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.
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