Washington Distressed Property Law

Washington HB 2791, the Distressed Property Law, is legislation intended to protect vulnerable property owners from scams to steal the property owner's equity. This new law went into effect June 12, 2008 to help Distressed Homeowner with their property sale.

A Distressed Property Owner

Owners of distressed homes have been victimized by "Equity Skimmers." Distressed homes are owned by homeowners who...

  • are at risk of losing their home due to non-payment of taxes.
  • are at least 30 days late on their mortgage payment.
  • are in default of a mortgage term so that the lender could accelerate the balanced owed.
  • believe they are likely to default on the mortgage within 4 months and tell this to, among others, the real estate agent.

Distressed Property Protections

The following distressed homeowner protections apply only when a purchase agreement includes an offer for the original homeowner to lease the home and buy it back or receive a portion of proceeds of any resale:

Distressed home purchases must provide homeowners with a written contract completely describing the terms of the sale and giving the homeowner a right to cancel the sale within five days.

  • Prior to the sale, the purchaser must verify that the homeowner has the ability to make rental payments and to buy the home back.
  • If the homeowner is unable to buy the home back, he or she must receive at least 82 percent of the fair market value of the home at the time the homeowner loses possession of the home.
  • A homeowner injured by a violation of the statute may collect up to three times the amount of actual damages, not to exceed $100,000.

Distressed Property Consultant Provisions

A Washington Distressed Property Consultant (DPC) is a professional who helps home sellers navigate through the financial struggles of a delinquent or soon to be delinquent home mortgage.  A Distressed Property Consultant should be a person of ethical standing, integrity, and understands Short Sales and Banking; both critical in working with a distressed property.

  • Distressed Home Consultants must provide homeowners with a written contract listing all services and charges.
  • The consultant has what is called "fiduciary duty" to the homeowner, meaning the consultant must act all times in the best interests of the homeowner.
  • Because the Legislature did not exempt licensed real estate sales persons from the law, sellers who are behind on their loans or real propery taxes may be asked to sign a revised listing agreement limiting the services offered by the real estate agent or broker. Without new agreements, brokers and agents risk unanticipated liability in such cases.

If you'd like to know more about the Distressed Property Law or how to get advice on selling your distressed property. Contact us!