Home equity theft prevention Act

General Real Estate Investing
1
"The law generally applies to the sale of a home in foreclosure to a buyer who wants to purchase the home as an investment."
http://www.banking.state.ny.us/hetpyrul.pdf

I was reading up on this and I have a question does this mean all foreclosed properties bought by an investor will have this rule in affect?

If you suspect that your buyer is doing or has done any of the following, the buyer may have committed a felony and the contract may be voidable—you may be able to legally cancel the contract and the sale, even after it has been signed and executed.

Your buyer may not, at any time, deceive or mislead you in any way about any aspect of the sale of the house or about any aspect of a buyback agreement.
In particular, your buyer must not:
• Deceive or mislead you in any way about the value of the house;

• Deceive or mislead you in any way about the amount of money you will receive as
a result of the sale;

• Deceive or mislead you in any way about the timing of the foreclosure process, or
about how much time you have until your home is put up for foreclosure auction by
the court;

• Deceive or mislead you in any way about the terms of any contracts;

• Deceive or mislead you in any way about the nature of any document the buyer
asks you to sign;
• Deceive or mislead you in any way about your rights and responsibilities before,
during, or after the sale of the house.

*Also what’s to stop the seller for intentionally claiming they buyer investor “mislead” them?
it seems the seller could cause a lot of harm-

2

  1. Pre-foreclosures, but not to foreclosed properties.

  2. It happens all the time, this proposed law won’t stop a seller from trying to get their house back after the investor has cured the default.

3

so what your saying is seller often do try to get the house back even if they sold it to an investor? I could only a imagine the court fees and the amount the time it takes to get everything under warps. Would it even be possible to get title insurance anymore for the investor? Also on a related note I currently have a motived seller willing to sell me her house for about 350k (she owes about 315k) the houses value is about 450k-500k but I’m kinda re-thinking if I wanna do this or not.

4

Usually, the way it goes is she sells it to you for 350K, and she either had no idea it’s worth 500K, or if she does, tells her friends and relatives that she sold a 500K home for 350K, everyone tells her how stupid she is, and everyone suggests she go see a lawyer.

There’s been so much of this going on that they finally passed this law. I’d lay off doing these deals in NY State.

:beer

5

I see thanks for your input. Maybe I’ll wholesale this deal does that sound ok?

6

Technically, under the act, you’re obligated to tell the seller the value of her home.

If you try wholesaling, first of all, a savvy investor should know the risks entailed, and avold it like a ten foot pole. And if you wholesale to a “newbie”, he gets in trouble, your reputation as a wholesaler would be down the tubes. Besdies, the seller can sue you and the guy you wholesaled to, and your buyer might sue you as well.

And why did they write the law this way??

To make it a minefiield that people would only get into trouble trying it, so they won’t.

7

Are there any laws being put in place to help investors? not try to run them out of business? Honestly this is getting hard and annoying-very fast! :banghead

8

Just wait a while, and let the banks foreclose.

In the year 1992, things were so bad that I went to auctions every week in NYC. There’s coops, condos, 1,2,3 family homes.

Banks would rent an auditorium, and auction off a hundred or so at a time. Then, they also have auctions on site of the property auctions. I did these, the wife went to the “courthouse” steps.

I recall a few auctions I went to where I was the only buyer showing up. At one, the auctioneeer asked to to submit a ridiculous offer after he showed up at several auctions with no buyers, I suggested he wait 15 minutes, which they agreed to, and submiitted an offer.

Basically, buying REO’s at auctions, with the property “free and clear” is one of the safest ways to buy under the new law. Banks foreclosing are exempt from the laws provisions, and you’re buying from the bank.

Keep in mind some flippers did some mean and sleazy things, and how some people lost their homes to these “cons” caused politiicians to hear the outcry and help.

Read of a case, where a widow who lived in a home all her life with an equity of over $200K was talked into deeding the house over for $20K. She thought they were charitable guys lening her a few bucks to tide her over, with her home as collateral.

Little did she know that she “signed over” her home with a big stack of documents presented to her. And it’s amazing how people in these circumstances get talked into signing things without lawyers.

Put it this way. A lot of people are really very very stupd, and trusting. Most of us a bit smarter can’t beleive things that they do.

And from time to time, my dad who’s 86, gets unsolicited offers to sell his place, and usually someone this old, uninformed, has no idea of the value of properties. Whem he tells me these things, I tell him he’s got a low ball offer.

So the law is to protect these very stupid people, Just let the banks do the dirty work, and you’ll be fine.

9

Thank you for the info Frank!

10

I’ve been meaning to mention this. One aspect of this NY law. and similar to ones in other states, also requires you to PAY 82% of FMV, whatever that FMV is.

If you’re saying the home is $500K, you MUST offer $410K. Since most flippers require 70% ARV to make anything work, that’s obstacle number one already.

Besides the fact they can come after you later to say you lowballed the FMV.

Why look for trouble??

11

What if I bought a note for 400k, and using your example above, the FMV of the house is 500k -say in 10 months from now the payee of the note defaults- Would there be any problems to accept a deed-in lieu of foreclosure legal wise? Would I-the bank- be subjected to this law?