DENVER, CO / ACCESSWIRE / October 21, 2017 / Investors in foreclosure homes play a necessary role in the real estate market. However, state lawmakers have measures in place that regulate investing behavior for this subset of the housing sector. According to William Bronchick, the 2006 Colorado Foreclosure Protection Act is not meant to prevent investment in foreclosure homes, but to stop bad actors from taking advantage of vulnerable sellers.
In 2016, the Department of Local Affairs reported 7,666 foreclosure filings, and 3,128 foreclosure sales at auction. Given the volume of activity in the market, the Act protects distressed homeowners from unscrupulous or predatory business practices. It specifies the information that a property owner must be provided to make an informed decision on whether to sell their home, as well as minimum contract requirements. Violation of the Foreclosure Protection Act is a criminal misdemeanor in Colorado, and the penalty is imprisonment for up to one year, a maximum fine of $25,000, or both. The Denver Post reports that since the Act has been in force, 20 to 25 complaints have been filed for alleged violations. The law distinguishes between foreclosure consultants, who receive payment to provide advice to their clients, and equity purchasers, who intend to buy properties from homeowners in default. Such agreements require precise wording, so it is wise to have a lawyer assist in drafting a consulting or equity purchaser contract, William Bronchick advises.
Under the law, foreclosure consultants cannot obtain any interest in the property, either directly or indirectly through a company or association. Moreover, a consulting contract with a homeowner has certain minimum requirements. It must be written in English and translated for the counterparty in the language principally spoken by the homeowner. The agreement must be in at least twelve-point font, include the consultant’s mailing address and be under the client’s review for at least twenty-four hours before signature. Also, the contract must be dated, initialed by the client on each page, and the body must disclose the services a consultant is providing along with payment terms. The homeowner’s right to cancel is to be clearly written in fourteen-point font near the signature blocks. Finally, the contract must be notarized in the presence of the property owner, and a signed, dated and acknowledged copy of the contract should be given to the homeowner immediately.
Equity purchasers acquire titles to foreclosed homes in the course of their business, vocation or occupation. Like for foreclosure consultants, contracts between buyers and sellers must have a minimum amount of mandatory information under the Act. A purchase contract must be in English and translated into the principal language of the seller. It should include the name, business address, and telephone number of the equity purchaser, as well as the address of the home in foreclosure. Within the body, disclosure of any financial or legal obligations of the homeowner that will be assumed by the purchaser must be clear and noticeable. The agreement should also include the total amount to be paid by the buyer including the terms of payment, and any services to be provided to the homeowner before or after the sale. The date and time that possession is to be transferred to the equity purchaser should be stated. If applicable, the terms of any rental agreement or lease, and a description of any option or right to repurchase should be included. A notice of cancellation must be presented in the same fashion as for consulting contracts.
William Bronchick is nationally recognized attorney, writer and speaker with over 25 years of experience practicing law. He is the author of Flipping Properties, named as one of the year’s top ten real estate books by Tribune Media. Mr. Bronchick has appeared as a guest on numerous radio and television shows, including CNBC Power Lunch, 9 News Denver, and Fox31 News Denver. He is admitted to practice law before the bars of New York and Colorado.