I think that the distressed property law is going to have a large negative effect on our industry.  Let me give an example -

Suppose you take a listing and the seller says that they are current and expect to remain that way.  The seller lives in the house being sold.  They sign the new 1A listing form that says as much.  You market the home (spend money) and attract a buyer (with a buyer agent).  An offer is negotiated and signed and the contingencies are satisfied or waived.  One week before closing, the seller gives you a call and tells you that he is concerned that the closing may not happen and he will not be able to make the payment(s) on his house.  Since he has now told you that he believes that he is 'within 4 months of default', paragraph 4 of the listing agreement indicates that your broker needs to either terminate the listing or instruct the seller to sign a new 1A-DH listing.  What if the seller refuses to do so?

My interpretation (note that I am not a lawyer) is that your claim on a commission is gone.  The problem is that the new law defines your seller as a 'distressed home seller'.  If he has asked you (or you volunteered the information) that the closing will solve his problem, then you have offered the services of a 'distressed home consultant' (DHC) by offering to save his home from foreclosure.  The listing does not fulfill the requirements of a 'distressed home consulting transaction' - it is the wrong font, if for no other reason.

As a DHC, you are now a fiduciary to the seller and need to consider his interests above your own.  I don't see how your commission is in his best interest.  And doing anything to stop the closing is definitely not in his best interest.

You may argue that the seller does not have a 'good faith' belief that he will be in default - but how can you know that?  Many people live paycheck to paycheck and it can very easy to live beyond their means.

You may also wonder if sellers will be sophisticated enough to use this technique.  Unfortunately, I predict that their will be a service that advertises that they can save the home seller the full commission on their house sale for only $1000.  This would be perfect for the ambulance chaser that is not making enough money.

I don't want to be a cynic, but I think this law is really poorly written and is ripe for abuse.

 Can anybody tell me why my example is wrong?  Or why anybody would think that this 'consumer protection' law will NOT hurt the very folks it is supposed to help?