A new law regarding "distressed properties" went into effect in Washington State yesterday. This new law was in response to equity skimming and other shady practices by companies claiming to help property owners facing foreclosure. While the intentions were good, the resulting law has thrown a huge and scary curve ball to Realtors.

The new Washington law defines a "distressed home" as a residential building with 1-4 units occupied as the owner's primary residence which is:

  • a) in foreclosure due to a mortgage default
  • b) at risk of loss due to non-payment of taxes
  • c) in danger of foreclosure because, with respect to the mortgage: i) the owner has defaulted, ii) the owner is 30 days delinquent, or iii) the owner believes they are likely to default within the next four months.

The definition makes it so a short sale is not neccessarily a "distressed home" and a distressed home is not necessarily a short sale. A seller of a "distressed" home who feels like they "could have gotten more" for their property can sue the listing agent, the selling agent, and even the buyer! This new law states the the BUYER of a distressed property has the same resposibilties as both the listing and selling agents, including the ability to levy fines of up to $100,000 against them. To top it off E&O insurance won't cover this!

In response to the huge personal and professional liability under this law, at least two large, full-service brokerages in our city have stopped dealing with these properties all together! Here at Keller Williams in Vancouver we are still servicing these "distressed" properties, albeit under strict guidelines. We're working hard to figure out exactly how this is going to affect our daily business. One thing's for sure - we can't do "business as usual." Yet another reason that hiring a professional Realtor is more important than ever for consumers.

The S&B Real Estate Team assists people in buying and selling real estate throughout Southwest Washington. We are proud members of Premiere Property Group, LLC in downtown Vancouver. Our local expertise covers: Vancouver, Battle Ground, Camas, Washougal, Brush Prairie, Hockinson, Ridgefield, Woodland and La Center. If you or someone you know is considering living or investing in Clark County, please contact us. Steve Borwieck can be reached at 360-241-7305. Or drop us a note on the “Contact Us” page at www.ppgwashington.com. We are here to help!

 
Posted by S&B Real Estate Team on 06/13/2008 01:42 PM   Comments (6)  
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6 Comments on Washington State Passed a SCARY New Law!

JUN
13
2008

That one will probably make your E & O rates go up.  Good luck!
1:53pm • #1
952,284 Points 93 Featured Posts Outside Blog Called Shot Master

Many states will be following suit shortly.  Last year in Georgia there was a ruling that advising a person in short sale...you really needed to be a lawyer.  You could actually get in trouble for practicing law without a license.  I bet you most agents in Georgia are not even aware of the ruling.
1:54pm • #2

Jamie,

Yes and we elected the people that passed this!  And WAR was off planning some big party and missed the last session when realtors were not exempted. Maybe the AG thought that Credit Counselors and Attorneys would be better than we would at marketing and selling these homes!

David Bell

RE/MAX Metro

Seattle
6:34pm • #3

It sounds like the state is not being quite fair about the matter but then you do have to protect people from themselves sometimes.
7:07pm • #4
JUN
25
2008
5 Featured Posts Attended Rain Camp

Scary Law Indeed.

I hadn't thought of the E & O Rates, I expect they will go up significantly in the next couple years.... Hopefully the law will be thrown out or seriously re-vamped to actually do some good before that happens, but I wouldn't bet on it.

-Bill
4:22am • #5
JUL
10
2008

The bill should have been named "Let's Increase Foreclosures".

Without Realtors and Investors to help distressed sellers get out of their houses and loans before the auction, more properties will be going to foreclosure.  If there is no one to buy these homes prior to auction the banks are going to end up with a lot of REOs.

There are a lot of honest, sincere and ethical realtors and investors that have assisted many of these homeowners in the past.  Now there is just too much liability in trying to help someone.
6:20pm • #6


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