The Distressed Property Law: Next Steps & Solutions

A discussion with Attorney General Rob McKenna

The Distressed Properties law is having a dramatic impact on the entire industry - far beyond what was intended by the legislature.

Our primary focus has been to provide our members with education and information for compliance with the law so that you can best protect yourself and the clients you serve.

Now, we want to share with you more about how this law passed and what we are doing to address its impact on the real estate industry.

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How did we get here?

Following is a brief history of how HB 2791 was passed:

  1. January 16 — HB 2791 was introduced (see original bill draft as written by the Attorney General's office to help protect financially strapped homeowners from equity skimming and foreclosure rescue scams), and the REALTORS® began tracking it. The bill passed the House, and then went to the Senate. The version of the legislation passed by the House did not include the broad definition for “Distressed Home Consultants” until it was added in the Senate.
  2. March 6 — the Senate adopted a striking amendment and approved the amended bill (39-6). This new striking amendment included the language regarding “Distressed Home Consultants” and form requirements from SB 6695 that had died in the Senate.
  3. March 8 — (less than a week before the Legislature adjourned) the House sent the bill back to the Senate and asked the Senate to “recede” (back off) from the Senate's amendment.
  4. March 11 — (just 48 hours before the Legislature adjourned) a new striking amendment was introduced on the Senate floor and the Senate approved the amended bill (46-3). An amendment to the striking amendment was also introduced, which the Senate adopted, exempting some other professionals from the bill.
  5. March 12 — with pressure to ensure the bill addressing problems with distressed home transactions was passed by the legislature before the end of session, and with little time remaining, the House concurred with the Senate amendments and approved the bill (97-0).
  6. March 13 — Legislature adjourns.

REALTORS® did not provide input to the striking amendments during the session's final days, relying on the Attorney General's understanding that the House would not agree with the Senate version. Legislators did not fully comprehend the ramifications of the well-intended legislation on the real estate industry, intending for the legislation to only affect distressed property transactions.

REALTOR® lobbyists and real estate attorneys who were following these developments, communicated with the Attorney General's office and key legislators on several occasions to indicate our concerns with certain aspects of the legislation while it was in the policy committees, and after the House refused to concur with the Senate amendments.

What are we doing to fix the problem?

Messages have been sent to every state legislator that we must address the problems created by the legislation. The Attorney General,s Office understands the problems the law creates and has committed to work with us for solutions. We are in the process of working with real estate attorneys and practitioners to determine the legislative solutions needed (including reviewing all the provisions of the bill and how it impacts the industry, such as liability, short sales, and how the legislation affects buyer's agents and normal real estate transactions). We are finding support for resolving the unintended consequences from both legislators and the Attorney General, and we are confident we will find appropriate solutions. Washington REALTORS® leadership will be meeting with the Attorney General's office to discuss legislative fixes for the bill on July 2. On July 15 the AG's Office, Consumer Protection Division, has invited REALTORS® to participate in a work group to address ways to correct the Distressed Property Law in the 2009 legislative session.

How do we prevent this in the future?

Let's face it. This should not have happened. As Washington REALTORS®, it is our responsibility to protect the industry from legislation such as this. We need to do everything we can to ensure it does not happen again. Therefore, in addition to finding the appropriate legislative fix, we have also meticulously reviewed our legislative process to take steps to make sure we prevent it from happening in the future. Though we reviewed more than four hundred bills this session for their impact on the real estate industry (including HB 2791), we failed to catch the implications of the final version of HB 2791 that was passed during the last 48 hours of the session.

Ultimately, it took a team of industry attorneys several weeks to understand the full impact of HB 2791. This situation has dramatically demonstrated that we must engage our industry attorneys in legal review of legislation (often on short notice) to understand potential legal ramifications on the real estate industry during the often complicated bill-making process.

We hope this provides you with some insight into how the distressed properties law was passed and what REALTORS® are doing to address the challenges created by this legislation. Please let us know if you have any questions or need additional information. We will be updating you regularly on compliance with the law and any progress on solutions for next legislative session.

For additional information about the Distressed Properties Law, please see: