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.
It is great to see that there is formal training available and Realestate professionals are taking it now. I bought a shortsale last year and it was total disaster with me teaching my agent the rules and regulations of a short sale!
We have dealt a lot with this law over the last year…one of the markets we are primarily working in (we are buyers and help a lot of agents with their short sales) is Washington.
But just like you say in your article, if agents are taking the time to become educated, there is very little left on the table for homeowners to come back and dispute if the agents are well-informed and well-disclosed.
You’re also right about the agents who are realizing if they WANT to have business for the next couple years, they need to learn how to tackle short sales. We closed over 11 million in escrow last month from them, so it goes to show if you’re on board…that is where the market is at.
Thanks for the good article –
Tracy Royce
We have dealt a lot with this law over the last year…one of the markets we are primarily working in (we are buyers and help a lot of agents with their short sales) is Washington.
But just like you say in your article, if agents are taking the time to become educated, there is very little left on the table for homeowners to come back and dispute if the agents are well-informed and well-disclosed.
You’re also right about the agents who are realizing if they WANT to have business for the next couple years, they need to learn how to tackle short sales. We closed over 11 million in escrow last month from them, so it goes to show if you’re on board…that is where the market is at.
Thanks for the good article –
Tracy Royce
Bleck. More laws to try to remember and keep up with in this industry. At least I work with Oregon more than I work with Washington.
I am completely in favor of increasingly educated real estate agents. However, that increased education was absolutely no insulation against being sued under the prior law. Sadly, under the prior law, anyone participating in a distressed property sale whether doing so as an agent, a REALTOR, or even in some instances as a buyer was at risk of legal suit. This, no matter their level of knowledge or experience or ability. While in your article you note with apparent satisfaction that no one was sued, I note that back at you with amazement.
In the interest of appropriate disclosure, I am a REALTOR.