Client Question: "What does it mean if the property for sale is a Bankruptcy sale?"
Dear What is a Bankruptcy Sale,
Every bankruptcy sale is different but there are three main things to know when considering purchasing a house or condo that is a part of a bankruptcy proceeding.
- They take much longer than a traditional sale; the last one we worked on took 6 months to close
- The court and the underlying lien holders can come back and increase the purchase price regardless of what you agreed to and signed around in the contract
- There is a bankruptcy fee that cannot be financed into the purchase price that is typically around 5% of the purchase price that must be paid at closing as part of your closing costs (for example: if the purchase price is $500,000 the fee is an additional $25,000)
In summary, if you are going to purchase a bankruptcy sale property you want to make sure you are flexible on your time frame as it can take an undetermined amount of time that is determined by the courts. You should also have more liquid funds available to pay for the additional fee and you should be prepared to wait a long while and then have the purchase price potentially get higher, leaving you to decide if you want to pay more or walk away after all the time you already invested in waiting.
By Marco Kronen with Seattle Condo Review: A guide to Seattle downtown condos.