of kitchen and baths (optional).
Topic Author
investor2018
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Re: Need Advice - Buying a house from Bankruptcy Sale

Post by investor2018 »

adamthesmythe wrote: Tue Jan 18, 2022 8:13 pm If you really wanted the house you would make an offer at, say, X+Y/2.

The seller will be thinking that they will easily get another offer at lest as high as X.

You're buying from a bankruptcy sake- this might just be the beginning of the difficulties.

Usually people buy this way because they are not in a hurry and think they are getting a bargain. If this doesn't apply to you you should pass anyway.
The area is in huge demand due to low supply. List price is fair market value and my thought process is buy this lower than list price. We got to know how much is the liens on the title and those are way less than our original offer.
Topic Author
investor2018
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Re: Need Advice - Buying a house from Bankruptcy Sale

Post by investor2018 »

andypanda wrote: Tue Jan 18, 2022 8:34 pm I'd ask to see all of those other written bids. If they weren't written I would ask the seller why they weren't in writing.
But I can be a difficult person when it comes to people wanting my money.

"You're buying from a bankruptcy sake- this might just be the beginning of the difficulties."

That's the truth.
Yes, that is the plan now. We are waiting for other buyer to sign the contract that we can review and beat (if makes sense). If no buyer signs a contract, we will be willing to sign contract for our original offer of $X.
J295
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Re: Need Advice - Buying a house from Bankruptcy Sale

Post by J295 »

Contact the trustee and find out the process he/she is using for the sale then you can decide how to proceed in consultation with your legal counsel.

For example, if this will be a private contract subject to bankruptcy court approval, will the trustee request the court not permit any upset bids, or will the trustee support upset bids? If the trustee supports upset bids, then I would not be the stalking horse bidder unless a break up fee is allowed in the contract.

You indicated you were having legal counsel involved, and you will want to be certain he/she is a bankruptcy lawyer experienced with these types of transactions (presumably the sale will be under under section 363 of the code).
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