Is it risky to buy a home from people who are in preforeclosure and filing for bankruptcy?

Question

My husband and I are first-time homebuyers. The "owners" of the home we are most interested in buying are in preforeclosure and are filing for bankruptcy. I put "owners" in quotes, because they still owe the full home value on their mortgage. They want to stay in the home five days past closing to give them time to move their belongings out once they are certain the deal has gone through. Our concern is that they will trash the place on the way out, after we have already closed, and we will have no real recourse. Even if we sue them, they won't have any money to give us, since they are bankrupt. We are also concerned that it will be a hassle to get them to actually move out. Are we being overly cautious, or is it risky to buy a home from people in this situation? Are there particular ways we can protect ourselves? Our real estate agent doesn't seem to think our concerns are very well founded, so any advice will be appreciated. Thanks!

Answer 1

Hey. I work in a real estate office that only deals with foreclosures. I am not sure about all of the states, but in general first the person is evicted. Then the home is sold. Your situation is different though. It is usually more of a hassle to buy foreclosures because the people are bitter about being evicted, etc. However, you can also save a lot of money. It really depends on how much you want to risk. If I were in your position, I would put in the contract that they have to vacate the property on the day of the closing. They can gather up their stuff before the closing date. You can also pay them to vacate sooner or ask for a security deposit that will be returned to them when they leave if the house is left in good condition. If they refuse to leave the home after the set date, then a sheriff or marshall will be notified by the state and they will get them out of there. As far as them leaving the house a mess, there is really nothing you can do about that because they have nothing to lose if they do trash the house. Make sure that your agent is hearing what you are saying. Most agents don't have that much experience in foreclosures. Good luck, but just remember to deal with things slowly and carefully.

Answer 2

First, call a real estate lawyer. They will be able to really address these concerns. Second, be very specific about what you want and put it in the contract. You do not have to allow them to spend time in the home after you have purchased it however, it is curteous. You can charge rent for each day that they are in the home and you can require a security deposit. If you word it right, they should be able to use some of the money from the sale of the home to pay back to you in rent and security deposit. that is presuming they will have enough left once they have paid off the loan. But first and foremost, call a real estate attorney. It may cost you a little money now but save you a lot of money later. peace

Answer 3

Your agent should be speaking to the sellers agent to find out when they will be moving out. You can also have an addendum added to your purchase and sale agreement that states they can occupy , you can also charge them rent for staying in the home. By signing a rental agreement and you charge them per day that they occupy. I wouldn't rec commend you do this just because the clients have nothing to lose and if this has been a difficult transaction I would tell them NO.
What I am trying to understand is why they would need 5 days after closing to pack up. Is this a short sale? and how far are you out from closing. If I can help you any further please email me.

Answer 4

YOUR WORRIES ARE VERY WELL FOUNDED!!! Thank God you asked!!!!!!!!!

If they are in such a hard spot and are in foreclosure, they should be bending over backwards to get this house sold...their actions do not point to people that are in a hard spot, but does smell of people that are use to working the system and taking advantage of people.

You close = it is YOUR house = they are OUT. I don't care for your Real Estate Agent's attitude either. Please, go check out another Agent. This whole situation stinks to High Heaven.

My advice:
Drop the deal unless they go by YOUR terms and get it in writing;
Get an independent professional to look at the house to insure that it is appraising at the value your buying it at;
Drop the Real Estate Agent that apparently has their best interests in mind - NOT YOURS.

I'm telling you: This whole deal stinks bad. It is a great thing that you and your spouse trust your instincts and are talking about it.

Good luck, God bless y'all and don't take any crap off them! You are buying, therefore you are the customer.

Answer 5

I would tend to agree with Jim7368. This is your first home. While it would be nice to think the current owners would not behave inappropriately, this is a large scale transaction. Delaying the close to allow them moving time places you in a safer position. Oh, when you do move in, get those locks changed. Then enjoy making your new house a home. Cheers!

Answer 6

buying the home shouldn't be a concern as you are not a creditor in their bankruptcy and the house is not yet foreclosed, however, the letting them stay after closing is very irregular and I advise against that strongly. Delay the closing 5 days if you want but take possession upon closing and inspect it before closing.

YOU would be liable if they fell and got hurt in that house during that 5 days as it is legally now your house. No reason to do that. delay closing.

Answer 7

YES!!!!!!!! it is very risky to buy from them at this point.because if they decide they dont wanna sell they can add that house onto the bakruptcy and you would lose it also.

Answer 8

I think so. Consult a lawyer