I’m currently dealing with a lot of short sales in New Jersey right now. A lawyer approached me today and brought this issue to my attention. Are short sales in nj illegal now? Is there a work around on the law below?
Debt adjusters. Any person who shall act or offer to act as a debt adjuster shall be guilty of a crime of the fourth degree.
“Debt adjuster” means a person who either (1) acts or offers to act for a consideration as an intermediary between a debtor and his creditors for the purpose of settling, compounding, or otherwise altering the terms of payment of any debts of the debtor, or (2) who, to that end, receives money or other property from the debtor, or on behalf of the debtor, for payment to, or distribution among, the creditors of the debtor. “Debtor” means an individual or two or more individuals who are jointly and severally, or jointly or severally indebted.
The following persons shall not be deemed debt adjusters for the purpose of this section: an attorney at law of this state who is not principally engaged as a debt adjuster; a nonprofit social service or consumer credit counseling agency licensed pursuant to P.L. 1927, c. 16 (C. 17:16G-1 et seq.); a person who is a regular, full-time employee of a debtor, and who acts as an adjuster for his judgment of court, or pursuant to authority conferred by any law of the debtor, or an agent of one or more creditors of the debtor, without cost to the debtor; or person who, at the request of the debtor, arranges for or makes a loan to the debtor, and who, at the authorization of the debtor, acts as an adjuster of the debtor’s debts in the disbursement of the proceeds of the loan, without compensation for the services rendered in adjusting such debts.
It is my understanding that this is partial text of a bill currently before the NJ legislature- it is not law yet.
I think the question would be if you don’t charge the homeowner money up front (as some do) are you acting or offering to act “for a consideration as an intermediary between a debtor and his creditors for the purpose of settling, compounding, or otherwise altering the terms of payment of any debts of the debtor” when you are negotiating a short sale with a bank on a property you either have a purchase agreement on, or have already obtained title to?
If so, what would be the qualifications necessary to get licensed?
If you are doing a short sale, then I assume that you are trying to buy the property as a wholesale or rental strategy. If you then have a contract with the home owner to buy the property at a set price with the usual earnest money down are you doing anything out of the ordinary with the owner than buying the house? The debit reduction is between you and the bank you are trying to convince the bank to take less money than owned for the mortgage. You are simply trying to buy a house not reduce his debit, he/she is still liable for the balance owed the bank after the short sale. I always ask the bank to consider the short sale as payment in full and most always get it, but the home owner gets a 1099 that he/she needs to deal with. There are provisions for the home owner to have the 1099 forgiven but that I tell them is up to them and their CPA.
I am no lawyer but would ask the question this way of a lawyer if I were in your place.
I would love to get more info on this because I spoke with someone last month wanting to do investing. She told me NJ law apparently prohibits assignments. Don’t recall if property status with regard to foreclosure was the issue but long story short she did it as a legitimate purchase.