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Trustee forcing a short sale

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  • Trustee forcing a short sale

    I have a rental property that I am slightly underwater on but want to keep. The trustee is telling end that I have to get rid of the tenants while he tries to sell the house. There is no way he can sell the house for what he's asking. I know this market well and it is highly unlikely that the house will go for more than we owe, let alone for an amount above value and fees.

    The trustee knows we can't pay the mortgage without the rent payments. I think he wants us to fall behind so he can negotiate a short sale and get his percentage. Is there any way I can stop this? Can I call the mortgage bank and try to negotiate with them myself?

  • #2
    Originally posted by Beautyberry View Post
    I have a rental property that I am slightly underwater on but want to keep. The trustee is telling end that I have to get rid of the tenants while he tries to sell the house. There is no way he can sell the house for what he's asking. I know this market well and it is highly unlikely that the house will go for more than we owe, let alone for an amount above value and fees.
    First, the Trustee can't have you revoke a valid lease. If the lease it month-to-month then it's an unexpired (self-renewing lease) and they could be asked to move subject to the terms in the lease renewal terms.

    In any event, if the Trustee want's to own the property and deal with it, then tell the Trustee it's all his/hers and they can manage the property including, but not limited to, upkeep and the management of the tenants.

    Originally posted by Beautyberry View Post
    The trustee knows we can't pay the mortgage without the rent payments. I think he wants us to fall behind so he can negotiate a short sale and get his percentage. Is there any way I can stop this? Can I call the mortgage bank and try to negotiate with them myself?
    It reads as though you filed Chapter 7 and this rental it property of the bankruptcy estate. It belongs to the bankruptcy estate and the Trustee can administer that asset. If you can't afford the property then just let the Trustee have it because there is nothing else you can do. Do not try to circumvent the Trustee by going to the bank.

    Many Trustees believe they can sell things for a price which they can't. The fact that you believe the price is lower has no bearing; It's not for you to argue. The Trustee is entrusted, hence Trustee, of the bankruptcy estate which includes that property. They must also manage the property by collecting and paying the mortgage company the rents, unless they negotiate a short sale. Some Trustees are able to negotiate a short sale and get a so-called "carve-out" of an amount which is typically around $10,000 (after fees).

    Carve-outs and short sales were a big thing here in Florida during the foreclosure crisis. Some ingenious Trustees found out a way to earn their commission while getting something for the creditors by using this tactic. It doesn't always work out for the Trustee and they could be wasting money (which would be bad). Chapter 7 Trustees make about $60 per case unless they find an asset to administer.
    Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
    Status: (Auto) Discharged and Closed! 5/10
    Visit My BKForum Blog: justbroke's Blog


    I am not an attorney. Any advice provided is not legal advice.

    Comment


    • Beautyberry
      Beautyberry commented
      Editing a comment
      Justbroke: if I could just give the trustee the property, I would. My understanding of the law is that the estate takes any benefit from the property while the debtor retains responsibility. My attorney made an offer, $5,000 plus the rental house and he needs to abandon our residence. He never accepted/declined. Then he got mad because the renters were still there. He told us not to renew the lease, which we didn't. But we allowed the tenants to rent month to month. But he hasn't taken official possession of the house or abandoned our residence.

      I believe he is going to make a deal to short-sell the house. Why would the mortgage company go along when I was willing to continue payments? Can we make him talk to us about our deal?

  • #3
    Originally posted by Beautyberry View Post
    The trustee knows we can't pay the mortgage without the rent payments. I think he wants us to fall behind so he can negotiate a short sale and get his percentage. Is there any way I can stop this?
    If you do not want the Trustee to control this property then try to convert to a Chapter 13. So long as you are in a Chapter 7 the property does not belong to you. Ownership and control belongs to the Trustee for the benefit of the bk estate.

    Des.

    Comment


    • Beautyberry
      Beautyberry commented
      Editing a comment
      Thanks Des. It's too late for that.

  • #4
    Justbroke: if I could just give the trustee the property, I would. My understanding of the law is that the estate takes any benefit from the property while the debtor retains responsibility. My attorney made an offer, $5,000 plus the rental house and he needs to abandon our residence. He never accepted/declined. Then he got mad because the renters were still there. He told us not to renew the lease, which we didn't. But we allowed the tenants to rent month to month. But he hasn't taken official possession of the house or abandoned our residence.

    I believe he is going to make a deal to short-sell the house. Why would the mortgage company go along when I was willing to continue payments? Can we make him talk to us about our deal?

    Comment


    • #5
      First, you responded to Despritfreya that it's "too late for that" which was a suggestion to convert to Chapter 13. It's never too late to convert until the property is "administered" fully.

      Originally posted by Beautyberry View Post
      Justbroke: if I could just give the trustee the property, I would. My understanding of the law is that the estate takes any benefit from the property while the debtor retains responsibility. My attorney made an offer, $5,000 plus the rental house and he needs to abandon our residence. He never accepted/declined. Then he got mad because the renters were still there. He told us not to renew the lease, which we didn't. But we allowed the tenants to rent month to month. But he hasn't taken official possession of the house or abandoned our residence.
      If the Trustee is going to administer an asset, let them be responsible The bankruptcy estate "owns" the property and the Trustee is the administrator. They are responsible. I surmise that the Trustee didn't want you to renew the lease because the Trustee would need to honor the lease. (It's easier to do the carve-out if the place is empty and not subject to a lease.)

      This is almost too funny that your attorney isn't more hands-on with the Trustee. The Chapter 7 (panel) Trustee, as the administer of the bankruptcy estate, is responsible for collecting rents and maintaining any property that they keep in the Estate. There is no "official possession" as the filing of the petition gives them administrative and ownership rights to the property by operation of law. They can use, lease, collect rents, and even sell (after a motion and hearing) any property of the Estate that is not fully exempt. It reads as though the Trustee wants you to do all the work and reap all the benefits. There's a line there somewhere... because the Trustee is to reject any lease within 60 days of filing anyhow.

      Originally posted by Beautyberry View Post
      I believe he is going to make a deal to short-sell the house. Why would the mortgage company go along when I was willing to continue payments? Can we make him talk to us about our deal?
      Likely because the mortgage company can be done with it and not worry about a discharged debt and later (possible) default. The mortgage company may not even want to do a short sale with carve-out. They can not be forced to do so. Additionally, you can't make the Trustee do anything but you can object to the Trustee's Motion to Sell Free and Clear (or whatever motion they file to allow the sale of the property).

      It appears that this Chapter 7 (panel) Trustee is teetering on what to do and was hoping it would be "easy." I would just let it be done with but you apparently have some other deals going on relative to your residence and a cash offer. That reads, to me, that this is more complex than just this rental home. You are going to need to rely on your attorney and if your attorney is not "engaging" the Chapter 7 (panel) Trustee, then you will need to "engage" more with your attorney.

      Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
      Status: (Auto) Discharged and Closed! 5/10
      Visit My BKForum Blog: justbroke's Blog


      I am not an attorney. Any advice provided is not legal advice.

      Comment


      • #6
        You are definitely right, I should be done with it. It's really just emotions making me want to hold on: it's s beautiful area and the family who is renting has three kids and there aren't many decent places to rent in that area. Also, there just seems like something sleezy about this. There won't be any money for the estate, it will all go to the Trustee and a little to the realtor and the mortgage company will take a loss. The trustee listed the house for $154,000 even though the Realtor said the most he could get was $120,000 and that would be highly unlikely. A more experienced coworkers of his said $110,000 at most and we owe $114,000. This is Appalacha, the market isn't booming.

        If if he sells that house, he can still go for our residence. He filed to list it at $152,000 and got a realtor but never actually listed it. The market where I live isn't as predicatable, my house could go anywhere from $80,000 to $120,000. Anything over $104,000 would count as equity above our exemption. And we keep building that equity because we have been paying the mortgage for the 11 months after we filed.

        The trustee's assistant said he didn't seem interested in it but who really who knows. My attorney has tried talking to him, he won't return her calls. She has talked to his assistant but got no response about our offer. She doesn't want to antagonize the trustee because he is known for being vindictive. He doesn't operate on sheer logic and practicality - he is a psychopath. He enjoys the power. My previous attorneys said they weren't qualified to help us any longer, but my new attorney (and her partner) is just as intimidated.

        Do do you have any thoughts about what he can do with our residence? Can he try a short sale with it?

        Comment


        • #7
          Originally posted by Beautyberry View Post
          Do do you have any thoughts about what he can do with our residence? Can he try a short sale with it?
          You can't do anything with any property at this point. It is all property of the bankruptcy estate and you can only sell by obtaining permission from the bankruptcy court (same as the Trustee).

          There are some stupid, ambitious, zealous, and obnoxious Chapter 7 panel Trustees out there. They are nothing more than professionals that are appointed by the United States Trustee to oversea Chapter 7 liquidation cases. Most of them are fare and usually know when they are wasting both their time and money. Your attorney can poke the Trustee by using a Motion to Compel Abandonment, but that's a big stick and that goes before the judge.

          I don't know if despritfreya has any thoughts on dealing with an overly aggressive Trustee.
          Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
          Status: (Auto) Discharged and Closed! 5/10
          Visit My BKForum Blog: justbroke's Blog


          I am not an attorney. Any advice provided is not legal advice.

          Comment


          • Beautyberry
            Beautyberry commented
            Editing a comment
            I think that's the plan when we hit the year mark. We have no plan on selling. I was wondering it the trustee can try doing a short sale on our residence as well.
            Last edited by Beautyberry; 08-06-2017, 06:34 PM.

        • #8
          Unfortunately I do not have much to add. When OP states that it is too late to convert such can only mean one of two things:

          1. OP's discharge has already been entered or;
          2. OP tried to convert and faced opposition from the Chapter 7 Trustee.

          I see that OP risked not only the rental but also the roof over his head. One has to wonder why OP filed a Chapter 7.

          An option in dealing with the Trustee is to get past the "claims bar date" and see who files timely claims. If the amount is manageable, OP can enter into an agreement to pay all claims and administrative expenses in exchange for keeping all non-exempt property. If the dollars are manageable, the Trustee may agree to take payments over a 6 month to 1 year time frame.

          Only other alternative is to let the case proceed without trying to save things and whatever happens, happens.

          Des.

          Comment


          • #9
            We filed Ch 7 because that's what our attorney advised us to do. The basis was that there was no equity in either property. My residence was worth $80,000 when we filed, the market in my city spiked this past spring/summer (it's stabilizing now I think) and the value may have gone up a bit.

            We we really thought - no equity means no risk of losing either house. From my understanding, if we had any other trustee this all would have been over.

            Comment


            • #10
              Hindsight is 20/20 but having an appraisal of value (a full appraisal), at the time of filing, may have gone long way in mitigating an over-zealous Trustee's perception of value. While any equity gains from the date of filing to the date of sale is property of the estate, proving value at the filing of the petition could help.

              Just reads as though you have one of those Trustees that believe they can administer the properties.

              Is your case discharged?
              Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
              Status: (Auto) Discharged and Closed! 5/10
              Visit My BKForum Blog: justbroke's Blog


              I am not an attorney. Any advice provided is not legal advice.

              Comment


              • Beautyberry
                Beautyberry commented
                Editing a comment
                My case is discharged. I did have a realtor do a value report (I forgot what they are called) in March. It wasn't an official appraisal, but it was very extensive with the comps and market analysis. That realitor said my house was worth $70,000 but I actually think that's a bit low. Problem is that there are a few very expensive houses around here and a very wealthy, trendy community nearby, so it's possible the trustee sees the possibility of big money but houses like this - where we have no broadband internet, and have septic, well water (we actually share the well with a neighbor) - don't get much money.


                So, do you think the trustee can try for a short sale with my residence once he is done with my rental property? Does he have an unlimited time? It's almost been a year since we filed.
                Last edited by Beautyberry; 08-07-2017, 09:50 AM.

            • #11
              Beautyberry that type of analysis is typically called a CMA (comparative market analysis). There's also a broker price opinion (BPO) that is also used at times. These don't typically trump a full residential appraisal performed by a license real estate appraiser and on a uniform residential appraisal report (URAR), but they certainly trump "guessing."

              Keep us up to date on what happens. You're just stuck with a Trustee that appears to just be a royal pain. Best wishes to you that this is resolved soon, and in your favor.

              The Trustee "technically" has unlimited time, but if the Trustee is wasting time on something that is not going to happen, the debtor's attorney will typically light a fire under the Trustee. The fire would b a Motion to Compel Abandonment.
              Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
              Status: (Auto) Discharged and Closed! 5/10
              Visit My BKForum Blog: justbroke's Blog


              I am not an attorney. Any advice provided is not legal advice.

              Comment


              • #12
                Thanks for your help. You all are awesome. I'll definitely give updates.

                Comment

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