As was expected, on May 28th Governor Crist signed into law what has generally become known as the second part of a series of “Anti-investor” legislation. This is Statute 501.1377 and it replaces the previous Stature 501.2078 which has been in effect since last year.
The legislation takes straight aim at what are called “Equity Purchasers and Foreclosure-rescue Consultants”. As the name implies, if the homeowner is in foreclosure the law must be complied with or fines of up to $15,000 per occurrence will result.
Not everyone knows that the last Statute 501.2078 is being enforced and the State’s Attorney General is prosecuting a group of cases. It is cheap insurance to have an attorney-approved disclosure if you deal with any prospect so you don’t unintentionally violate a law and suffer the consequences unfairly.
Simply doing the very best for the homeowner is no defense if you violate the Statutes and State Senator Fascano is currently drafting yet another piece of legislation focused at Short Sales and the investors doing them.
If you intend to do deals and do them legally, I suggest you get an attorney to do your disclosure docs or take advantage of the offer on the website above. These guys are even donating a portion of their sales to a lobbying effort to help our industry!
What does the law actually say? If it’s aimed at predators trying to take advantage or running a scam then its O.K. If it hinders honest investors, then they’re hurting the homeowner and lender. There HAS to be enough equity in the property in order for an investor to make money.
I guess the question then is how much is enough… I don’t think anyone will argue that investors should make a profit. However I know people that think there should be a cap on how much profit an investor should be allowed to make in each deal.
I have mixed emotions about this… As I read the stories on this board, sometimes I come across investors bragging that they were able to buy a house from someone that did not have a clue about what he was doing… I don’t think it is ok to take advantage of someone that is not as knowledgeable as you are… Having said that I do believe that investors take risks and work hard and should be able to profit from that. I don’t know where the line is. I guess I will need to figure that out as I go along. However I do think that in some cases it is wrong to buy a house for pennies on the dollar from someone just because of that person’s ignorance.
I don’t see anything wrong with the law. Some newbies and shady investors been taking advantage of sellers and marketing themselves as “rescue” services to get sellers to call them then make them think they have no other choice but to sell to them or do a short sale through them. These people should be locked up. in any case, foreclosures are small part of this market, there are lots of fish in the sea.
I don't think it is ok to take advantage of someone that is not as knowledgeable as you are....... However I do think that in some cases it is wrong to buy a house for pennies on the dollar from someone just because of that person's ignorance
I would argue that knowledge is always power and that it is legitimate for an investor to use a disparity in knowledge to make money. For example, I bought a house a few weeks ago from a woman for $20,000. I didn’t hunt her down (or even do any advertising at all) - she called me. The first time she called, I told her that I wasn’t buying anything. She then called me again a couple of months later and was very insistent that she wanted to sell her house to me. I knew that the house was worth about $52,000. So, I agreed to go look at the house and bought it on the spot.
Should I have told her that I KNEW the house was worth $52,000? Should I have offered to give her $30,000, $35,000, $40,000 for her house because I didn’t want to make too much money? I don’t think so. She is a mentally competent adult and wanted to get rid of the house. I can make good money with this house as a rental at $20,000.
I also buy a lot of houses from DESPERATE landlords. In almost every case, these landlords have lost a TON of money because they didn’t choose to become educated about the business before they bought their rental. They are selling because of their ignorance of the business. Should I refuse to buy their property because we have a disparity in knowledge levels? Should I hold their hand and explain how they could turn the property around and make money with it? Of course not, my business is to buy rentals at a HUGE discount and make money. My business is not to “help” people that have chosen not to do things right.
As long as you operate in an ethical and transparent manner, you can't go wrong.
That would be true in a perfect world. However, the Florida law is filled with many gray areas that could easily trap an investor even if they are operating in an ethical and transparent manner.
I agree with Mike completely. The reason why these people sell you the property for such a good price is because they are desperate and unwilling to do the research (to gain the knowledge) and figure out a way out of the mess they are in.
What if a collector goes to a garage sale and comes across a rare painting that is being sold for $15. The collector knows this painting is actually worth more then $1000, should he be obligated to tell the garage sale owner about that? NO absolutely not. Is there a law protecting the owner, NO absolutely not. So why should there be a law like that in real estate? just stupid :banghead
This law however specifically mentions fraud… people who pretend to be foreclosure rescue operations with the aim of buying the house for pennies on the dollar. Pretending to be a rescue (consultant) operation when you are not is fraud. It is unethical even though legal (legal till the law passed anyway). These investors give us bad name and need to go.
Propertymanager - what you just said is exactly why I believe there is a line I will not want to cross. I believe in my heart that I will be able to discern between being a savy investor and taking advantage of someone. It seems that in your example you did not feel that you were taking advantage of the person. I believe that each one of us need to evaluate each deal on its own merits to ensure we are doing the right thing.
[[[[…What if a collector goes to a garage sale and comes across a rare painting that is being sold for $15. The collector knows this painting is actually worth more then $1000, should he be obligated to tell the garage sale owner about that? …]]]]]
On the other hand, if the expert collector sees a painting in someone’s house, knows it is a lost Old Master, convinces the owner that it is cheap junk, but he will pay $15 for the frame, that is fraud. He might very well find himself sued when the painting hits the auction houses.
You have to be very careful how you use your expert knowledge and not deliberately deceive the inexperienced.
Disclose, disclose, disclose and CYA with good solid lawyer-written contracts… that contain even more disclosure.
Somebody is cheating the consumer, or no one would have thought to write the law wheere no protection was needed.
The government will go after flies with an elephant gun, but they wouldn’t have been gunning for this particular fly unless there had been complaints.