ALL THINGS REAL ESTATE Buyers in home equity sales contract are breaking the law

Q: Let me start by saying I know you won’t print this, but I had to get it off my chest. I read your column regularly and I’ve seen you write about what you consider to be the evils of people who invest in real estate by buying properties that are into foreclosure. Well, I decided to see what the fuss was about, so I did just what you say not to do: I stayed up late and sent money to -------- for his “how to get rich in real estate with no money out of your pocket” program. I’ve read it and talked to some people about your morality con cerns. You are way off base and you’d think a big-shot real estate attorney would know better. We are actually helping people by getting them out from under mortgages they can’t afford. Apparently, a lot of these home owners are actually grateful that someone would help. I wish you’d stop talking about stuff you apparently don’t know anything about and stop preaching about how evil people are who make money buying “distressed” properties. I am not an evil person.

A: Well, I’m glad you’re not an evil person, but you obviously aren’t that bright, either; for two big reasons.

For starters, good luck finding foreclosures in this economy. I’m sure there’re a few, but for the most part, the economy is still great, unemployment is at a record low and people just aren’t losing their homes.

But all that aside: Mr. LateNight already scored and got money out of your pocket! If you read my column “regularly” you’d know you didn’t have to send $350 to Mr. --------on late night television. I’ve told readers many times for free what he’s charging you $350 to learn (though admittedly I don’t have a link to download a four-color brochure). I’m happy to share this

First, go down to the County records check (it’s free) for any residential real estate that has a notice of default filed on it. A notice of default is simply a lendthe property is at least 90 days make an appointment to meet with the owner and tell them you’ll get them out of all their problems if they’ll just sign this deed transferring the property to you. They can even stay in the house. Wow, stop the foreclosure and stay in the house. They’ll just love you.

Then you try to quickly sell the house for more than the debts that are currently owed on it. If you find a buyer, you close on the property, pay off the debt, evict the owner-now-tenant from the property and keep the profit.

If you can’t quickly find a buyer, you walk away. In a couple of months the house is sold in foreclosure and the ex-owner is evicted from the property. You, on the other hand, come up smelling like roses since you never recorded the deed or paid money out of your pocket. You just screwed the “happy” homeowner out of his equity by giving him false hope and preventing him from talking to a Realtor who could have sold the house and preserved the equity.

See. You didn’t need to drop the $350 after all.

Oh, but here’s a really small little detail Mr. ------- (who doesn’t live in California) forgot to tell you about. What I’ve just described is illegal in California. Yup, it’s against the law and you can be sued, found liable for punitive damages and tossed in jail.

Section 1695 of the California Civil Code makes it a crime in most instances to be the buyer in a home equity sales contract (which is the method Mr. Late-Night tells you to use) on a residential property when that property is in default.

The very first sentence of the rather lengthy Civil Code section reads, “The Legislature finds and declares that homeowners whose residences are in foreclosure have been subjected to fraud, deception, and unfair dealing by home equity purchasers.” (That’s you).

So, if it makes you feel any better, it’s not just me, but the entire state of California who thinks you’re evil.

Let’s be clear on this: I am not against buying properties in foreclosure, but there is a right (legal) and wrong (illegal) way of going about it.

So, if I were you, I wouldn’t spend your time lambasting me for my “preaching.” Instead, I’d try to petition my legislators to change the Civil Code, or if that’s too much work, try to find a really good criminal attorney.

Tim Jones is a real estate attorney in Fairfield. If you have any real estate questions you would like to have answered in this column, you can send an email to AllThingsRealEstate@ TJones-Law.com.

Contractors work on a new home under construction in Tucson, Arizona, Feb. 22, 2022. Sales of new U.S. homes retreated in January after a flurry of purchases at the end of 2021, indicating a jump in mortgage rates may be starting to restrain demand.