"Bad" Investor Laws

Hi Everybody! I’m working on a project. I need to get help from y’all by way of information on laws around the country, or pending legislation, that is detrimental to the way that we, as investors, do business. Living in Texas I’m well aware of the laws that were recently passed here but I need to know what’s going on where the rest of you live. Any links y’all can provide would be greatly appreciated!


Hi Austingal,

You may want to start with Bill Bronchick’s excellent article.

If you are dealing with pre-foreclosures you had better be sure you are treating the homeowner fairly. Illinois is pursuing Foreclosure Bailout Services.


To prevent distressed property purchasers from victimizing others, the legislation would provide numerous protections for homeowners by requiring that:

(1) distressed property purchasers must provide homeowners a written contract that lays out all the terms of the sale and makes it clear that the home is actually being sold;

(2) the homeowner has the right to cancel the contract for five business days after it is executed by all parties;

(3) prior to sale of the property, the purchaser must make a determination that the homeowner has the ability to make rental payments and buy the house back;

(4) the purchaser must pay the homeowner at least 82 percent of the fair market value of the home at the time of the sale and may not include fees as part of the payment;

(5) a homeowner who remains in the home under a rental agreement has the right to cancel the rental agreement at any time;

(6) and the purchaser must record the purchase contract with the county recorder of deeds so that any subsequent purchaser is put on notice.

Thanks so much y’all. I’m familiar with Bronchick’s article. I’m actually researching for an article I’m writing on anti-investor laws from all over the country be they against l/o, sub 2, cfd, pre-foreclosures, etc… I’m looking for examples of current or pending legislation that will hurt the very people they’re trying to help, the legislatures that is.

Thanks again!

Here’s a new proposed law in Arizona that is actually good for investors and homeowners:


NO prepayment penalties.


Try www.narhri.com.

Thanks for the link!

Thanks Kim!

Austingal. I know your topic is regarding new bad investor laws, but I’d like to post how judges view lease options that most investors are not aware of. Here goes:

Here is a list of five things that may violate the law and cause the judge to classify the transaction as a “disguised sale”. This is not my list, but a list actually prepared by a Judge in Arizona who co-authored Arizona’s landlord/tenant laws:

  1. Collection of more than 1.5 times the monthly rent as Option Deposit.

  2. Collection of an Option Deposit or Rent Credit to be credited to a Purchase, or to discount the Purchase as in a Down Payment.

  3. Predetermining a Purchase Price, as in delaying or disguising a sale.

  4. The Lessee also holding an option on the same property they are leasing regardless if it is one document or two separate documents.

  5. The Lessee being responsible for maintaining the property.

If the lease option is not recognized by the court as a lease, it doesn’t get the benefits that go along with a legally recognized lease. If the judge feels a sale has taken place instead of a lease, the rules governing foreclosures will apply. For this reason, possession of the property will be decided by a judge in position to decide matters of title and the process can be extremely expensive. Costs can run $10,000+, not including having to pay the back mortgage payments during the life of the suit.

Be careful out there.