Good News on WA State Distressed Property Law

Effective March 25, 2009, the Washington legislature has amended Distressed Homes Law (RCW 61.34) (the “Law”).  We got the notice today on our NWMLS system.  This change is important for real estate professionals who were very hesitant to work with sellers who were in the “Distressed Home” category.  The potential liability was just too scary for most of us.  In the previous law, it seemed as if everyone else who worked with the seller was exempt, except for the real estate agents.  Now real estate agents are also exempt.

In the previous law it was simply too easy for a real estate agent to become a “Distressed Home Consultant” without intending any such thing, and find him or herself suddenly under a list of obligations.  Here is part of what the law says now:

1. Real Estate Licensees are Exempt from the Law when Rendering Real Estate Brokerage Services.

The amended Law generally exempts real estate licensees from the definition of a Distressed Home Consultant (“DHC”). Specifically, the definition of a DHC does not include “a person licensed as a real estate broker or salesperson under chapter 18.85 RCW, when rendering real estate brokerage services under Chapter 18.86 RCW, regardless of whether the person renders additional services that would otherwise constitute the services of a distressed home consultant, and if the person is not engaged in activities designed to, or represented to, result in a distressed home conveyance.” In other words, a real estate licensee will not be considered a DHC when the licensee is providing routine real estate brokerage services.

2. Exception to Exemption – Distressed Home Conveyances.

A real estate licensee is not exempt from the Law when the licensee participates in a “Distressed Home Conveyance.” A “Distressed Home Conveyance” is a transaction where a buyer purchases property from a “Distressed Homeowner” (defined by RCW 61.34), allows the Distressed Homeowner to continue to occupy the property, and promises to convey the property back to the Distressed Homeowner or promises the Distressed Homeowner an interest in, or portion of the proceeds from a resale of the property.

As discussed below, NWMLS’s existing forms and its amended forms do not allow real estate licensees to participate in “Distressed Home Conveyances” without a separate written agreement. The reason for this is that these transactions are very risky under the Law and NWMLS forms are not adequate for this type of transaction. The Law requires that this type of transaction be completed on a special form of purchase and sale agreement containing certain provisions that are not included in NWMLS forms and legal counsel is required. Therefore, if a buyer or seller wants to complete a transaction of this type, the buyer or seller should be immediately referred to legal counsel. If the broker and real estate salesperson would like to participate in the transaction, they should also seek legal counsel. These considerations are not new and thus should cause no concern.

Now our NWMLS system has to update many of our forms again, but we are relieved at the change in the law.  Our office swore off doing any Distressed Properties, and will now be able to once again help sellers who need such help, and feel comfortable showing distressed homes to potential buyers.  This is a good change for us.

On another note, according to our news guy, Dedrick Allan, Mason County is going to receive our share of the stimulus money — hurray!   We were was awarded $1.32 Million for three projects. One of those projects is an access road for a Skokomish Tribal housing development in Potlatch.  The County is getting about $150,000 for lighting at 15 intersections. And the third project is $350,000 for freight mobility pavement improvements.  The County’s Health Department will receive $600,000 to help replace reservoirs at Oak Park and Madrona Beach.  The County’s Utility and Waste Management Department is still waiting for word on funding requests for sewers in Belfair and for stormwater improvements.  And the Sheriff’s Office is applying for criminal justice money.

Our Chamber of Commerce has started asking for money for the flower baskets that hang here and there along our roads.  These baskets are so beautiful, and I look forward to seeing them every year.  When the Chamber starts asking for money, that’s a good sign that spring is really here!

Tags: distressed home, law, real estate