Since Redfin has announced that they were including unlisted bank-owned property on their website, it’s raised a lot of questions about foreclosures, short sales and distressed property in Washington State.
The Distressed Property Law was passed during the 2008 Legislative session and signed into law by the Governor on March 30 for the purpose of protecting vulnerable property owners from scam artists who seek to steal the property ownerâ€™s equity.
An unintended consequence of the law has the potential for dramatically increasing the duties owed by a real estate agent to a distressed homeowner. The law defines the term â€œdistressed home consultantâ€ as anyone who helps or offers to help a distressed homeowner in a variety of ways. For example, if an agent offers to save the distressed home from foreclosure by selling the home prior to foreclosure, it is possible that the law will be interpreted to mean that agent is a distressed home consultant. If the seller is a distressed homeowner and a real estate agent contacts the short sale lender to obtain a reduced payoff or to delay a foreclosure sale, the real estate agent is a distressed home consultant. If the agent writes an offer on a distressed home and the transaction will close within 20 days of a foreclosure sale, buyerâ€™s agent is a distressed home consultant, and the buyer is also a distressed home consultant.
There are many interesting dimensions to this new law, including the fact that if a property owner fits any of the definitions of a distressed homeowner, then the law protects them as a distressed homeowner even if they never communicate that fact to anyone and even if they do not realize themselves that they are a distressed homeowner.
Obviously, this is messed up.
How was this law passed without intervention?
The Washington Association of Realtors monitored the legislation as it was proposed by the Attorney General as the legislation progressed through the House and the Senate. Both WAR and the AG were satisfied that the Bill, as proposed and intended by the AG, did not include the adverse language now causing the problems. However, after the Bill was passed in one form by the House and in a slightly different form by the Senate, it moved into a process that occurs outside the arena where public comment or influence are allowed. It was at that stage that the adverse language was added and the Bill was immediately voted out of the Legislature without any opportunity for the AG or WAR to testify about the problem.
No one’s sure if this will be resolved before the new law changes on June 12th.
All of the listed distressed property in our area is listed on our MLS and supplied to brokerages in their regular feed, but Redfin has specifically decided to include UNLISTED Bank-Owned properties, and also continue to do limited short-sales that meet certain criteria.
Redfin supports buyers pursuing some types of short-sale listings ……(however) in many cases, Redfin will not be able to represent you in a short sale. In the first quarter of 2008, we handled 65 short sales but only four were approved by the bank.
I wonder how much money those 61 lost sales cost their firm? Each one must have represented at least several hours of paperwork and negotiation. The nature of their business model would be inclined to attract bargain-hunters, low-ballers and others looking for “a deal”. If I made 65 offers on property with only 4 closings, I’d be really depressed. Not to mention, really poor.
Because of that, Redfin’s made very specific rules about how and when they’ll present an offer on a short-sale. However, even then, it’s a crap shoot if they’ll close or not and there might not even be enough of a commission to cover their minimum fee, as banks have been known to renegotiate the commission at closing.
I have to say that I don’t have much experience in short sales and after reading their statistics, doubt I’m going to make that the focus of my business anytime soon.