Understanding Florida 501.1377
Our system was designed specifically to comport to and comply with the Florida Statute 501.1377 established in 2008 thru 2012 which is outlined below. Failure to comply with this act could result in fines of $15,000.00 per violation.
Does this law affect how Real Estate Agents deal with Distressed Sellers?
Not directly, but it does affect the buyers they represent and their roles when making an offer to purchase a property that is in distress or default. By working with us we will help keep you informed about issues such as this. If you have not already done so please subscribe to our newsletter.
Florida Statute 501.1377 defines the exact process that must be followed and used when working with distressed sellers including the proper paper work that is used, the font size, timelines and proper disclosures that must be followed in order to avoid any appearance of being in violation.
Some of the key elements of this statute that needs to be addressed are as follows.
- What is an “Equity Purchaser”?
- What is a “Foreclosure Rescue Consultant”?
- What does “Foreclosure Related Rescue Services” mean?
- What is a “Foreclosure Rescue Transaction”?
- What is a “Prohibited Act?
- What Written Agreements must be used, how they are written and what they must contain.
- All written agreements must be left with the homeowner no less than 24 hours. ( We have a documented process for this).
- Homeowner “Right to Cancel”- A written agreement that permits the homeowner the right to cancel the transaction within 3 days.
- The right for the homeowner to re-purchase the property must be addressed.
Below is an exact copy of the 2012 version of Florida Statute 501.1377 also known as the Florida Foreclosure Rescue Consultant Act. Written in Italics below each line item is how we are complying with this statute through full and complete disclosure. Through the use of proper documentation we have a proprietary process that has proven to get results while operating within the guidelines set forth by Florida Statute 501.1377.
Our Affidavit of Understanding along with the Supplemental Short Sale Addendum and the process in which we ask our Agent Partners to utilize including the use of a “Document Receipt” and following the designated time lines and procedures we have laid out ensures that everyone understands what has been promised, to whom and when.
Please refer to our agent instructions to better understand how these documents are utilized and the purpose for each.
Hopefully, once you have reviewed this system you will agree that we have gone to great lengths to make certain that not only are we in compliance with state mandates and local real estate laws but we try to ensure the agents work with are working within the same guidelines as well in an effort to keep all parties out of trouble.
The 2012 Florida Statutes
REGULATION OF TRADE, COMMERCE, INVESTMENTS, AND SOLICITATIONS
- LEGISLATIVE FINDINGS AND INTENT.—The Legislature finds that homeowners who are in default on their mortgages, in foreclosure, or at risk of losing their homes due to nonpayment of taxes may be vulnerable to fraud, deception, and unfair dealings with foreclosure-rescue consultants or equity purchasers. The intent of this section is to provide a homeowner with information necessary to make an informed decision regarding the sale or transfer of his or her home to an equity purchaser. It is the further intent of this section to require that foreclosure-related rescue services agreements be expressed in writing in order to safeguard homeowners against deceit and financial hardship; to ensure, foster, and encourage fair dealing in the sale and purchase of homes in foreclosure or default; to prohibit representations that tend to mislead; to prohibit or restrict unfair contract terms; to provide a cooling-off period for homeowners who enter into contracts for services related to saving their homes from foreclosure or preserving their rights to possession of their homes; to afford homeowners a reasonable and meaningful opportunity to rescind sales to equity purchasers; and to preserve and protect home equity for the homeowners of this state.
Our Affidavit of Understanding was carefully researched and designed to address each of these issues through full disclosure. Each of the items described above and outlined below have been specifically addressed in our Affidavit of understanding and further defined on the page called “Explanation of the Affidavit of Understanding”. A written copy of the Affidavit of Understanding can be downloaded here.
- DEFINITIONS.—As used in this section, the term:
a) “Equity purchaser” means a person who acquires a legal, equitable, or beneficial ownership interest in any residential real property as a result of a foreclosure-rescue transaction. The term does not apply to a person who acquires the legal, equitable, or beneficial interest in such property:
1. By a certificate of title from a foreclosure sale conducted under chapter 45;
2. At a sale of property authorized by statute;
3. By order or judgment of any court;
4. From a spouse, parent, grandparent, child, grandchild, or sibling of the person or the person’s spouse; or
5. As a deed in lieu of foreclosure, a workout agreement, a bankruptcy plan, or any other agreement between a foreclosing lender and a homeowner.
Our system was carefully researched and designed to comport with this statute. In an effort to protect our Agent Partners who are licensees we wanted to make certain that we were in compliance which is why we have had our entire process reviewed by several prominent law firms in the local area. Although this is a much debated topic as to whether or not the agent needs to comply with this statute there is no doubt the buyers certainly better regardless of their intent.
Unlike the methods utilized by other investors designed to circumvent statues like this such as the use of Trusts or throw away LLC’s to hide their intent to make a profit when investing in distressed properties. We operate in interests of Full Disclosure through proper documentation to make certain that ALL parties including the lenders and servicers are aware of our intent.
b) “Foreclosure-rescue consultant” means any person who directly or indirectly makes a solicitation, representation, or offer to a homeowner to provide or perform, in return for payment of money or other valuable consideration, foreclosure-related rescue services. The term does not apply to:
1. A person excluded under s. 501.212. (This includes Real Estate Agents but excludes the buyers they represent).
2. A person acting under the express authority or written approval of the United States Department of Housing and Urban Development or other department or agency of the United States or this state to provide foreclosure-related rescue services.
3. A charitable, not-for-profit agency or organization, as determined by the United States Internal Revenue Service under s. 501(c)(3) of the Internal Revenue Code, which offers counseling or advice to an owner of residential real property in foreclosure or loan default if the agency or organization does not contract for foreclosure-related rescue services with a for-profit lender or person facilitating or engaging in foreclosure-rescue transactions.
4. A person who holds or is owed an obligation secured by a lien on any residential real property in foreclosure if the person performs foreclosure-related rescue services in connection with this obligation or lien and the obligation or lien was not the result of or part of a proposed foreclosure re-conveyance or foreclosure-rescue transaction.
5. A financial institution as defined in s. 655.005 and any parent or subsidiary of the financial institution or of the parent or subsidiary.
6. A licensed mortgage broker or mortgage lender that provides mortgage counseling or advice regarding residential real property in foreclosure, which counseling or advice is within the scope of services set forth in chapter 494 and is provided without payment of money or other consideration other than a loan origination fee.
7. An attorney licensed to practice law in this state who provides foreclosure rescue-related services as an ancillary matter to the attorney’s representation of a homeowner as a client.
c)“Foreclosure-related rescue services” means any good or service related to, or promising assistance in connection with:
1. Stopping, avoiding, or delaying foreclosure proceedings concerning residential real property; or
2. Curing or otherwise addressing a default or failure to timely pay with respect to a residential mortgage loan obligation.
d)“Foreclosure-rescue transaction” means a transaction:
1. By which residential real property in foreclosure is conveyed to an equity purchaser and the homeowner maintains a legal or equitable interest in the residential real property conveyed, including, without limitation, a lease option interest, an option to acquire the property, an interest as beneficiary or trustee to a land trust, or other interest in the property conveyed; and
2. That is designed or intended by the parties to stop, avoid, or delay foreclosure proceedings against a homeowner’s residential real property.
e) “Homeowner” means the record title owner of residential real property.
f) “Residential real property” means real property consisting of one-family to four-family dwelling units.
g) “Residential real property in foreclosure” means residential real property against which there is an outstanding notice of the pendency of foreclosure proceedings recorded pursuant to s. 48.23.
Key Terms Above:
“Other Valuable Consideration” in the form of a purchase and sale agreement that states that the buyer may buy and the seller will sell the property at some point in the future.
In addition to the “Affidavit of Understanding” our “Supplemental Short Sale Addendum” (SSSA) was designed to comport with the exact language and requirements outlined above.
The SSSA is used in conjunction with the FARBAR AS-IS Purchase and Sale Agreement and State Mandated Short Sale Addendums. All three documents are presented to the lender in the course of our negotiations. For further explanation please see the “Explanation of the Supplemental Short Sale Addendum” page located here.
- PROHIBITED ACTS.—In the course of offering or providing foreclosure-related rescue services, a foreclosure-rescue consultant may not:
h) Engage in or initiate foreclosure-related rescue services without first executing a written agreement with the homeowner for foreclosure-related rescue services; or
i) Solicit, charge, receive, or attempt to collect or secure payment, directly or indirectly, for foreclosure-related rescue services before completing or performing all services contained in the agreement for foreclosure-related rescue services.
We do not charge or solicit any fees from the homeowner in any manner. Regardless of the outcome our services are free of charge. It is for this reason that we use the Mortgage Assistance Relief Services (aka MARS) disclosure which has 2 parts.
The first part describes what services we offer and highlights that we do not charge any fees.
The second part describes what if any settlement that has been reached with the seller’s lenders and lien holders. Additionally it also grants to the seller the right to reject the terms of the settlement and withdraw from the short sale if they are not happy with the outcome. Please refer to our page called “Explanation of the MARS Act”.
- FORECLOSURE-RELATED RESCUE SERVICES; WRITTEN AGREEMENT.—
a) The written agreement for foreclosure-related rescue services must be printed in at least 12-point uppercase type and signed by both parties. The agreement must include the name and address of the person providing foreclosure-related rescue services, the exact nature and specific detail of each service to be provided, the total amount and terms of charges to be paid by the homeowner for the services, and the date of the agreement. The date of the agreement may not be earlier than the date the homeowner signed the agreement. The foreclosure-rescue consultant must give the homeowner a copy of the agreement to review not less than 1 business day before the homeowner is to sign the agreement.
b) The homeowner has the right to cancel the written agreement without any penalty or obligation if the homeowner cancels the agreement within 3 business days after signing the written agreement. The right to cancel may not be waived by the homeowner or limited in any manner by the foreclosure-rescue consultant. If the homeowner cancels the agreement, any payments that have been given to the foreclosure-rescue consultant must be returned to the homeowner within 10 business days after receipt of the notice of cancellation.
c) An agreement for foreclosure-related rescue services must contain, immediately above the signature line, a statement in at least 12-point uppercase type that substantially complies with the following:
HOMEOWNER’S RIGHT OF CANCELLATION
YOU MAY CANCEL THIS AGREEMENT FOR FORECLOSURE-RELATED RESCUE SERVICES WITHOUT ANY PENALTY OR OBLIGATION WITHIN 3 BUSINESS DAYS FOLLOWING THE DATE THIS AGREEMENT IS SIGNED BY YOU.
THE FORECLOSURE-RESCUE CONSULTANT IS PROHIBITED BY LAW FROM ACCEPTING ANY MONEY, PROPERTY, OR OTHER FORM OF PAYMENT FROM YOU UNTIL ALL PROMISED SERVICES ARE COMPLETE. IF FOR ANY REASON YOU HAVE PAID THE CONSULTANT BEFORE CANCELLATION, YOUR PAYMENT MUST BE RETURNED TO YOU NO LATER THAN 10 BUSINESS DAYS AFTER THE CONSULTANT RECEIVES YOUR CANCELLATION NOTICE.
TO CANCEL THIS AGREEMENT, A SIGNED AND DATED COPY OF A STATEMENT THAT YOU ARE CANCELING THE AGREEMENT SHOULD BE MAILED (POSTMARKED) OR DELIVERED TO (NAME) AT (ADDRESS) NO LATER THAN MIDNIGHT OF (DATE).
IMPORTANT: IT IS RECOMMENDED THAT YOU CONTACT YOUR LENDER OR MORTGAGE SERVICER BEFORE SIGNING THIS AGREEMENT. YOUR LENDER OR MORTGAGE SERVICER MAY BE WILLING TO NEGOTIATE A PAYMENT PLAN OR A RESTRUCTURING WITH YOU FREE OF CHARGE.
d) The inclusion of the statement does not prohibit the foreclosure-rescue consultant from giving the homeowner more time in which to cancel the agreement than is set forth in the statement, provided all other requirements of this subsection are met.
e) The foreclosure-rescue consultant must give the homeowner a copy of the signed agreement within 3 hours after the homeowner signs the agreement.
We include within our process the “Homeowner’s Right To Cancel” as outlined above that is used in conjunction with the “Document Receipt”. The Document Receipt is a very important document that establishes that all of the require documents were delivered to the homeowner and left with them for the required time period and when that time period began.
- FORECLOSURE-RESCUE TRANSACTIONS; WRITTEN AGREEMENT.—
- A foreclosure-rescue transaction must include a written agreement prepared in at least 12-point uppercase type that is completed, signed, and dated by the homeowner and the equity purchaser before executing any instrument from the homeowner to the equity purchaser quitclaiming, assigning, transferring, conveying, or encumbering an interest in the residential real property in foreclosure.
- The equity purchaser must give the homeowner a copy of the completed agreement within 3 hours after the homeowner signs the agreement. The agreement must contain the entire understanding of the parties and must include:
a. The name, business address, and telephone number of the equity purchaser.
b. The street address and full legal description of the property.
c. Clear and conspicuous disclosure of any financial or legal obligations of the homeowner that will be assumed by the equity purchaser.
d. The total consideration to be paid by the equity purchaser in connection with or incident to the acquisition of the property by the equity purchaser.
e. The terms of payment or other consideration, including, but not limited to, any services that the equity purchaser represents will be performed for the homeowner before or after the sale.
- The date and time when possession of the property is to be transferred to the equity purchaser.
- A foreclosure-rescue transaction agreement must contain, above the signature line, a statement in at least 12-point uppercase type that substantially complies with the following:
I UNDERSTAND THAT UNDER THIS AGREEMENT I AM SELLING MY HOME TO THE OTHER UNDERSIGNED PARTY.
3. A foreclosure-rescue transaction agreement must state the specifications of any option or right to repurchase the residential real property in foreclosure, including the specific amounts of any escrow payments or deposit, down payment, purchase price, closing costs, commissions, or other fees or costs.
4. A foreclosure-rescue transaction agreement must comply with all applicable provisions of 15 U.S.C. ss. 1601 et seq. and related regulations.
a) The homeowner may cancel the foreclosure-rescue transaction agreement without penalty if the homeowner notifies the equity purchaser of such cancellation no later than 5 p.m. on the 3rd business day after signing the written agreement. Any moneys paid by the equity purchaser to the homeowner or by the homeowner to the equity purchaser must be returned at cancellation. The right to cancel does not limit or otherwise affect the homeowner’s right to cancel the transaction under any other law. The right to cancel may not be waived by the homeowner or limited in any way by the equity purchaser. The equity purchaser must give the homeowner, at the time the written agreement is signed, a notice of the homeowner’s right to cancel the foreclosure-rescue transaction as set forth in this subsection. The notice, which must be set forth on a separate cover sheet to the written agreement that contains no other written or pictorial material, must be in at least 12-point uppercase type, double-spaced, and read as follows:
Again, please see the “Explanation of the Affidavit of Understanding” page located here to see how we are in compliance with the above statement.
NOTICE TO THE HOMEOWNER/SELLER
PLEASE READ THIS FORM COMPLETELY AND CAREFULLY. IT CONTAINS VALUABLE INFORMATION REGARDING CANCELLATION RIGHTS.
BY THIS CONTRACT, YOU ARE AGREEING TO SELL YOUR HOME. YOU MAY CANCEL THIS TRANSACTION AT ANY TIME BEFORE 5:00 P.M. OF THE THIRD BUSINESS DAY FOLLOWING RECEIPT OF THIS NOTICE.
THIS CANCELLATION RIGHT MAY NOT BE WAIVED IN ANY MANNER BY YOU OR BY THE PURCHASER.
ANY MONEY PAID DIRECTLY TO YOU BY THE PURCHASER MUST BE RETURNED TO THE PURCHASER AT CANCELLATION. ANY MONEY PAID BY YOU TO THE PURCHASER MUST BE RETURNED TO YOU AT CANCELLATION.
TO CANCEL, SIGN THIS FORM AND RETURN IT TO THE PURCHASER BY 5:00 P.M. ON (DATE) AT (ADDRESS). IT IS BEST TO MAIL IT BY CERTIFIED MAIL OR OVERNIGHT DELIVERY, RETURN RECEIPT REQUESTED, AND TO KEEP A PHOTOCOPY OF THE SIGNED FORM AND YOUR POST OFFICE RECEIPT.
I (we) hereby cancel this transaction.
Printed Name of Seller
Printed Name of Seller
b) In any foreclosure-rescue transaction in which the homeowner is provided the right to repurchase the residential real property, the homeowner has a 30-day right to cure any default of the terms of the contract with the equity purchaser, and this right to cure may be exercised on up to three separate occasions. The homeowner’s right to cure must be included in any written agreement required by this subsection.
c) In any foreclosure-rescue transaction, before or at the time of conveyance, the equity purchaser must fully assume or discharge any lien in foreclosure as well as any prior liens that will not be extinguished by the foreclosure.
d) If the homeowner has the right to repurchase the residential real property, the equity purchaser must verify and be able to demonstrate that the homeowner has or will have a reasonable ability to make the required payments to exercise the option to repurchase under the written agreement. For purposes of this subsection, there is a rebuttable presumption that the homeowner has a reasonable ability to make the payments required to repurchase the property if the homeowner’s monthly payments for primary housing expenses and regular monthly principal and interest payments on other personal debt do not exceed 60 percent of the homeowner’s monthly gross income.
e) If the homeowner has the right to repurchase the residential real property, the price the homeowner pays may not be unconscionable, unfair, or commercially unreasonable. A rebuttable presumption, solely between the equity purchaser and the homeowner, arises that the foreclosure-rescue transaction was unconscionable if the homeowner’s repurchase price is greater than 17 percent per annum more than the total amount paid by the equity purchaser to acquire, improve, maintain, and hold the property. Unless the repurchase agreement or a memorandum of the repurchase agreement is recorded in accordance with s. 695.01, the presumption arising under this subsection shall not apply against creditors or subsequent purchasers for a valuable consideration and without notice.
(6) REBUTTABLE PRESUMPTION.—Any foreclosure-rescue transaction involving a lease option or other repurchase agreement creates a rebuttable presumption, solely between the equity purchaser and the homeowner, that the transaction is a loan transaction and the conveyance from the homeowner to the equity purchaser is a mortgage under s. 697.01. Unless the lease option or other repurchase agreement, or a memorandum of the lease option or other repurchase agreement, is recorded in accordance with s. 695.01, the presumption created under this subsection shall not apply against creditors or subsequent purchasers for a valuable consideration and without notice.
(7) VIOLATIONS.—A person who violates any provision of this section commits an unfair and deceptive trade practice as defined in part II of this chapter. Violators are subject to the penalties and remedies provided in part II of this chapter, including a monetary penalty not to exceed $15,000 per violation.
History.—s. 1, ch. 2008-79; ss. 62, 63, ch. 2009-241; s. 112, ch. 2010-5.
Again this entire statute has been addressed line by line and item by item though our documentation and our processes to make certain that both Real Estate Liquidators Inc and the members of our team are in complete compliance with all of rules and regulations outlined above through our Affidavit of Understanding and Supplemental Short Sale Addendum. Please review the “Understanding the Documents” page.