Home Equity Prevention Act

Many times when a homeowner is in default on a mortgage or is in foreclosure, the homeowner will be contacted by "investors" who are interested in purchasing the property. Some investors are looking to prey on the homeowner by offering an arrangement that at first blush seems to offer some degree of hope to the homeowner who typically is desperate to save the home and is inclined to sign a contract that may not be in the homeowner's best interest. This act is designed to protect the homeowner from being such victims of shady type investors and it is codified in Real Property Law Section 265-a.  For the act to apply, the homeowner must be residing at the property at the time the contract is entered into, and the purchaser/investor is not intending to reside at the property.  Generally the act covers the following contracts: 1).  A contract incident to a sale of a residence in foreclosure or 2). a contract incident to a sale of a residence in foreclosure or default where such contract includes a reconveyance arrangement. A reconveyance arrangement is similar to a lease with an option to buy back the property. Before any homeowner in default and/or in foreclosure enters into a contract with someone, he or she should speak to a qualified attorney who specializes in foreclosure and real estate law.  If an investor is looking to purchase your property or is offering some type of arrangement that promises to offer a solution to your situation then there is pause to consider why the investor is interested. Perhaps the mortgage is defective and the investor knows that the foreclosure action can be dismissed for substantive reasons or perhaps the second lien holder is willing to take pennies on the dollar which increases the homeowner's equity.  There are many other possible scenarios, and it's the wise homeowner who consults with an experienced attorney before ever signing on the dotted line.  A brief summary of the act may be found on the website below: 
http://www.dfs.ny.gov/consumer/hetpa.htm

For a further discussion of investors see my August 2016 post entitled "We buy houses for all cash"