Circular Logic?

Posted April 7th, 2008 by Joe Kaiser

I'm buying their distressed home, so okay, maybe, but then again, since this isn't a rescue, er, no, I guess I'm not.

Dear Rob,

Not being an attorney, I sometimes have a hard time understanding what the law intends.

Case in point?

What’s a distressed home conveyance?

I’ve read the new law and frankly, I can’t figure it out . . .


Huh?

Here’s the part of the code that troubles me . . .

(5) “Distressed home conveyance” means a transaction in which:

(a) A distressed homeowner transfers an interest in the distressed home to a distressed home purchaser;

(b) The distressed home purchaser allows the distressed homeowner to occupy the distressed home; and

(c) The distressed home purchaser or a person acting in participation with the distressed home purchaser conveys or promises to convey the distressed home to the distressed homeowner, provides the distressed homeowner with an option to purchase the distressed home at a later date, or promises the distressed homeowner an interest in, or portion of, the proceeds of any resale of the distressed home.


Rescue or no rescue?

Here’s the problem . . .

The code, one would think, is attempting to define a “distressed home conveyance” as a transaction involving what’s considered a “foreclosure rescue,” where the owner is allowed to remain in the property and has the right to repurchase it at a later date.


The wheels on the bus

Okay, then what’s a distressed home purchaser?

Anyone buying a distressed home from a distressed homeowner in a distressed home conveyance.

Hmm, okay, then what’s a distressed home conveyance?

Any transaction where a distressed home owner sells a distressed home to a distressed home purchaser.

Grrrrr . . . basically, it just loops and loops.


An outright sale

Please explain . . .

John and Mary are in foreclosure. Is their home is a distressed home? Here’s the statute:

(2) “Distressed home” means either:

(a) A dwelling that is in danger of foreclosure or at risk of loss due to nonpayment of taxes; or

(b) A dwelling that is in danger of foreclosure or that is in the process of being foreclosed due to a default under the terms of a mortgage.

Yes, it is.

Okay then, are they distressed homeowners? Here’s that statute:

(7) “Distressed homeowner” means an owner of a distressed home.

Clearly, they are distressed homeowners.

They want to sell me their distressed home and move to a brand new place. They have no intention of staying and renting or buying it back. It’s a simple, straightforward sale.

Now, if I buy their distressed home, am I a distressed home purchaser? Here’s the statute:

(6) “Distressed home purchaser” means any person who acquires an interest in a distressed home under a distressed home conveyance.

If I am in fact a distressed home purchaser, then doing a deal with them makes this a distressed home conveyance, per 5(a) above, and therein lies the problem.

A distressed home conveyance obligates me to all kinds of things, including doing a critical analysis of their financial position to determine they have the wherewithall to buy the property back. Since buying the property back is not a consideration, it makes no sense for me to be burdened with those responsibilities.

If a distressed home conveyance is meant to describe a rescue situation, as I imagine it does, this is definitely NOT a distressed home conveyance.

As such, I cannot possibly be a distressed home purchaser, or can I?


dazed and confused

Am I a distressed home purchaser or not?

I’m buying their distressed home, so okay, maybe, but then again, since this isn’t a rescue, er, no, I guess I’m not.

I’m not because in order to be a distressed home purchaser, I have to be doing a distressed home conveyance, and since a distressed home conveyance means a rescue, and I’m not rescuing, this can’t be a distressed home conveyance at all . . . even though I’m buying their distressed home.

Except that if I’m buying it from them within three weeks of the foreclosure sale, I am a distressed home consultant, even if they haven’t hired me to consult and merely want me to buy their distressed home (no energy to get into that at the moment).

Is that about right?


What Eric said

Here’s how at least one guy describes the new law . . .

ericdunn.jpg
Eric Dunn – staff Attorney at Northwest Justice
Project and co-author of HB 2791

. . . give(s) Washington homeowners the nation’s strongest, most sophisticated protection against foreclosure scams . . .— Eric Dunn

Sophisticated?

We deserved much better, Rob.

in the arena,

Joe Kaiser


16 Responses to: “Circular Logic?”

  1. David Alexander responds:
    Posted: April 7th, 2008 at 7:01 am

    There wording reminds me of that scene in the Movie “The
    Princess Bride”

    http://youtube.com/watch?v=TUee1WvtQZU

    Let’s outthink this whole thing because we are smarter…

  2. Mark responds:
    Posted: April 7th, 2008 at 6:11 pm

    Wow….My brain hurts after that.

  3. anemonehead responds:
    Posted: April 7th, 2008 at 7:57 pm

    Sounds more like Abbott & Costello doing who’s on first!

  4. Vlad responds:
    Posted: April 8th, 2008 at 9:26 am

    Yeah, right David – outthink….

    Where is our immunity to Government Power (Iocan Powder)?

  5. David Alexander responds:
    Posted: April 9th, 2008 at 3:25 pm

    I’m Talking about them trying to out think the situation… and they truly believe their logic is dizzying…..

  6. DaveD responds:
    Posted: April 10th, 2008 at 5:35 am

    Anytime the reading of a statute makes one’s head hurt this much is an excellent opportunity for the AG to write an opinion. To clarify the state’s position on the law, of course. Except they have a demonstrated history of not following their own opinions, don’t they? (But I digress…)

    Expect an opinion saying “anyone with the initials ‘JK’ is hereby deemed to be a distressed home buyer by definition.”

    You’re in there, somewhere, Joe. Bet on it.

  7. Ken Holmes responds:
    Posted: April 11th, 2008 at 8:15 am

    I just received this email……. say it aint so!

    U.S. Senators are crafting anti-Real Estate Investor legislation right now.

    Hi Ken,
    This is not a joke. U.S. Senator Herb Kohl from Wisconsin is drafting anti-real estate investor legislation that’s already been approved in Minnesota and has been modeled in many other states.

  8. David Alexander responds:
    Posted: April 14th, 2008 at 12:39 pm

    The feds have figured out that helping investors is a good thing…

    http://banking.senate.gov/_files/040208_ForeclosurePreventionActSummary.pdf

    While the states go the other way… so, feel good laws get passed to protect the consumer and make th AG’s look good…

    You know…. why not enlist of the aid of local investors themselves… to find out what the true scams are… and enlist us to show them how to find those guys…. they are easy to spot… once you know what you are looking for…

    Oh, but, I forgot… this isn’t really about that… it’s about the fact that some investors are playing in their domain getting their money… and about making some political figures look very good to the public…

  9. Ignacia Ramirez responds:
    Posted: April 14th, 2008 at 8:32 pm

    Hello. I am new to your website. However, I don’t think the new law is as difficult to understand as you are making it out. Do you really not understand it, or are you just pretending not to understand?

  10. Joe Kaiser responds:
    Posted: April 15th, 2008 at 3:20 pm

    Ignacia, why don’t you go ahead and explain it to us. I’m lost here.

    If I buy John and Mary’s house, am I a distressed home purchaser or not?

  11. Joe Kaiser responds:
    Posted: April 15th, 2008 at 8:51 pm

    As I said, John and Mary’s home is in foreclosure. That makes it a distressed home and as owners, they’re distressed homeowners.

    John and Mary want to sell me their distressed home. If I buy it from them, is this a distressed home conveyance?

    And don’t forget . . .

    (5) “Distressed home conveyance” means a transaction in which:

    (a) A distressed homeowner transfers an interest in the distressed home to a distressed home purchaser;

    And . . .

    (6) “Distressed home purchaser” means any person who acquires an interest in a distressed home under a distressed home conveyance.

    Enjoy the ride.

  12. Ignacia Ramirez responds:
    Posted: April 15th, 2008 at 8:34 pm

    Joe —
    It looks like you would not be a “distressed home purchaser” just for buying John & Mary’s house, unless a number of other things were true. John & Mary’s mortgage would have to in danger of foreclosure. John & Mary would have to continue living in the house after the sale. Also, you would have to promise John & Mary a right to buy the house back in the future.
    If you just pay John & Mary a fair price for the house with no strings attached, then you have nothing to worry about.

  13. Davido responds:
    Posted: April 16th, 2008 at 2:31 pm

    The States and Federal governments are passing these laws because they see mass foreclosures ahead (2012 – 2020?) and they want to be sure people are forced out.
    Major banks will end up owning large blocks of land and recycleable resources. Govt will end up with more control over individuals and communities. The people publicly promoting these laws are generally unaware. The real drivers remain behind the scenes. Face it, our system is contolled by corrupt powers. They won’t deal justly.

    http://www.dunwalke.com/ http://www.financialsense.com/fsu/editorials/gnazzo/2004/part7.html

  14. Ignacia Ramirez responds:
    Posted: April 16th, 2008 at 8:27 pm

    There is also a “(b)” and “(c)” to the definition of “distressed home transaction.” By leaving those parts of the definition out of your discussion, your complaint is disingenuous. You are making the bill appear to do something it does not. But then, from what I hear about your so-called “business,” that’s all par for the course.

    (5) “Distressed home conveyance” means a transaction in which:
    (a) A distressed homeowner transfers an interest in the distressed home to a distressed home purchaser;
    b) The distressed home purchaser allows the distressed homeowner to occupy the distressed home; and
    (c) The distressed home purchaser or a person acting in participation with the distressed home purchaser conveys or promises to convey the distressed home to the distressed homeowner, provides the distressed homeowner with an option to purchase the distressed home at a later date, or promises the distressed homeowner an interest in, or portion of, the proceeds of any resale of the distressed home.

  15. Joe Kaiser responds:
    Posted: April 16th, 2008 at 8:45 pm

    Ugh, not quite, Ignacia.

    With no “and” after 5(a), it stands on its own, the result of which means it makes no sense (and yes, that is all par for the course).

  16. David Alexander responds:
    Posted: April 17th, 2008 at 1:32 pm

    So, Ignacia….

    I guess all investors across the nation just have a so called business…..

    I’d love to hear your viewpoint…


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