The Home Equity Sales Contract Act: What It Means to Sellers (Part 2)
The Home Equity Sales Contract Act provides provisions regarding “representatives” of purchasers as well. If the equity purchaser wishes to have a “representative” in the transaction, the representative must provide the equity seller proof and a statement that he or she has a valid and current California Real Estate Sales License. The representative’s failure to do so gives the equity seller the right to cancel the transaction under the Act. If the purchaser uses an unlicensed individual as a representative, he or she risks having the transaction cancelled by the seller after it has been completed.
The Act also hinders the negotiation of short sales with the lender on the property in several ways. The purchase and sale contracts necessitated by the Act must include a notice that throughout the cancellation period the purchaser cannot request that the seller sign a deed or “any other document,” including a notice to release. This document is one universally required by lenders from sellers in order to deal with any third parties regarding the seller’s loan. If the purchaser wishes to negotiate a short sale during this period, he or she must include the “notice to release” into the purchase and sale contract, which the standard forms do not provide. Another problem is that lenders often reject several contracts over a few days before accepting one, and that each one may violate this prohibition of sellers signing “any other document” during the period.
Essentially, the Act imposes numerous punishments upon purchasers who violate its terms, granting equity sellers to the right to rescind transactions for failure of a purchase and sales contract to adhere to its provisions or for violations of the cancellation period restrictions. Violation of the Act also gives sellers the right to collect damages and attorney’s fees, and possible exemplary damages and even criminal sanctions. In conclusion, if homebuyers are considering the purchase of troubled properties, they should make sure to completely familiarize themselves with the Act and to follow its requirements and prohibitions with great care and attention to detail.
(This article is for informational purposes and does not contain or convey legal advice. The information herein should not be used or relied upon in regard to any particular facts or circumstances without first consulting a lawyer. If you have any questions about this Article, please call or e-mail Stephen Vokshori, Esq. (213.785.5366 / firstname.lastname@example.org) or any other member of Vokshori Law Group.)