“Seller is a debtor in a pending Chapter 13 Bankruptcy case. Seller's obligations under the Contract shall be contingent upon the Bankruptcy Court entering an order approving sale of the Real Estate. A Motion to Approve Sale will be filed and scheduled to be heard on January 15,2026. If Seller is unable to obtain Bankruptcy Court approval for sale in advance of Closing, Seller may request an
extension of the Closing Date, and if not agreed to by Buyer, either party may cancel the Contract.”
My understanding is that even though it seems quite shady and unethical, it is not illegal. Also when I search for a public record of this bankruptcy, this is what I find:
07/25/2024 Bankruptcy Case Closed and Trustee Discharged
07/24/2024 Chapter 13 Final Report and Account Filed by Trustee
Is this normal occurrence?
Seller disclosed that the buyer is going through chapter 13 bankruptcy only after the inspection was done. Can I demand the refund of the inspection fee?
byu/Fragrant-Ad-7388 inRealEstate
Posted by Fragrant-Ad-7388
6 Comments
Who are you in this scenario?
… What did you expect to be different knowing that they’re in debt? You’d still have to get an inspection anyway, and that’s not on the Seller to pay for.
You came in with an offer that you felt the home was worth paying for.
That information should be available to your Agent. Idk what state you’re in, but I’m Georgia, there’s a section in the MLS to identify any sort of special circumstances the property may be in. eg foreclosure
It’s rare but it’s possible (not all Agents are created equal), that the Agent was not diligent enough in their inquiries and found out after the fact it went under contract. (I highly doubt this but you never know – people hide a lot of things that are actually important).
Actually, yes, you can, but you might never get it. It’s hard to squeeze blood from a turnip.
I’m in Georgia, and our contracts contain no special provision to get a refund for due diligence if something like this happens. I doubt yours did either. However, the buyer has a right to enforce the contract as it was signed. Yours was signed with terms that weren’t contingent upon any bankruptcy proceedings. The traditional remedy here would be suing for specific performance when the seller can’t fulfill his end of the agreement. In your case, demanding the inspection money back would be simpler than suing. I truly think you’ll be out of luck though. It’ll cost you more than what you paid.
You mean the seller is going through bankruptcy, not the buyer.
There’s probably a line in the purchase agreement that says that the seller intends to convey clear title. It’s no different from the buyer provisions about the buyer intending to get financing.
If the seller knew about it needing third party approval to complete the sale, they probably should have disclosed it – OP, your agent can check your local MLS rules and regs.
The seller may well not have understood that their closed bankruptcy case still needs court approval for the sale of the house.
I doubt you can recover the fee you paid for inspection. Just hang tight and you’ll most likely be able to close.
Relax. It’s not that big of an issue. They file the bankruptcy back in 2024. The home was included in the bankruptcy. It’s a chapter 13 which means they have to make payments on the debt. All the bankruptcy Court’s going to care about is whether or not they’re selling it for a loss. As long as they’re selling it for more than what’s owed on at the bankruptcy courts going to approve of it.
If you want peace of mind, ask them when are they going to petition the court for permission to sell the home?
Although it’s not super common this shouldn’t be a big deal. The court order that is being sought is routine and there should be no reason the order doesn’t get issued assuming this is an arm’s length transaction. The seller has no control over the court calendar so it makes sense to include this language in the contract.
Honestly many sellers in similar circumstances don’t realize they need a court order to proceed with the sale until the title company raises the issue so I’d take it as a good sign that they are proactive.