Tuesday, October 14, 2008
Distressed Property Sales in Washington
Our latest market report highlights that sales of bank owned and distressed properties are increasingly impacting our local real estate market. Within the Northwest MLS (not including foreclosure auction sales) we calculated that at 6% of the properties listed and 18% of the pending sales were from bank owned properties or short sales (where a distressed seller obtains lender concurrence to close the sale of the property with a payoff less than the full amount of the loan). In Washington a Distressed Home is an owner occupied primary residence (single, duplex, triplex, 4-plex) in the process of foreclosure or in danger of foreclosure because the owner has defaulted on a mortgage, because the seller is at least 30 days delinquent on a loan secured by the property, because the seller believes that he/she is likely to default on such mortgage or loan within 4 months due to lack of funds, or because the seller is at risk of loss due to non payment of taxes. In some parts of the country, real estate agents have shifted their business full time to assisting distressed sellers in negotiating with lenders a sales price to complete a home sale or negotiate a loan work out with their lender to allow the seller to remain in the house. There’s even a Certified Distressed Property Expert designation available to agents completing certain approved courses of instruction.
However, since Washington’s State Legislature passed a distressed homes law last June (HB2791), Washington real estate agents have had a strong negative incentive to become involved with distressed sellers. The law was modeled after bills in several other states to prevent equity skimming, which is a practice where a buyer offers to take over a distressed seller’s house payments, let the seller remain in the house and pay rent, and ultimately evict the seller and pocket the seller’s equity. The law now requires that anyone offering to perform certain services to assist the distressed seller in renegotiating to prevent foreclosure or in purchasing a distressed home within 20 days of foreclosure be designated as a Distressed Home Consultant, and real estate agents fall into this category. As such, the Consultant must enter into a special form of contract and be subject to the punitive consequences of the state’s Consumer Protection Act. Licensed mortgage brokers, financial institutions, non-profit credit counselors, and attorneys have been exempted from the law, and so it is to this group that the distressed sellers must turn for assistance.
We recently received a presentation from a company called XtraMile Investment Solutions that specializes as Distressed Home Consultants. Undoubtedly others in our area (or in your area) are fulfilling the same function. XtraMile’s program provides sellers of Distressed Homes with a dedicated advocate who can meet the requirements of the new law while working out a price that the lender will accept and make possible the sale of the home before foreclosure. Their program allows real estate agents to perform the normal duties of the listing agent in completing the sale, while avoiding the pitfalls agents face if they choose to also be the Distressed Home Consultant. Please call us if you would like more information about their program.
Statistics not compiled or published by NWMLS
