What many Realtors and investors do not know is that there is a way to buy property pre-foreclosure and receive free & clear title from a court appointee.  It is not a bankruptcy, but kind of similar.

Many commercial loan documents include provisions for "assignments of rents" and/or the "appointment of receiver".  What this means is that if the borrower is in default on the loan, the lender (through a court process and/or agreement with the borrower) can have any income assigned to them, ie rents and can move the court to appoint a receiver to take possession of the property.  In some cases, take possession of an entire company.

A receiver is a court appointee who is an officer of the court instead of an agent for any of the disputing parties.  This person or entity is responsible to all of the parties and is directed by state law and possibly limited in scope of duties by a court order.  The lender can request that a certain individual be considered as the appointee.  Many Judges will agree with this and appoint the person requested, however it is at the discretion of the Judge and he/she can order the receivership, yet appoint an individual of their own choosing.

Typically, the receiver in a real estate situation would take possession of the real property, manage it, account for income / expenses and, in most cases, move to an eventual sale.  Sometimes the property is ultimately sold "on the courthouse steps" by the Sheriff.  Many times the receiver can and will sell the property to a third party without going through the Sheriff.

When a receiver decides to market and sell the property, they may elect to do so utilzing the assistance of a broker or an auctioneer.  These professionals will need to be engaged by the receiver and approved by the courts.  When an agreement with a buyer is entered into, it will be between the receiver and the buyer.  This agreement will then need to be approved by the court and typically an Order is granted approving the sale Free and Clear of Any and All Liens.  The receiver would then attend a closing in place of the owner would and provide a fiduciary deed to the buyer.

Following the closing, the funds are placed in the receivers accounts and ultimately paid to the appropriate creditor after another Order is entered approving disbursement.

Obviously this is a thumbnail sketch of the process and there are other ways a receivers sale can be handled.  This is a quick review of how I have done it in the past.  Receivers are typically attorneys or private turnaround consultants, however many lenders have moved to requesting the appointment experienced brokers and auctioneers in this capacity as well.  Note that both residential and commercial property can be involved in a receivership, however receiver and assignment of rents terms are part of commercial loan agreements.