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FAQ about Washington’s new distressed homeowner law

FAQ about Washington’s new distressed homeowner law

(Predatory Lending, Scams, Everything Else) Permanent link

A new state law proposed by the Washington Attorney General’s Office to help protect financially strapped homeowners from equity skimming and foreclosure rescue scams became effective in Washington on June 12. Last-minute changes by the Legislature revised the definition of a “distressed home” and added the term “distressed homeowner consultant” to the bill (HB 2791). These changes are generating questions among real estate professionals. Our office is working with REALTORS and legislators to address the concerns. In the meantime, we’ve posted a fact sheet in both English and Spanish on our Web site to help agents, sellers and buyers better understand the new legislation.

Posted by AGO Blog Moderator at 07/07/2008 02:34:23 PM | 

I appreciate a law that creates safety for homeowners and appreciate the requirements of disclosure in such a way to curtail "scams". However, the idea that the government is defining how much, as a percentage of the value of a property, a homeowner or bank (in the case of a short sale) can accept on their own accord is ridiculous.
Posted by: Nathan Street ( Email ) at 9/11/2008 1:35 PM

Hi Nathan,

Thanks for the comment. Straight sales (with no options or other promises to sell or lease back the property) are unaffected by the provisions of Washington's new distressed homeowner law.

Posted by: Kristin Alexander ( Email | Visit ) at 9/12/2008 9:48 AM

With so much focus on real estate and changes I am sure that there are many questions. I am just glad that legislators are taking into account the would be actions of scammers and criminals when it comes to protecting home owners.
Posted by: Jodi Suguitan ( Email ) at 1/4/2009 8:14 PM

I would like information on foreclosure. My home is currently in foreclosure what can I do to get the mortgage company to work more with me so I can stay in my home? [BLOG MODERATOR'S RESPONSE: Ken, I understand your situation. Please contact your lender first. In addition, see the resources on our site at]
Posted by: Kenneth Webb ( Email ) at 3/5/2009 2:23 PM

To clarify your comment to Nathan on 9/12/08, if I, as a r.e. investor offer to purchase a home from a "distressed homeowner"- using a straight purchase & sale agreement without a lease-back provision or any other options, can I offer less than 82% of the market value? AND, who determines what is the market value? (P.S. I always structure the Purchase agreement so the homeowner leaves their home with several thousand dollars in their pocket, enabling them to get a fresh start elsewhere.)
Posted by: Joanne Ryser ( Email ) at 4/16/2009 3:46 PM

Joanne, let me first remind you that nothing in my reply should be considered legal advice. Second, you may be interested to know that the Legislator has since made updates to that bill that are contained in SB 5221, which you can read at

As for your question, the “distressed home conveyance” provisions of RCW Chapter 61.34 apply only to conveyances that fall within the statute’s definition of the term. One of the three required elements of that definition is: “ (c) The distressed home purchaser . . . 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.” RCW 61.34.020(5). Where the purchaser does not provide an option to buy or any other such promise (as in a straight purchase and sale), the distressed home conveyance provisions do not apply.

Where the statute does apply, the market value of the property is determined by the parties. In the event the parties cannot agree or in the event the valuation is subsequently challenged, the market value of the property would be determined ultimately by a court based upon the evidence of value submitted by the parties.
Posted by: Kristin Alexander ( Email | Visit ) at 4/29/2009 9:24 AM

As a realtor and as someone who deals with distressed homeowners, I know for a fact that there are people out there who do take advantage of these distressed homeowners. However there are also people who are focused on helping these individuals as well. Tell the two apart can be tricky. Just know this, no one should ask you up front for money to do a loan modification. At the very most, they might ask that you put money into a neutral third party escrow before they begin work. Just be careful with who you deal with. As far as "equity skimming" goes, the problem is most people today don't have equity to skim. Although, I've seen some legislation treat properties without equity (short sales) the same as properties with equity. The point is to protect distressed homeowners.

Posted by: Norman ( Email ) at 2/8/2010 6:38 AM

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