Re: Bankruptcy Trustee Fees

[Treasach]

Hello,

I want to buy a house on a bankruptcy sale in WA. The listing agent says the buyer should pay the trustee fee at closing and wants me to sign a document saying so. The document also says that the trustee fee paid cannot be rolled into the buyer's mortgage loan.

Here are my questions:

1. Does the buyer really have to pay the trustee fee?

2. Can this trustee fee not be rolled into the mortgage loan under any circumstances?

3. The trustee fee is 5% of house value + $3250. Considering I want to buy the house for 475k, the trustee fees would be close to 27k. Does this sound reasonable?

Thanks for your time.

Ravi.

ANSWER: You are free to offer whatever you want to pay and I would NOT agree to pay these fees if it was my deal.  Also -- if it's a bankruptcy sale, most likely there will be a hearing to confirm the sale at which time overbids will be invited in open court.  You don't have to go through the listing agent on this deal and in fact I suggest you not do so for the reason that he's obviously not looking out for your best interests here.  Get your own agent and have your guy write up the normal 50/50 split in commissions.

You can also look at the bankruptcy case file at the court house(electronically stored most likely) and see what were the terms of hiring this realtor -- odds are it's a commission based on sale and they're directed to split with other agents.

If you found this in MLS then it's a sure bet that they're offering to split the commission with a buyer's broker.  You need someone on your side in this.

Good luck!  Let me know how it turns out.

Lee

---------- FOLLOW-UP ----------

Lee,

Thank you so much for the answer. It was really helpful. However, I'd like some clarifications. So, there's a bankruptcy trustee who is a bankruptcy attorney. There's the listing agent who I suppose works with the bankruptcy trustee. And I have my own agent who is communicating with the listing agent about this. The problem is that my agent has never dealt with bankruptcies and we are learning along the way. When I said bankruptcy trustee fee/bankruptcy estate fee, I am assuming the fee is entirely going to be taken by the bankruptcy trustee and not the listing agent and my agent? Or is this a fee that all three people involved share?

Here is the wording on the paperwork given to us by the listing agent that I will paste here so you understand better what I am saying:

TRUSTEE ADDENDUM TO US BANKRUPTCY PURCHASE & SALE AGREEMENT

THE FOLLOWING IS PART OF THE PURCHASE AND SALE AGREEMENT DATED: ________________________

BETWEEN _______________________________________________________________________BUYER

AND____________________________________________________________________________SELLER

CONCERNING THE PROPERTY LOCATED AT: _________________________________________________

IT IS AGREED BETWEEN THE SELLER AND BUYER AS FOLLOWS:

BUYER AGREES TO PAY THE STATUTORY BANKRUPTCY ESTATE FEE. THIS FEE IS TO BE PAID IN FULL AT

CLOSING. THIS FEE CANNOT BE ROLLED INTO THE BUYER'S LOAN. SEE EXHIBIT 'B' FOR FEE SCHEDULE.

BUYER AGREES THAT IF COMMISSIONS ARE REDUCED BY EITHER A COURT ORDER OR A LENDER THE

RESULTING COMMISSIONS ARE TO BE EVENLY DIVIDED BETWEEN THE LISTING AGENT AND THE SELLING

AGENT.

IF BUYER RESCINDS ON INSPECTION, BUYER SHALL FORWARD ALL WRITTEN INSPECTION REPORTS &

DUE DILIGENCE WITH THE TERMINATION NOTICE.

[mabellemurphy]

Did you consult for the bankruptcy experts for your question? I think they can answer all of your question.

[Tayson]

I would positively absolutely under no conditions whatsoever agree to that "addendum" and I'd be tempted to report the trustee's attorney to the state bar for solicitation of a direct conflict of interest with some third party paying the trustee instead of the bankruptcy estate.

Here's what I'd suggest.  Tell Mr Listing agent "no dice" on this addendum and that you insist that your offer be presented to the COURT for confirmation without the addendum;  and to let you know when the court hearing will be.

If they refuse, I'd then suggest your agent file the offer directly with the court clerk!  He should at the same time request special notice in the case of any hearings to sell the real estate.

These sales are pretty straight forward;  much like probate sales;  folks can come in and overbid and the court will decide what the increments are -- $500;  $1000;  in your case it might be $1k to $5k increments so you're not doing a one dollar per bump bidding war.

Be prepared with proof you can perform, such as a bank letter of credit, preapproved mortgage, whatever so you can compete on an equal footing with anyone there.

Your agent will have to agree to be paid whatever is allowed as a commission by the court.

I would ABSOLUTELY NOT give them your inpsection reports(if you have any) if you change your mind.

The listing agent is required to present all offers whether they're in the form they "want" or not;  the trustee might reject your offer but that doesn't mean you lose out;  file your request for notice of hearing on the confirmation of sale in court and in any case show up in person with your broker.

When the court calls for overbids, step up to the lecturn(most people call it a "podium" but it's a lecturn) announce your name your broker's name who's right there with you and you're prepared to bid $x but not pay the trustee's fees.

That's pretty creative of them but I believe totally unethical.  I as an attorney can't have someone else pay my attorneys fees for representing a client because, think about it, how can I represent the client knowing that there is some third party that might have a different interest in what's going on?

Clearly that's the case here -- the trustee gets paid his statutory fee out of the proceeds of the estate sales after a full accounting is made to the court.

if it comes up at court, I'd be sure and let the judge know they've insisted on this "buyer pays the trustee fee" deal as the court may not be aware of it.

If I was the judge I'd sure like to know about that sort of monkey business.

Good luck!  Don't let them stonewall you here.  

Lee