I just finished a conversation with a client. Heis setting an appointment with an attorney to file for bankruptcy.
We've had his home on the market for a year. A few weeks ago, we negotiated a sale contract .. he was to bring a couple of thousand to closing, but at last the burden of this mortgage was off his shoulders. HOWEVER, the closing agency found a large lien against the property. Turns out that the seller had co-signed a car loan for his daughter -- and she hadn't paid the note for over a year.
Apparently it was a judgment passed through the courts so the lien is on all he owns. So, he's tried to get a payment plan worked out if they would lift the lein on this property --- he needs to sell it so he has the money to pay them back. They (the attorney for the bank) says NO - you weren't cooperative earlier so we won't be now. So, in desperation he is seeking bankruptcy.
Of course, the deal is dead - buyers don't want to wait around to see what happens -- can you blame them?
Ironically, if he does file bankruptcy, in this market his property will sell for just about the amount of the first mortgage -- and the lein holder will get NOTHING.
What a lose-lose situation. Unfortunately the closing agency is telling me scenarios like this are more and more common. Is it the economy or unfortunate choices made by all concerned?