Dallas-Fort Worth Real Estate Investor Club

Subject to with a Wrap

  • 15 May 2016 1:29 PM
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    Message # 4021380
    Tang Nguyen

    Hi everyone!


    I recently bought a property subject to and did a wrap on it.  Everything has been great for about 2 months until now.  The seller just called me to inform me that she has just filed for bankruptcy.  Has anyone experienced this issue?  What will or can happen to the property?  Thank you in advance.
  • 15 May 2016 4:57 PM
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    Reply # 4021523 on 4021380
    Robin Carriger (Administrator)
    I am not an attorney.  Any comments I may make on this thread are simply my own opinion and should not be considered legal advice.  As a proactive caution, anybody posting on this thread should refrain from mentioning any specific third-party person or financial institution.


    I'm sorry this happened, Tang.  I have lots of questions.  Here are a few:

    1. What kind of bankruptcy did the original owner file?  Chapter 7 or 13?
    2. Is the house protected by the bankruptcy?
    3. Did you thoroughly disclose to the new owner that their ownership of the property would be "subject to" a pre-existing promissory note and deed of trust (I hope so.)?
    4. Is the new promissory note with the new owner held by you, your company or a trust created by the previous owner who has now declared bankruptcy?

    I have more questions, but those will do for now.

    Thanks,

    Robin
    President
    DFW REI Club
    Last modified: 16 May 2016 10:53 PM | Robin Carriger (Administrator)
  • 16 May 2016 1:38 PM
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    Reply # 4023325 on 4021380
    Milton Colegrove

    I am sorry to hear about the problem that has come up regarding your wrap transaction. The bankruptcy of the original seller is one of those issues that you can never really prepare for when doing this type of transaction. Robin's questions are on point and very important. You must find out which chapter has been filed and if they have included the house/note in the bankruptcy. If they have, are they planning on reaffirming that particular debt. If they are just throwing everything into the bankruptcy and are willing to give the house back to the lender, I am afraid you have a problem. Lets get answers first. 

    Last modified: 16 May 2016 10:54 PM | Robin Carriger (Administrator)
  • 16 May 2016 11:51 PM
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    Reply # 4024036 on 4021380
    Tang Nguyen
    Thank you guys, for help and input.  I am gathering up all information right now.  I will let you know shortly. 
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