THE BLOG

You Need to Know Your Foreclosure Laws

06/12/2015 07:16 pm ET | Updated Jun 12, 2016

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Let's say you're in California and you met a seller who is willing to sign over the deed. Would you take it? If you do, the seller can come back and void the transaction within two years from that date because you violated the "California Civil Code." Further, you will be liable for any damages to the seller. If you didn't know this rule, you'd be heading for an unpleasant surprise. Here's more from that Code...

Let's say you met with a seller and you got only the Purchase and Sale Agreement signed. Next morning you research the title and complete your due diligence, and in the afternoon you meet the seller to get the deed. STOP! You are again in violation of the Code. The Code states that you need to give the seller in foreclosure a "Notice of Cancellation" which gives the seller the unconditional right to cancel the contract within the five business days. Only after that time expires are you allowed to get the deed.

Many novice investors don't fully realize the consequences of jumping into real estate investing before getting the proper knowledge. Here's the excerpt out of a section of the California Code that tells you what happens if you don't follow the above rules:

Any person who commits any violation described in Section 2945.4 shall be punished by a fine of not more than twenty-five thousand dollars ($25,000), by imprisonment in the county jail for not more than one year, or in the state prison, or by both that fine and imprisonment for each violation. These penalties are cumulative to any other remedies of penalties provided by law.

This is serious! You must know the rules and legalities for your state! Not knowing them can seriously cost you. Homeowners in foreclosure are in fact vulnerable, and in many cases subject to fraud, deception, and unfair dealings by dishonest investors. Therefore, there are different laws in place that govern the dealings with owners in foreclosure. You should know and follow the rules to be on the right side of the law. Get the proper training and education before jumping into making real estate deals.