Equity Skimming and Washington State law

[Branton B.]

BP Community,

Ever so often we come across investors whose tactics don't give us the "warm and fuzzy".  While each state has its own legislation and case law, it is important that we all, in our continued efforts to source great "deals", maintain an ethical and moral stance.  Loopholes in fiduciary responsibility do not justify predatory methods.  And in the fallout of the real estate crash, perceived wrongdoing on the part of investors is taken seriously, and can paint our entire industry in a negative light.  When working with a potential seller, ensure they understand the importance of third party review.  While this may seem counter to "scoring" the best deal, it will keep us all out of hot water, legally, and otherwise.  

Here are some resources related to Washington State law. I am eager to hear of anyone who has seen changes/restrictions/guidance in Washington related to sourcing off-market deals, as it is a constantly evolving topic. 

WA Supreme Court Decision, 2/6/14, Jametsky v. Olsen, No. 88215-1

http://rowleylegal.com/washington-state-investors-buying-distressed-residential-properties/

http://souderslawblog.com/?tag=distressed-property-conveyances-act-washington

http://www.kolerlaw.com/2008/06/11/washington-distressed-property-law/

http://www.kolerlaw.com/tag/equity-skimming/

[Levi T.]

If your buying a property correctly, meaning you are making an offer and following standard closing processes and payments, no matter the agreed price, then "Equity Skimming" does not apply. If you take closer look at equity skimming and what is really is, it is built around predatory lending that was designed to force people into foreclosure to liquidate their homes. Somehow people have started confusing equity skimming with buying homes below fair market value.

Outside of the banking industry, the most common type of scam that people link with equity skimming, is a type of foreclosure fraud. It's where someone offers to stop foreclosure by transferring the property to them via a quick claim, even sometimes renting the house back to the owner as part of the scam. The owner never really stops the debt, but end up giving their home away unknowingly. Most states have written laws for this type of fraud, as it was rather common in the housing bubble.

There is a big old thread on BP that covered this topic once.