One of the the differences between Trustee Bui and the other Chapter 7 Bankruptcy trustees in Riverside is that she conducts short sales for the benefit of the bankruptcy estate. A few months ago, she had one in front of Judge Houle and it is interesting to see the way in works as noted in his tentative ruling:
On March 24, 20xx, (“Debtors”) filed for chapter 11 relief. On August 7, 20xx the case was converted to a chapter 7. Lynda T. Bui is the duly appointed chapter 7 trustee (“Trustee”). Among the assets of the Debtors is real property located at Huntington Beach, CA 92648 (“Property”).
On October 16, 20x the Trustee filed an application to employ (“Broker”) as her real estate broker, which was approved on November 9, 20xx.
On July 23, 20xx the Trustee filed the current motion seeking to approve the short sale of the Property free and clear of liens pursuant to 11 U.S.C. § 363(b), approve payment of the real estate commission, and grant related relief including the use of the sale proceeds to reimburse the Trustee for costs incurred.
The Debtors listed the Property on their Schedule A with a value of $945,000. On Debtors’ Schedule D, Debtors listed one lien on the Property held by JP Morgan Chase Bank, N.A. (“Chase”) in the amount of $1,460,000. However, after obtaining a title report the Trustee found the Property is encumbered by several more liens bringing the total lien amount to more than $1,645,000
On August 14, 20xx, after the Trustee filed this Motion, but before Trustee filed the Supplement to the Motion, Debtors filed an Amended Schedule C, reflecting a claimed exemption in the Property of $21,405.00.
In the proposed short sale, (“Buyer”) agrees to purchase the Property for $808,224.50 which includes
1. a bankruptcy fee “carve-out” of $40,500 to be paid to the estate,
2. approximately $1,500 payment to the estate for legal services related to the sale
3. real property taxes,
4. brokerage commissions of $44,700 and a short sale negotiator fee of $7,450,
5. closing costs, and
6. other monetary obligations the Trustee, as the seller of the Property, would normally need to pay at the close of escrow.
The sale also proposes that Chase will accept $691,184.95 as full satisfaction of its lien thereby allowing the Property to be sold free and clear of their lien and no other junior liens will be paid pursuant to 11 U.S.C. § 363(f)(1) and (5). Chase has requested the Trustee file this motion and therefore the Trustee believes that Chase will have no objection to these terms.
CONDITIONAL NON-OPPOSITION filed by JP Morgan Chase Bank, N.A. on 8/6/xx
Chase requests that the following provisions be included in the Order on the Motion:
· The sale of the Property is contingent on Chase’s secured claim being
paid in full or in accordance with an explicit short sale approval by Chase.
· Chase’s secured claim shall be paid off in full or in accordance with any short sale approval authorized by Chase before satisfying any other lien on the Property.
· In the event that the sale of the Property does not take place, Chase shall retain its lien on the Property for the full amount due under the applicable loan documents.
· Each party shall bear their own attorneys’ fees and costs incurred regarding the Sale Motion.
SUPPLEMENT TO TRUSTEE’S MOTION filed by Trustee on 8/16/xx
Trustee does not oppose the above-stated provisions being included in the Order approving the sale, prior to proceeding with final approval of the short sale of the Property. Trustee provides that she has received inquiries and interests on overbidding from (the Debtor) and (an individual who has overbid on other properties this Trustee sold). The Trustee requests that the Court approve the sale of the Property conditioned on Chase’s final explicit approved terms. Trustee provides that Chase still needs to conduct its own appraisal of the Property, prior to approving a sale price. Trustee further requests that the Court approve the sale and allow the Trustee’s brokers to counter interested buyers to obtain the approved sale price by Chase and/or the highest price to benefit the Estate.
In the alternative, Trustee requests that the Court continue the hearing for two weeks to allow the Trustee to work with Chase and obtain a final approval for the short sale and its terms.
See net time for Judge Houle’s analysis of Ms. Bui’s attempt to short sale the debtor’s property.