Special offer

Foreclosure Vultures ... BEWARE! (Colorado's NEW Foreclosure Protection Act)

By
Real Estate Agent with The Artisan Group- Keller Williams Premier Realty

 You know them. They plant their little yellow signs. They check on the weekly election and demand lists religiously. They gather like vultures around any Seller that is or may be facing foreclosure. You, the Realtor, can only educate the selling public so much about these predators before an "investor" promising "Quick Cash and Walk Away From Your Problems" becomes the "too good to pass up" answer to the Seller's foreclosure problems.

Well, foreclosure vultures, watch your backs. The tables have turned. The Sellers that you have been making meals out of, can now make meals out of you. Ha. Ha. Colorado now has a new law, THE COLORADO FORECLOSURE PROTECTION ACT ... effective NOW (Jan. 2007) that protects the very people that you prey upon.

This comes in good timing, as "A rising wave of home mortgage foreclosures crested in 2006, propelling Colorado to the top of a much-publicized ranking (#1) that no state wants to be on." (according to Denver Business Journal article, Dec.29, 2006.) FYI: Nevada bumped it out of it's #1 position in November, 2006.

Colorado's foreclosure rate ranked first among the 50 states for eight consecutive months, from March through October, according to Irvine, Calif.-based RealtyTrac Inc.

And if you break this law ... don't plan on picking up soap anytime in the near future... and I hope you look good in orange. This is a "Go directly to jail. Go directly to jail. Do not pass GO. Do not collect $200." offense. Yep.

And what do I say? ... Thank Goodness!  And what should YOU say? Well... You better just agree with me, ok?

Colorado now has a new FORECLOSURE PROPERTY ADDENDUM TO BUY AND SELL REAL ESTATE.

 This Act was designed specifically for "investors" buying homes in some stage of foreclosure.

(Bolded items are pulled exactly from the Addendum.)
In BOLD, on the very TOP of this addendum, there is a "Note" that states:

This form is to be used only if (1) the Property is in foreclosure, (2) the Property is residential, (3) Buyer is not to reside in it for at least 1 year, and (4) ALL of the requirements in Section 3 (Terms) of this Addendum are satisfied. If these items are fulfilled, this Addendum may be prepared by a Broker for a buyer purchasing the Property as a rental or as a non-owner occupied. If ANY of the requirements are not satisfied, an attorney, NOT the Broker, should prepare the contract.

Now, this references a "Section 3 (Terms)" which I will now address. I find these Terms to be of particular interest. I will address some of the ramifications after each term. My input will be in non-bolded italic.

 Terms: Buyer and Seller agree to all of the following 6 conditions:   (Note that it says ALL ...)

a. There will not be any financial or legal obligations of Seller (related to Property) after closing, except income tax liability, if any. Basically, the Seller cannot be held liable, after close, for any written or unwritten obligations. This nips in the bud the "Yeah. We'll close but after close you pay me XX a month clause" that has been used against Sellers.

b. There are no rental agreements or leases for the Property between Buyer and Seller. This prohibits the Lease Option/Lease Purchase that has hurt Sellers facing foreclosure in the past. We have heard plenty of stories where a Seller agrees to a Lease Option, where the "investor" buys their property (for a horrifically low price) and rents it back to them... but then the terms are so awful that the Seller winds up having to move or gets evicted.

c. Seller does not have an option or right to repurchase the property. The only way  that a Seller can re-purchase the property is going through the process than anyone else would go through to buy a home, and only if the Property goes up for sale.

d. A notice of cancellation is attached to this Addendum.  There is a Cancellation Notice that is detailed below.

e. Seller represents that English is the language principally spoken by Seller. Yay! No taking advantage of our English-as-a-Second-Language Community!! People come to America for the American Dream. Part of the American Dream is home ownership. How dare ANYONE screw them over- regardless of their foreclosure situation!

f. No consideration shall be paid to Seller prior to the expiration of the Seller's right to cancel the Contract. This is the part that prohibits, "I will give you XX dollars and take over your payments."  Nope. Not allowed anymore (unless drafted by an attorney). I have heard the horror stories of Sellers agreeing to this and finding out a few months later that the "investor" has not been making the mortgage payments.

If any of the above 6 conditions are changed, modified or amended at any time prior to or at Closing, the parties agree that the Contract to this Addendum shall be void and in no effect. If Buyer and Seller do not agree to one or more of the 6 conditions, then the Contract and this Addendum are void and in no effect.

In HUGE BOLD font it goes on to state that the Buyer, nor anyone working for the Buyer CANNOT ASK the Seller to "SIGN OR HAVE [THE SELLER] SIGN ANY DEED OR ANY OTHER DOCUMENT" before the agreed upon cancellation date.

Stop SignWhat IS THE Seller's Right to Cancel?

There is a separate form, approved by the Colorado Real Estate Commission, which gives the SELLER (yes! The SELLER!) the right to cancel- without ANY penalty or obligation, under the following circumstances, and "in addition to any right of rescission available under state or federal law":

1.  The Seller has the right to cancel the contract with Buyer until 12 Midnight of the 3rd business day following the day on which the  Seller signs a contract that complies with the Act, or

2. Until 12 noon on the day before the foreclosure sale of the residence in foreclosure, whichever occurs first.

*Please note:
In Colorado, EVERY licensed real estate agent is a Broker.
This is the FIRST time, in a long time where attorney involvement in a contract is MANDATORY, under certain conditions.
• This Addendum is to be a part of ANY Contract to Buy and Sell Real Estate that involves a residential foreclosure, in the state of Colorado.
• This Addendum was created to conform to the new COLORADO FORECLOSURE PROTECTION ACT.

What I love about this new Act is that it really defines what is and is not acceptable when dealing with a Property and a Seller that is in Foreclosure. It protects the Selling public from going from a bad situation (foreclosure) to a worse one. It closes the loophole that so-called "investors" take advantage of when trying to get their slimy hands on more properties- or, yet, more money.

More Acts like these need to be initiated across the country, if they haven't been already. Of course, the public needs to be educated (that's OUR job, as Realtors® and lenders) but first and foremost, they need to be PROTECTED, which is what this Act is designed to do.

(I know. I know. There ARE earnest folks out there- folks that really, really want to help. All my 'Investor-Hatin' obviously does not apply to them.)

**Update... This act in no way affects the foreclosure process or the ability to "short sale" a property. This act was intended to protect distressed sellers from private investors- not lenders or banks- from offering shady and potentially detrimental alternatives to foreclosure, to the unknowing public.**




READ MORE ABOUT RECENT FORECLOSURE SCAMS HERE There ARE scammers out there taking advantage of homeowners.

Posted by

       Posted By: Derek and Mariana Wagner - Springs Top Agents

Keller Williams Premier
(719) 434-7525    SpringsTopAgents.com

Comments (52)

Ken Cook
Content, coding, marketing, host. - Marietta, GA
Content Marketer/Creator

Bryant! You think like a shark and that keeps us guppies alive! I hadn't even thought about the pay-o-la aspect. Yes, you are probably right. There is always a way around it for the shady dealers ... it's always the just who are limited in their honest deeds by the justice system.

Mariana, my sole objection here is government interference in free enterprise. And, by the way, I do not trust my doctor nor my mechanic. I research EVERYTHING they say and have cured myself of ills in ways my doctor assured me would not be affective. CHERRY! Bingo! 

Jan 13, 2007 12:22 PM
Derek and Mariana Wagner
The Artisan Group- Keller Williams Premier Realty - Colorado Springs, CO
The Artisan Group - Colorado Springs REALTORS®
Ken- I also do a lot of research on my own, as well. But I am not planning on going to school for every aspect of my life .. and I even LOVE school. I guess I still do not see how this Act limits free enterprise of honest do-ers. In agreeing to disagree, I wish you a great weekend! (pear)
Jan 13, 2007 02:21 PM
Ken Cook
Content, coding, marketing, host. - Marietta, GA
Content Marketer/Creator

Thanks! You have a great weekend, too. As I tell my son who loves to "test the waters" on his own and is proving it by never visiting his dad ... well, that's a different story ... I've already seen it. Been there, done that and got the T-shirt. I've seen it hundreds of times in hundreds of other government attempts at correcting a civil wrong. It's just a perk of having been in the business and on the earth for several decads. It's also the reason I listen to my elders like Brian Brady. Youth has its priviledges. Hindsight is not one of them.

CHERRY! Bam! That's two on YOUR blog. One more and I win the prize. 

Jan 13, 2007 02:59 PM
Kristal Kraft
Novella Real Estate - Denver, CO
Selling Metro Denver Real Estate - 303-589-2022

Mariane ~ Since you asked me to comment I will.  This whole Colorado Foreclosure Protection Act appears to be a knee-jerk reaction to problems we  have had in the past.  It is a shame that unethical people take advantage of uneducated homeowners in distress but IMHO this is a law that in not well conceived.

The timing of this law is even less of a blessing.  We need to have legislation that enables sales to occur, not prohibits them.

I understand what it is trying to do.  I also understand the spirit of your feelings, I totally agree predatory bad actors should not be allowed to profit on the backs of homeowners, but legislating this is NOT GOING to stop the BAD Guys.  What will happen is the good guys will go invest in something else.  Increasing the glut of homes, and also desperate, up-side-down homeowners.  The Act will just raise the temperature in the pressure cooker.

Setting terms for selling a home to include "Seller represents that English is the language principally spoken by the Seller" is prejudicial. 

Yes, sure then when they can't come to the 6 terms they get to go spend more money they don't have on an attorney, who of course is much more ethical than a REALTOR®.  We all know there aren't any bad actor attorneys out there don't we?

So now we have a foreign national who is in financial trouble who now needs to spend more money in order to sell his home.  Now if he could speak English, he could sell his home.  What is wrong with this picture? 

America home of the free, land of the brave where everyone is equal, unless you don't speak English?

I wish fixing this problem were as simple as passing legislation.  It's not. It's just one more piece of paper that will be abused by unethical people who don't care.

There's my 2 cents.

kk

P.S. You shouldn't hate investors so.  Most are good people who will in fact pull this market out of the dumps.  I know I've seen it happen before.  This too will pass.

Jan 13, 2007 03:13 PM
Ken Spencer
Buckeye, AZ
for Verrado, Buckeye, Sundance

I think laws may have originally been conceived to protect all of us the majority of the time.  Unfortunatey they can be a double edged sword or get out of hand.  The attention that foreclosures have gotten in Colorado have just created a stage for actors of a different kind.  Those actors don't necessarily have the good of all of us in mind. 

Ken 

Jan 13, 2007 03:42 PM
Derek and Mariana Wagner
The Artisan Group- Keller Williams Premier Realty - Colorado Springs, CO
The Artisan Group - Colorado Springs REALTORS®

Ken- Times are always changing. We must always learn from the past and prepare for an unknown future. Sometimes I think my 3 year old has all the answers...:o)

Kristal- Thank you for stopping by and sharing your 2 cents. I really appreciate it. It is nice to hear the opinion of a fellow Colorado broker regarding this. I DO agree about the possible prejudice regarding this act, and believe that THAT will be the first hurdle in making any of it work. And rightfully so. That part of the act was not very well thought out. 

Also, my "investor" hatin' has nothing to do with real investors. I know that there are many, many investors who know what they are doing and are creative enough to make wonderful things happen in bad times. I am talking about those "investors" who really are not really investors because they are not investing anything- just trying to make a quick buck off the backs of the distressed. Heck! I am an investor, but not that kind.

Ken S.-You are right. When one door closes and another window opens- both for good guys and bad ones.

Jan 13, 2007 05:46 PM
Ken Cook
Content, coding, marketing, host. - Marietta, GA
Content Marketer/Creator

Oh, Kristal. You are always, usually ... no, always, such a breath of fresh air. Sorry that Colorado is percieved as a socilalist state. I'm from Georgia and I don't know anyone named Bubba, have never dated my cousin, and ... well, maybe I did that, but we are not all tobacco chewing, beer swilling, gun toting, rednecks. Well, I don't chec tobacco.

Marianna, bless you. Times change but not that way. That would be too ideal. You just keep believing that government regulations do good and I'll keep teaching investors not to be sharks and minnows not to get eaten. Shucks, Lime. Guess I'll have to make a marguerita.

Jan 14, 2007 12:28 PM
Derek and Mariana Wagner
The Artisan Group- Keller Williams Premier Realty - Colorado Springs, CO
The Artisan Group - Colorado Springs REALTORS®

I have faith in a lot of people and a lot of situations. In most situations I am very anti-legislation. But I have seen way too many people hurt in this situation - maybe things work differently in Georgia.
We also do a lot of teaching- both to foreclosure bound sellers and to all of the investors that we work with. I am a teacher by trade and and educator by nature. It is what I do and I believe in it whole heartedly. I ALSO believe that education is a better answer. I never said that legislation is the only answer. It is an answer and I would hate to see the state of the world if there were NO laws or judicial acts.

Jan 14, 2007 01:01 PM
Anonymous
Anonymous
There are ethical ways to invest in foreclosures that do not hurt the homeowner.  Can you get the home sold before the bank forecloses?  Most of the time the owner doesn't have time to wait 6 months for a realtor to sell the home.  Sometimes their only option is to sell to an investor who can perform and close.  Now there are a lot of scams out there that is for sure.  But if the homeowner can sell the home and get some of their equity and move on that's good for them.  Having a listing sit for 6 months while the owner loses their home is very bad for them. Hopefully you're helping owners by listing them.  I know many realtors who can't sell a home fast enough to help the owners. 
Aug 24, 2007 05:42 AM
#41
Derek and Mariana Wagner
The Artisan Group- Keller Williams Premier Realty - Colorado Springs, CO
The Artisan Group - Colorado Springs REALTORS®

Hello, and thank you for your comment. You are absolutely right. If an agent can sell it before the bank forecloses, then that is usually a wonderful thing. However, if a seller is in Foreclosure, then there are certain precautions that need to be taken.

Luckily, if a Seller can price a home effectively, it will more than likely sell before the bank takes it over. The problem that we are seeing is that Sellers are not contacting agents until it is almost too late.

My advice to Homeowners facing foreclosure: Most agents understand that hard times fall on people and therefore, will not judge you. As soon as you know that you may lose your home in a foreclosure, please call an agent who has experience in effectively dealing with foreclosure situations. They should be able to get your home sold before it gets ugly.

Aug 24, 2007 11:04 AM
Ken Cook
Content, coding, marketing, host. - Marietta, GA
Content Marketer/Creator
Rob - laws will never be more powerful than knowledge. Education not legislation.
Aug 25, 2007 12:41 AM
Derek and Mariana Wagner
The Artisan Group- Keller Williams Premier Realty - Colorado Springs, CO
The Artisan Group - Colorado Springs REALTORS®

Rob and Ken

I think there is a balance. Sometimes legislation HAS to happen in order for people to become educated.

Aug 25, 2007 02:13 AM
Anonymous
Anonymous

Ever heard of the pot calling the kettle black???  This sounds like a Realtor (aka VULTURE) to me.  So how did so many Colorado homeowners end up getting foreclosed to begin with???  Answer:  REALATORS, who sold them homes they couldn't afford because the higher the home price the more $$$ they make!  These VULTURES charge 3% to 6% for what???  Listing a home on the MLS and showing it a couple of times, what a joke.  Then they shove a pen in their CLIENTS hand at closing to sign mortgages they can't afford and 2nd mortgages just to come up with the "down payment" they never had.  Zero Down Loans, 5 Year ARMS, who exactly advised their clients this was a good idea?  Ever heard of ETHICS and FIDUCIARY DUTY or did you sleep through that class during your extensive education to become a licensed VULTURE?  Do you truly believe you are helping someone out by SHORT SELLING their home?  I'm sure you waive all your commissions on those sales, don't you???  I'm glad you are so supportive of new legislation, because changes are coming your way too... Yes, hope you had a good run.  Things may be bad for REALTORS now, but they are about to get much worse.  By the way, deleting this comment will only validate its truth.

Jul 15, 2008 08:58 AM
#46
Donna Harris
Donna Homes, powered by JPAR - TexasRealEstateMediationServices.com - Austin, TX
Realtor,Mediator,Ombudsman,Property Tax Arbitrator

Mr. Don't Delete this Comment, Sounds like you woke up with a foreclosure notice in your hands this morning.  Whose fault is that?  It's not your own?  You didn't see the mortgage payments and decide you could afford it?  You didn't find the house you asked your Realtor to find for you?  Were you drinking?  Signing documents while drinking is considered under duress.  How did that pen get in your hands?  Was it super glued?  It sounds like you should be taking your issues up with your lender/mortgage person, not the realtor.  We have no say in what house a buyer wants to buy.  We show houses according to the approval level the mortgage person gives the buyer, and the buyer tells us the range within that approval that they want to stick with. 

Jul 15, 2008 09:13 AM
Anonymous
Mariana

Don't worry, I am not deleting your comment. You were polite enough not to throw out explicatives and I thank you for that.

I am sorry you had a negative experience with a real estate agent and understand your want to rant. However, I am having a great career - as are many other agents I know. - and not off the backs of the home byuing and selling public. A lot of us are ethical and know what we are doing. My business is built off the service leve  I provide my clients. I am sorry if you never got to experience working with a true professional, but painting "us all" with the same brush is erring on the side of ignorant.

Ultimately, it is the home buyer who makes the decision to buy a home when they know they cannot really afford it.The loan they choose is between them and their lender. I am not a lender and am not trained in the field of lending. My job is to find homes for home buyers, sell homes for home sellers and negotiate contracts. Yes... bad things happened in the lending field and although there were a few bad apples doing shady things, there are scoundrels in EVERY profession ... even yours. We are doing everything we can to right wrongs.

Also, you speak of listing comissions .... this article is about purchases, not listing contracts.

Thank you for leaving your name, and good luck with your future real estate investments.

P.S. You should go visit HousingPanic.com ... Right up your alley.

Jul 15, 2008 09:18 AM
#48
Anonymous
Mariana

... and by the way ... this legislative act is aimed at helping homeowners, not real estate agents.

Jul 15, 2008 09:22 AM
#49
Anonymous
Patrick

WOW!  I just happened to stumble over this blog, and I am nearly choking here.  Mr. "Don't delete this comment" hit the nail on the head.  Holy moley!  You really must educate yourself a little bit better on this topic because this is the kind of ignorant stereotyping of a group of professionals, most of whom feel very strongly about how they help people to avoid the big foreclosure.

Seems to me that you are going on about are folks with equity (subjective, certainly in this market) who have been swindled by swindlers.  You know there are bad people in all professions (take Catholic Priests for example) but to hurt away at anybody involved in the disposal of financially distressed properties and genuinly helping people avoid the worst, is just down right ignorant.

Here's a scenario for you Mariana.  True story.  Ya see, a little over a year and a half ago, I saw the writing on the wall.  Perhaps because all the poor folks out there were calling me to refinance them, but of course that was not possible.  Because I HATED having to call and turn-down these good desperate folks, I studied my hind-end off harder in 4-5 months than I did in my entire 4-years of college to LEARN how to help these people.  No equity, poor credit, upside-down, perhaps other personal financial issues I learned how to address.

So, while you may be ranting at the few crooks out there preying on the un-eduated and un-informed, here's what the rest of us are doing (This is short-sale negotiations by the way, and yes we do get paid.  Don't you?):  Mind you, this is typically at least a 3-month process - but the end result is this -

Bank gets what they agree to take.  Seller avoids foreclosure (they have negative equity and are being forgiven significant amounts of money based on our professional due dlilligence and negogitations witht the lenders).  A couple of Realtors or sales associates usually get paid, and the new retail buyer gets a stellar deal as well.

You might do well to change your tune a bit.  It may behoove to work with an ethical foreclosure specialist.  Did I mention there are a number of us that also assist with loan modification mediation to help those who are simply the victims of sub-prime mortgage adjustments.  My favorite Realtor, who unfortunately moved off to Florida right before the storm, made over $10K his last month from me alone based on the short-sale listings I gave him.

P.S. I just read your last response and I cannot believe what I am reading, in light of the way you ignorantly slammed an entire profession to kick off your blog!  I'm sorry, but whew!! 

"I am sorry you had a negative experience with a real estate agent and understand your want to rant. However, I am having a great career - as are many other agents I know. - and not off the backs of the home byuing and selling public. A lot of us are ethical and know what we are doing. My business is built off the service leve  I provide my clients. I am sorry if you never got to experience working with a true professional, but painting "us all" with the same brush is erring on the side of ignorant.

 

Aug 25, 2008 04:26 PM
#50
Anonymous
Patrick

Also, the new legislation is for the criminals.  I have more disclosures in my contracts by far.  All clients that work with ethical foreclosure specialists are thoroughly disclosed.  Disclosure, disclosure, disclosure.  There is nothing to hide.  It is what it is.

Aug 25, 2008 04:33 PM
#51
Anonymous
Mariana

Patrick-

First of all, if you actually read the entire post and not just skimmed over it and assumed you knew what I was writing about, you would see that I am talking about scammers who pose as "investors" ... If this is not you, then I do not understand why you (and others who have commented here) seem to be taking such offense.

I did not "slam" an entire profession to kick off my blog. I have had a successful blog and career WAY before I found the need to educate the consumers about scammers posing as "investors" in this post.

I, myself, am ALSO an investor - but not in the way that I describe in this post.

Aug 29, 2008 02:14 AM
#52
Anonymous
Jon C.

It's really great that a state has passed laws to protect homeowners against foreclosure predators.  more states should consider this.  Homeowners in foreclosure should learn what is a short sale in real estate to avoid foreclosure.  Real estate short sales provide a great alternative to foreclosure.

Oct 28, 2008 12:37 PM
#53