In today’s market, Realtors often see the upside of doing a short sale of troubled real estate. With a short sale, the lender accepts less than the total amount owed on a home in order to allow the sale to go through. The homeowner avoids a foreclosure sale on his record and the realtor gets paid his commission. The problem is that this short sale solution can become complicated and endangered if the homeseller files for protection under the U.S. Bankruptcy code. Upon filing a bankruptcy, all of the homeseller’s assets, including his home, become part of the Bankruptcy Estate. The BK Trustee, not the homeowner, is now in charge of the home. Without pushing the case along, the home can languish in the BK process and a prospective short sale simply dies on the vine. Both the homeowner and the realtor lose. The law firm of Robinson & Henry P.C. has seen this problem come up time and time again and has come up with a solution for short sales that are stuck in Bankruptcy Court. Short sales can get a new lease on life when the Robinson & Henry BK Cleanup crew is on the case.
Below are some frequently asked questions that apply to both homeowners and realtors.
SHORT SALE: WHAT WE DO
Q: What does Robinson & Henry do in Bankruptcy Court?
A: The R&H BK Cleanup Crew enters an appearance in the existing BK case then moves the court to release the house from the Trustee’s Estate powers. The Crew can also move to shorten the time period for a ruling to allow a short sale to go through. The end result is a short sale closing with benefits for both homeowner and realtor.
SHORT SALE: ADVANTAGES TO THE HOMEOWNER
Q: What are the advantages for the homeowner of a short sale over foreclosure?
A: A short sale may decrease the waiting period required for the
homeowner to qualify for a new mortgage. Each governmental lending
agency (FNMA, FHLMC, FHA, and VA) has its own underwriting guidelines,
but both Fannie Mae and Freddy Mac make qualifying significantly
easier for those homeowners who have opted for a short sale. With
Fannie Mae, the waiting period after foreclosure is 7 years. A short
sale can drop this period to as low as 2 years – a 5 year advantage
over foreclosure. With Freddie Mac the waiting period can drop to 4
years, giving the homeowner a 3 year advantage.
Q: Will a homeowner in bankruptcy who chooses to short sell a
home incur any costs/fees to take the property out of the
A: No. Robinson & Henry P.C. is paid out of the closing for any
fees and costs required to successfully remove the property from the
Q: What is the impact of a short sale on a homeowner’s credit
as compared to a foreclosure?
A: Credit scores are given by private credit reporting agencies;
these agencies consider a variety of criteria -including public real
estate records -when calculating scores. If a home in Colorado is
lost in foreclosure, a Public Trustee’s Deed giving the property back
to the bank becomes part of the public record. The credit agencies
know that a Public Trustee’s Deed means foreclosure. If the homeowner
chooses a short sale instead, a Warranty Deed is recorded – this looks
the same on the public records as a regular sale.
SHORT SALE: ADVANTAGES TO THE REALTOR
Q: How can Robinson & Henry PC help realtors who are trying to close a short sale that is tied up in bankruptcy?
A: A homeowner in bankruptcy cannot sell a home without the
permission of the BK Trustee and bankruptcy court. As a result, neither title
companies nor mortgage lenders will allow a sale until all bankruptcy
issues are resolved. Robinson & Henry can assist in taking the
property out of the bankruptcy quickly so the sale can close.
One of the biggest of the problems short sale realtors face is impatient
buyers unwilling to wait until the seller’s bankruptcy is
complete. In many cases we can remove property from bankruptcy within
a month (and sometimes in less time) in order to preserve the sale.
Q: Is it possible to remove liens from the seller’s property through bankruptcy?
A: In some cases we can file motions with the bankruptcy court to
remove judgment liens from the property – this can eliminate
problematic title issues that would otherwise prevent a sale from
Tax liens cannot be removed from property through the bankruptcy
court; however, our tax attorneys may be able to assist with requests
to the IRS and the Colorado Department of Revenue to release tax
Q: How can I get more information about legal issues affecting a short sale?
A: Our attorneys practice in the following areas: bankruptcy, tax,
real estate, elder law & estate planning, business & corporate law,
and related matters. Feel free to contact us if you or your clients
have legal questions – we are here to help.
The R&H BK Cleanup Crew -- Michael A. Robinson, William L. Henry and Ryan M. Wood
Robinson & Henry, P.C., Attorneys at Law
757 Maleta Lane, Suite 104
Castle Rock, CO 80108
firstname.lastname@example.org - www.RobinsonAndHenry.com