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Do we have a contract or not?

By Stella Barbour

Real Estate Broker/Owner with NoVa Brokers LLC 0225 094634 VA/ 643686 MD

February 27, 2008 06:52 AM

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.

FOR ALL YOUR REAL ESTATE NEEDS

STELLA BARBOUR

JOBIN REALTY

301-934-5806 OFFICE

703-999-6104 CELL

703-433-0600 OFFICE

www.stellabarbour.com

stellabarbour@yahoo.com

Licensed in Virginia & Maryland

http://www.stellabarbour.com/default.asp

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Bill Gillhespy

16 Sunview Blvd - Fort Myers Beach, FL

Fort Myers Beach Realtor, Fort Myers Beach Agent - Homes & Condos

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.

Feb 27, 2008 07:03 AM

Scott Guay

Berkshire Hathaway Home Services PenFed Realty - Ocean Pines, MD

Associate Broker. Ocean City and Ocean Pines MD

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

Feb 27, 2008 07:06 AM

JDo Doe

Barrington, RI

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).

Feb 27, 2008 07:11 AM

Dawn Grasty

Prudential YSU Realty - Durham, NC

Durham NC Real Estate

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!

Feb 27, 2008 07:13 AM

"JT" Prevatte

Former Agent - Fayetteville, NC

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.

Feb 27, 2008 07:22 AM

Stella Barbour

NoVa Brokers LLC - Vienna, VA

Principal Broker, Serving Virginia and Maryland

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.

Feb 27, 2008 07:38 AM

Delete Account

Just Delete It - Oaklevel, VA

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.

Feb 27, 2008 08:17 AM

Zach Dahl

Ameritime Mortgage Company, LLC. - Charlottesville, VA

Virginia Home Loans

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!

Feb 27, 2008 08:29 AM

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.

Feb 27, 2008 11:10 AM

Julie Jalone

MagnumOne Realty - Roseville, CA

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

Mar 14, 2008 04:55 AM

Renae Bolton

Marketing 4 Realtors - Garfield Heights, OH

I'm your Professional Real Estate Marketing VA!

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

Mar 14, 2008 08:50 AM

Chelle Gassan

RE/MAX Regency and Staged Homes VA - Bristow, VA

NOVA Realtor and Stager

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.

Mar 14, 2008 09:38 AM

DeAndrea "Dee Dee" Jones

Samson Properties - Manassas, VA

DMVRealEstateChick

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

Mar 14, 2008 09:56 AM

Jim Crawford

Long & Foster - Fredericksburg, VA

Jim Crawford Broker Associate Fredericksburg VA

See a lawyer.

Mar 14, 2008 09:59 AM

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.

Mar 14, 2008 12:26 PM

Do we have a contract or not?

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