I don’t know about you, but my email inbox is getting flooded with solicitations for Foreclosure Investment Workshops. Without a doubt, now is the time to make some money on the buy!
I’ve been in real estate investing long enough, that I’ve seen this cycle before. So have most of the foreclosure instructors out there. The one thing that is very different, though, is the rules have changed in many states. Please read the rest of this article before you sign up for anything.
A number of states are changing the rules regarding investors buying pre-foreclosure properties. While I could go into the public policy of that (causes more foreclosures, etc) but that’s not the point of this article. Instead, I want to make sure that if you’re going to use this method to build your real estate inventory, that you do it in a way that doesn’t land you in jail!
For example, in Colorado under a 2006 law, if you fail to follow exactly the rules you risk 6 months in County Jail! There are requirements as to what exactly needs to be in the contract. It even states what size of the type your need to use (12 point or bigger). If you’re a foreclosure consultant, as defined by Colorado’s rules, the homeowner can cancel the contract at any time, regardless of what your contract may say.
It’s even harder in Maryland, where you are considered a foreclosure consultant if:
“Anyone who advertises or solicits to or contracts homeowners in pre-foreclosure in writing or through any electronic or telecommunications medium and directly or indirectly makes a representation or offer to perform any service that the person represents will:
- Stop, enjoin delay, void, set aside, annul, stay or postpone a foreclosure sale,
- Obtain a forbearance from any servicer, beneficiary or mortgagee,
- Assist the homeowner to exercise a right of reinstatement provided in the loan documents or to refinance a loan that is in foreclosure and for which notice of foreclosure proceedings has been published,
- Obtain an extension of the period of time within which the homeowner may reinstate the homeowners obligation or extend the deadline to object to a ratification of the foreclosure,
- Obtain a waiver of an acceleration clause contained in any promissory note or contract secured by a mortgage on a residence in foreclosure or contained in the mortgage,
- Assist the homeowner to obtain a loan or advance of funds,
- Avoid or ameliorate the impairment of the homeowner’s credit resulting from the filing of a petition to foreclose or the conduct of a foreclosure sale,
- Save the homeowners residence from foreclosure,
- Purchase or obtain an option to purchase the homeowners residence within twenty (20) days of a docketed, scheduled or advertised foreclosure sale
- Arrange for a homeowner to become a lessee or renter entitled to continue to reside in the homeowners residence,
- Arrange for the homeowner to have an option to repurchase the homeowners residence,
- Engage in any documentation, grant, conveyance, sale, lease, trust or gift by which the homeowner clogs the homeowners equity of redemption in the homeowners residence,
- Systematically contacts owners of property that court records, newspaper advertisements, or electronic media show are in foreclosure or are in danger of foreclosure.
If you do any of the above, you are considered to be a foreclosure consultant and YOU MAY NOT HAVE ANY INTEREST IN THE PROPERTY.”
The bottom-line that I see in Maryland is that you simply can’t pick up a pre-foreclosure property using any of the method that foreclosure seminars teach.
Before you attend any workshop, call or email the event promoter and ask these questions:
- Is this based on state law in my home state? (If you get a “huh?”, that’s probably your answer.)
- Will you have a legal representative (lawyer, paralegal) at this event? If yes, that’s a great answer. Ask who it is and his or her phone number/email address. Then, drop him a quick note and ask if the materials have been reviewed to make sure they are in compliance with your home state.
If you know someone who might attend a workshop like this, please email this article on to them and suggest they check back at the TaxLoopholes website frequently for up to date tax and financial strategies.