Proposed changes to the Distressed Property Law have passed both branches of the Washington State Legislature and the bill is headed to Governor Gregoire’s desk for her signature. You can read the changes here. Real estate agents and Realtors are now exempt “from the definition of “distressed home consultant” when the broker or salesperson is providing services governed under the real estate brokerage laws and the services do not result in a distressed home conveyance.”
I have mixed feelings about the passage of the exemption. Real estate agents and Realtors were raging mad last summer when their liability increased under the original Distressed Property Law. All through the summer and fall of 2008, agents swore up and down that they were going to avoid listing or selling short sales in order to limit their liability. In a way, the Distressed Property Law had some good consequences: Only experienced agents were allowed to take short sale listings at some firms, and it became extremely important to make sure the homeowner was referred to legal counsel. Short selling homeowners are often better served when their listing agent knows what they’re doing. The home buyer is also better served when the seller’s listing agent is short sale-competent. The Distressed Property Law brought this to everyone’s attention. There were many agents who were very, very worried about increased liability. So far, I haven’t heard about any lawsuits.
Something interesting started happening toward the end of fall, 2008. November and December of 08 saw a remarkable increase in the number of real estate agents attending the Short Sale class. Attendance went from, say, 15-25 agents all summer to 50-70 by December of 2008. When I asked why they were in class, agents all agreed: “Short sales are becoming more and more of the percentage of available inventory. We don’t have a choice anymore; we HAVE TO take these listings, even with the added liability. We need to pay our own mortgage and we also like to eat, Jillayne.”
So now real estate agents are exempt from the DPL (provided they’re not going to engage in a distressed home conveyance.) This means we will see an increase in agents listing short sales left and right, whether or not they are short-sale competent.
KLK and other agents have said that foreclosures would increase because of the Distressed Property Law. I argued that it’s not the DPL that will result in more foreclosures but the normal unwinding of mortgage lending gone wild and that higher foreclosure rates will be with us for some time as homeowners who cannot afford their home loans sell or default and return to the housing market as renters. As time moves forward through the rest of 2009, it will be interesting to see if, in fact, foreclosure rates decline.