CALIFORNIA REAL ESTATE AGENTS CAN NOW REPRESENT INVESTORS BUYING HOMES IN FORECLOSURE
INDUSTRY NEWS, REAL ESTATE LEGISLATION, REAL ESTATE PRACTICE, SHASTA COUNTY, SHORT SALES, TIPS FOR BUYERS, TIPS FOR SELLERS, TIPS FOR SENIORS
August 6th, 2008
A recent court ruling (Schweitzer vs. Westminister Investments) makes it possible for a real estate
agent to represent an investor purchasing a home on which a Notice of Default (NOD) has been recorded and the property is occupied by the owner. Until recently, state law required any real estate agent representing an investor, that did not intend to occupy the property as their principal residence, obtain a bond equal to twice the purchase price in order to represent the buyer of an owner-occupied 1-4 unit property in foreclosure. The basis for this law is rooted in the theory that a seller of a home they are living in is in distress and susceptible to being taken advantage of by unscrupulous investors or equity purchasers (as they are sometimes referred to). The agent would have to refer the buyer to the listing agent but could not assist the buyer in any way including drawing up the purchase agreement, negotiating the sale, facilitating the closing or advising the buyer unless said bond was secured. The problem is, no such bond is available from any insurer in the state. The court case tested this bond requirement and the judge decided this provision of the law is unconstitutional.
However, any real estate agent that wishes to represent you as an investor/purchaser of a owner-occupied 1-4 unit property must meet certain other requirements including using a special purchase agreement that gives the seller a 5-day cancellation right. Additionally, the agent must provide a copy of his/her license as well as their broker’s license and a printout from the California Department of Real Estate showing valid,current licensed status before writing an offer to purchase. What could happen if all or part of Civil Code Section 1695-1695.17 are not followed by the real estate agent?
The buyer or equity purchaser:
- may be responsible for actual damages and attorney fees and costs incurred by seller, and either damages or penalties up to $2,500.
- may be fined up to $25,000 or imprisonment for not more than one year or both fine and imprisonment.
- may have the transaction rescinded by the seller for up to two years after close of escrow.
Notice that the buyer, not the real estate agent, is responsible if the law is not followed to the letter. That is why it is important to work with an agent that stays informed with all the law changes that constantly impact the way we do business. If you have any questions about this or any other real estate matter, don’t hesitate to call, blog or email me at:
530-224-6767
530-941-7492
BRAD GARBUTT
REALTOR/BROKER
REAL ESTATE PROFESSIONALS GMAC
TWENTY FIVE YEARS LOCAL REAL ESTATE EXPERIENCE
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