Bankruptcy Sales- Purchasing notes

I tried putting an offer in on a park with a listing broker recently and was denied on several attempts. He told me that he had to wait and made it seem as if there was a legal reason he could not submit my offer. So I got a lawyer and went right around him and had that lawyer put the offer in directly to the court. If the judge approves the motion with my offer, that listing broker gets cut out of both sides of the commission that he could have had if he just submitted my offer. My offer was higher than the incumbent he was pushing through. What a crook. So my first open question is are there any good internet or training resources that talk about buying properties during bankruptcy? I had to pay about 3k to an attorney to pull the property records from the debter’s attorney in addition to whatever else they had to do to get the park historical and the incumbent offer. I then copied the incumbent offer word for word but increased the purchase price and earnest money. That makes it simple for a judge to compare. The other option I had was buying the first position note from the bank at a steep discount. I called their commercial department and they asked me outright if I wanted to buy the note. I don’t have the cash to buy that note. In this situation is it possible to negotiate a discount and have the bank finance that note to you?

Am I the only one here that attempts to pick up deals out of bankruptcy?

We buy REOs all the time. We don’t buy notes unless the debtor signs a Deed in Lieu in advance – too risky. We buy REO from banks and at auction. You can get great deals if you know what you’re doing. Buying notes has sunk many an investor, as the borrower can delay the foreclosure process for years, and you end up with a vacant park. Our favorite REO is the standard purchase of a park from a bank that has already foreclosed on it and allows us the proper time for diligence. Auction deals are extremely pressured and you do your diligence before the auction and then lose 90% of the bidding.

Thanks Frank,What are the circumstances at auction? So I succeeded in derailing the sale at court but the court decided that the property should go to auction. I’m assuming this means it is being auctioned prior to bank foreclosure. I fired the attorney I was working with so did not follow up on the auction aspect of it. Most of this is way over my head. I’m interested in the auction aspect but won’t take any action if I think I can be fleeced due to inexperience.

You will have to show financial capability in order to get an auction number, and post a non-refundable 10% of the price if you win, with 30 days to close. It is very hard to get financing done on a park in 30 days, start to finish, so this is a very dangerous situation. On top of that, you will have to do all due diligence before you bid as, even if you decide not to close due to some terrible problem that you uncover, you will lose your 10%.

Frank, thank you for that useful info. In the situation I spoke of, we were essentially trying to get the debtor to approve a short sale in addition to the court approving it. Now that the property is going up for auction, I’m assuming that will be by the Trustee. In these types of auctions, are they typically put out free and clear of all liens and obligation or is the debt risk still attached to the sale of the property? If it is the latter, I’m assuming it is all a wash and the property will be foreclosed on by the bank. The reason for the bankruptcy sale is an old feller with no investment experience paid 2x what the park was worth in 2013 and it sunk him.

Every sale is different, and will stipulate what is being sold. Some auctions are for parks, and some are for notes on parks. Just make sure you know what you are bidding on.

I have bought at auction a park with a 30 day closing no problem but I got pre-approved for a bid that was less than if the property was bare and producing no income so due diligence was not an issue.      Very difficult to buy at auction since there are buyers that strictly buy foreclosed properties anywhere and to them it is an art. 

Thank you Carl. Could you explain how you were able to obtain the approval? I know what the park is worth but the bank still needs an appraisal and environmental to commit to financing in 30 days. I have also been told by several banks that guarantee letters for financing are now a thing of the past and they can back out for any reason.

I used another park as equity if needed and the bank did not require initially an appraisal nor ever a environmental study even though they  use to sell fuel as a marina.    The bank knew the property and its stand alone value.    The key is you if I need a million dollar loan from one the banks I deal with the first question is WHEN you want to close.    When banks are familiar with your diligent  business practices  finding money is not a problem–but that takes TIME and a track record that is spotless!