Distressed Property Hawaii Law MUST be Amended to Exclude Realtors

Distressed Property Hawaii Law MUST be Amended to Exclude Realtors. (edit/delete)

The stated purpose of the new law is to protect the property owners facing foreclosures, liens, or encumbrances from persons who would prey on them.

 This act addresses possible misrepresentations by such persons who would offer assistance to these owners and requires them to fully describe their services in a written contract. It gives the property owner the right to cancel at any time before a "distressed property consultant" has performed all services called for in a contract.

The problem arises in the definitions section: "Distressed property consultant means any person who performs or makes any solicitation, representation, or offer to perform any of the following relating to a distressed property: ... Stop or postpone the foreclosure sale or loss of any distressed property due to the nonpayment of any loan that is secured by the distressed property..."

Previously, these were duties real estate professionals performed when they represent a seller in a short sale.  Unfortunately real estate professionals are not specifically excluded in this law. However, lenders, attorneys and insurance companies are all exempt from the law.  Why not real estate agents?

Short sales are a challenge for agents under the best of circumstances. They take much more time and their commissions are usually reduced by the lenders as a condition of approving the short sale transaction.

Agents work on short sales as a service to their clients.  Under the new law, real estate professionals acting as "Distressed property consultants" have their compensation capped at two most recent monthly mortgage installments of principal and interest due on the loan first secured by the distressed property or the most recent annual real property tax... which ever is less".

This is very little incentive for a real estate professional to list, market, find a buyer and negotiate with the lender to help the distressed seller avoid foreclosure, especially when that compensation is split with a co-operating broker representing a buyer.

Ultimately, I believe the consumer will be harmed greatly by this law. If real estate agents are not involved in helping distressed sellers sell their property through the short sale process and marketing it on the Multiple Listing Service, the lenders will have no choice but to foreclose.

The law must be amended to exclude licensed real estate professionals from the definition of "distressed property consultant" when they are performing services on behalf of a buyer or seller.