Foreclosure Laws

June 14, 2007



In 1979, the Califiornia legislature enacted laws which sought to curb business practices of certain firms and individuals that were considered to be unscrupulous and fraudulent. Some of you probably remember seeing ads which offered to purchase a home by taking over the existing loan. Frequently a homeowner in financial duress would deed over their home by signing contracts without fully realizes what exactly they were signing.


These laws were amended in 1990, 1997 and 2003 and the requirements codified. They strictly regulate the activities of an "equity purchaser" and/or their representatives.


The intent and purpose of the law is to:

Provide homeowners with information necessary to make informed sales decisions;

Require written sales agreements;

Safeguard the public against deceit and financial hardship;

Insure fair dealing in the sale and purchase of homes in forclosure;

Prohibit misleading representations;Restrict unfair contractural terms; Provide homeowners reasonable opportunity to rescind sales to equity purchasers; and

Protect homeowners' equity.



An equity purchaser is defined as any person who acquires title to any residence in foreclosure. The court of appeal has found this law to apply only to owners who live in the residence subject to foreclosure.


There are some exemptions that do allow a buyer to purchase a residence in foreclosure.


On Friday, I will explain some of these exemptions.