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Do we have a contract or not?

Another Real Estate Agent I know had asked me some questions about a deal she was working on because she was unclear of what to do next. I wanted to share this situation with others because in this market this situation may arise with one of your deals.

Lister has property listed for sale. Buyer's agent (person I know) has contract on property with her buyer. During all of this, ratified contract in place, Owner of home files Chapter 7 Bankruptcy and does not inform anyone for some time. During this time, buyer's agent orders home inspection, appraisal being order, the usual process.

Well, guess what? Everything falls apart. Contract is voidable at this point. Bankruptcy puts "automatic stay" in place. Listing Agent's listing agreement is "voidable".

Is there a contract or not? The listing agent says that she still has the listing. The buyers still have a contract. Listing Agent tells Buyer's Agent there is nothing to worry about, everything is fine.

UPDATE: Owner receives a chapter 7 discharge; listing agent still shows listing as active, and buyer's agent still thinks this contract is going to happen. No one has received any legal advice yet.

Always check with an attorney to get the professional advice you need for situations like this. Not being well informed could cost your clients money they don't need to spend.

Posted by Stella Barbour - Real Estate Agent - Serving Northern Virginia on 02/27/2008 02:52 PM

Comments (15)

short sale, loan, hardship, sell home, mortgage, foreclosure, virginia, northern virginia, loudoun, buyer, seller, home

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15 Comments on Do we have a contract or not?

I can't believe a broker or friend of the court has not been contacted for a legal opinion. Also, you could call your state legal hotline. Good luck.

02/27/2008 03:03 PM

by Bill Gillhespy Fort Myers Beach Realtor (Century 21 Tripower Realty)

I will be watching for rest of the story. But I think I know the ending.

02/27/2008 03:06 PM

by Scott Guay Ocean City and Ocean Pines Maryland (Coldwell Banker Residential Brokerage)

I'm with Scott G. - I think I can foresee the outcome but I'll definately stay tuned on this one! Way to keep us on the edge of our seats - you should write some serious sci-fi real estate books (joking).

02/27/2008 03:11 PM

by Nathan Scott (TBD)

I'm going to stay tuned, too. This happened to me early on -- my buyers just moved on, got their earnest back, but lost the cost of the inspection, survey, etc. Keep us posted, and I hope it works out for all!

02/27/2008 03:13 PM

by Dawn Grasty - Durham NC Real Estate (Prudential Carolinas Realty)

Been there and did this....worst nightmare of my career....sorry, I cannot go into detail but I can tell you that it is a bad spot for the listing agent.

02/27/2008 03:22 PM

by "JT" Prevatte, REALTOR, ABR, ASR ~Fayetteville, NC Real Estate (ERA Strother Real Estate, Fayetteville, NC)

Bill - I was shocked too about no one really doing anything to get real answers. She just asked me in passing because I work for an Attorney too and I am a Bankruptcy Assistant.

Scott - Yea I know the ending already too.

Nathan - I will let you know how it ends.

Dawn -I am sorry that happened to you.

JT - Yes it is a bad spot for listing agent. I can imagine what you went through. With this market this could happen any time.

02/27/2008 03:38 PM

by Stella Barbour - Real Estate Agent - Serving Northern Virginia (Jobin Realty - Real Estate Agent)

It is my impression that bankruptcy by either the Broker or the Seller the contract is voidable. Listing, Buyer Agency Agreement, and Sales Contract. I would have the Buyer contact an attorney to see exactly where they stand.

02/27/2008 04:17 PM

by Sarah Stelmok, ABR, GRI, Fredericksburg VA (Century 21 New Millennium)

Stella,

Very informative post. Our Lenders generally loose hundreds of dollars when loans don't follow through, not to mention the $350 that the buyer probably paid for an appraisal and most importantly all the time put in by everyone to get to that point. I have a local real estate attorney that I always refer to for any real estate transactions...it's worth the extra money!

02/27/2008 04:29 PM

by Zach Dahl Virginia Home Loans (Ameritime Mortgage Company, LLC.)

Sarah - Bankruptcy does void all contracts. New contracts must be done.

Zach- It is nice to have legal counsel at hand. I have that also since I work at a law firm too. You are right about the money being wasted.

02/27/2008 07:10 PM

by Stella Barbour - Real Estate Agent - Serving Northern Virginia (Jobin Realty - Real Estate Agent)

What a mess! Can't believe anyone thinks things are fine. I agree with Sarah, got to start from scratch.

Thanks for visiting my site and commenting on my Referral Exchange post. I appreciate the time and effort. Julie Jalone in Sacramento

03/14/2008 11:55 AM

by Julie Jalone (MagnumOne Realty)

This is unbelievable! I can't understand why everything was not placed on hold until the legal ramifications were figured out. I feel for the buyers.

~Renae

03/14/2008 03:50 PM

by Renae Bolton ~ Marketing 4 Realtors (Marketing 4 Realtors, LLP)

WOW- that is a new issue that I have not seen before. These deals are getting more complicated as the market changes, and that is just another great example.

03/14/2008 04:38 PM

by Chelle Gassan-NOVA Realtor and Stager (Weichert, Realtors and Staged Homes VA)

Couldnt the buyer sue the sellers for their expenses? Since the sellers are in default.

03/14/2008 04:56 PM

by DeAndrea "Dee Dee" Jones The Hampton Roads Real Estate Lady! (Wainwright Real Estate)

See a lawyer.

03/14/2008 04:59 PM

by Jim Crawford ~ Atlanta Real Estate-ABR E-PRO (RE/MAX Greater Atlanta)

Julie - You are welcome. I was telling someone about your post and people tell me that they have experienced similar situations where their client was taken care of.

Renae - Thanks for commenting. I know I feel bad for the buyers also.

Chelle- The more complicated, the more we work in this market. No time for rest. Thanks for stopping by.

DeAndrea - No, apparently not. Thanks for s visiting.

Jim - True. Thanks for commenting.

03/14/2008 07:26 PM

by Stella Barbour - Real Estate Agent - Serving Northern Virginia (Jobin Realty - Real Estate Agent)

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