Home Equity Theft Prevention Act — Don’t Get Caught
I want to encourage everyone considering the pre-foreclosure/foreclosure markets as their primary investing strategy in New York to read the Home Equity Theft Prevention Act very carefully.
The act is very strict when it comes to these Equity Sellers (homeowners). The covered contract/agreement must include very specific language and the equity purchaser (investor, etc.) has specific obligations as specified in the new law, including but not limited to:
1. The equity seller has 5 days to cancel (“conveyance shall become effective no sooner than midnight of the 5th business day after the date on which the contract is executed”). The Notice of Cancellation must be included,
2. There can be no reconveyance arrangement (no leaseback) to allow equity seller to regain possession either by purchase agreement, option to purchase or lease.
3. Contract/Agreement must be in both English and Spanish if Spanish is the primary language of the Equity Seller.
4. A transaction in violation of the requirements of the new law is voidable and may be rescinded by the Equity Seller within 2 years of the date of the recording of the conveyance. (this is a very long time)
5. A waiver of the provision or a limitation of the Equity Purchaser’s (investor’s) liability for a violation is null and void and the Equity Purchaser that is found in violation of the requirements can be hit with penalties up to $25,000.
These are just some key points that I wanted to bring to the groups attention because I know there are “new investors” out there that are eager to get started with Pre-Foreclosures/Foreclosures and Short Sales. This is still a viable and lucrative option, just use due diligence and stay informed. Reading the Act is Step#1.
Effect on Bird Dogs or Representatives:
One of the important things that may tailor your investing techniques is that the Act covers all “Representatives” and defines representative as “a person who in any manner solicits, induces, arranges, or causes any Equity Seller to transfer title or solicits any member of the Equity Seller’s family or household to induce or cause any Equity Seller to transfer title to the residence in foreclosure or, where applicable, default to the Equity Purchaser.” This would include a Bird Dog/Finder.
Bona Fide Purchasers Are Protected:
If you actually purchase a residential property from the Equity Purchaser for valuable consideration or provide the Equity Purchaser with a mortgage, provided you had no notice of the Equity Seller’s continuing rights in the foreclosure or of any violation of the Act by the Equity Purchaser, you will be protected from liability.
Please be careful and use your due diligence in EVERY deal. I know there are a lot of Real Estate Mentors teaching Foreclosures and Short Sales using Leasebacks, etc. but you must research your market very carefully before utilizing standard contracts because almost all standard contracts or course materials come with a very specific disclaimer: “XYZ is not an attorney or accountant and questions relevant to the specific tax, legal and accounting needs of the party should be addressed to practicing members of those professions.” So when using standard contracts, make sure you have a competent attorney review it for local relevancy to protect your interests. Be safe and invest wisely.
Advice from Teresa R. Martin. View Teresa R Martin’s site at www.martinlegal.com.
