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  1. #1
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    Aug 2009
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    Default Closing Blocked by Seller's Bankruptcy

    My question involves real estate located in the State of: Texas

    I signed a contract on a house at the beginning of July with a closing date of July 29. On July 29, I signed all the closing documents and brought a check for all closing costs the next morning. Well, on the 30th, I recieved call from the title company that I would have to wait until Monday the 3rd of August to gain possesion of the house because the seller was going to court to file for bankruptcy.

    I waited patiently until the 3rd, and received yet another call from the title company that I would now have to wait another 7-10 days until the judge signed the papers for the bankruptcy (in California).

    How can they take my money and give me copies of all the signed closing papers until they are sure the house can be sold. Now I am out all of the money I put into inspections, etc. and have already given my landlord 30 days notice.

    What if anything can I do?

  2. #2
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    Default Re: Between a Rock and a Hard Place

    Because by federal law, bankruptcy stays (stops) actions by creditors (including you) until the automatic stay expires or is lifted by the court.

  3. #3
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    Aug 2009
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    Default Re: Between a Rock and a Hard Place

    I understand that...but what legal recourse do I have because no one disclosed the bankruptcy until AFTER I had closed on the house?

  4. #4
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    Default Re: Between a Rock and a Hard Place

    It's helpful if you share the facts, so we know what you're talking about.

    In terms of your expenses toward the purchase, how are you "out" anything if you've closed and are just waiting a bit longer than expected to take possession?

    If you've closed, your contract gives you immediate possession upon closing, but the sellers won't vacate, you can bring a motion for relief from stay in the bankruptcy court then, once that's granted, evict them. If the issue is waiting a week while they voluntarily vacate, that will typically be faster, cheaper, and easier.

    On the other hand, perhaps you mean that they've vacated and you're waiting on the bankruptcy court to sign off on the closing. You haven't told us the issue, so we can only guess.

    I'm not sure who you expect to have told you about the possibility of bankruptcy, as beyond the sellers you haven't even hinted at who might have known.

  5. #5
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    Aug 2009
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    Default Re: Between a Rock and a Hard Place

    As far as expenses, since the contract stated I recieved possession upon closing, I have already moved items into the house..I also hired movers, since I have an injured back and cannot move myself. I also had to rent a storage building and am currently living out of a suitcase.

    I was under the impression that the title company should have known about the bankruptcy since it was filed in 2007....isn't it there job to check to make sure the title is clean?

  6. #6
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    Default Re: Between a Rock and a Hard Place

    Now you're stating that the bankruptcy was filed in 2007, but previously you stated, "I would have to wait until Monday the 3rd of August to gain possesion of the house because the seller was going to court to file for bankruptcy." Which is it?

    A bankruptcy filing doesn't appear in the title history. If nobody tells the title company that a bankruptcy has been filed or is about to be filed, whichever it is, how do you propose that they would know?

  7. #7
    Join Date
    Mar 2008
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    1,995

    Default Re: Closing Blocked by Seller's Bankruptcy

    Let me add a few comments.

    First, I didn't see any mention of a real estate agent, or attorney, so assume there is none is this transaction. It might be helpful in such a transaction that there is a knowlegeable person in the chain that you can get some advice on the law, particularly in your state.

    If you paid the title company, and you are waiting for the paperwork to be completed, title companies had explained to me, in NY State at least, that in this interregnum, the title company is in legal possession, and it is their responsibility to make sure that you would gain title eventually. This would mean though, in the meantime, that the title company should have received deeds, properly signed and executed, granting title to you.

    I have bought bank foreclosures, where the seller was bankrupt, and property was deeded to the bank by way of a "bankruptcy trustee", not by a seller, so it was possible the title company may be awaiting the signature of a trustee. If, as it turned out, the house cannot be sold, then the title company would have to return whatever downpayment you made, but not at this point, expenses you incurred such as inspections.

    In this case though, it is less than clear the Title Company would be at fault particulary if this is a "via the mail" type of closing rather than a simultaneous sit down closing, where the buyer, seller, exchange money and documents via the title company in one sitting. In the sitdown simultaneous closing, it should be immediately clear the seller does not have the excecuted documents, in which case the closing should be postponed.

  8. #8
    Join Date
    Aug 2009
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    4

    Default Re: Between a Rock and a Hard Place

    I was told the day after closing that the seller was going to court to FILE for bankruptcy. After meeting with the CEO of the title company, it has come to light that the seller filed in 2007. It's not that I am changing my story, just that what I am being told keeps changing.

  9. #9
    Join Date
    Aug 2009
    Location
    San Antonio, Texas
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    Default Re: Closing Blocked by Seller's Bankruptcy

    assuming that you do get into the house, I'd suck it up.

    It sucks, but as last minute screwups in real estate go, this isn't too bad.

    I've been involved in lots of transactions (buying and selling) and seen situations that would make you laugh and cry.

    Congratulations on your new house. Maybe the sellers' situation helped you get a better deal?

    Keep your chin up.

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