What Buyers Need to Know About the New Distressed Properties Law

According to Washington State Attorney General Rob McKenna, the original draft of the controversial Distressed Properties Law intended to protect homeowners from equity skimming scam artists. It was originally very narrow in scope and specifically targeted certain individuals who promise aid to distressed homeowners, but who would end up stealing a distressed home owner's equity.

The original intent of this law was well-meaning when it was first drafted, however, when the draft reached the State senate, the senate added new language at the last minute that made the law very broad and harmful not only to Realtors, but also to buyers. Steps are being made to correct the harmful language of this new law. However, until then, buyers and their agents must take care to avoid the actions that would impose the "Distressed Home Consultant" designation upon them.

What buyers and their agents need to watch out for:

1. Do not make any offers to save a home from foreclosure

2. Do not contact lenders on behalf of the seller (buyers and their agents should not be doing this anyway)

3. Do not close (or set a closing date) within 20 Days of a scheduled foreclosure date (IMPORTANT)

4. Do not systematically contact distressed homeowners, for example, looking specifically for foreclosure properties to buy, etc.

What happens if a buyer and/or their agent becomes a "Distressed Property Home Consultant"

1. Under the new law, if the "Distressed Property Home Consultant" designation is imposed, buyers and their agents will owe fiduciary duties to distressed homeowners under consumer protection laws. There will also be cumbersome procedures that must be followed under this legal implication (see video below for more details). This is a bad situation for buyers to be in, as well as their agents. At this point, buyer's and their agents would need to consult with their respective legal advisers asap.

It is critical to understand that distressed property homeowners cannot waive their rights under this new law. Therefore, the best way to avoid the risk of implication is to avoid being exposed to this situation altogether.

Bottom line:

Until legislative officials remove or revises the adverse language contained in this new law, buyers and their agents will need to stay vigilant and aware--being very careful not to become ensnared in the flaws of this new law.


To learn more about this new law and find out what is being done about it, watch this video as Washington Attorney General Rob McKenna discusses the issue:

The Distressed Property Law: Next Steps & Solutions

To learn more about this law in general as well as its implications, watch this video produced by the Washington Association of Realtors, Northwest Multiple Listing Services, and supported by the Washington State Department of Licensing:

Distressed Properties DVD Chapter 1

For buyers contemplating the purchase of a residential property of 1-4 units or who have questions about this law, please consult with your attorney and be clear on how to proceed with your buyer's agent before stepping into the market. Preparation and planning will go a long way to prevent becoming a "Distressed Property Consultant."