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socrateaser
socrateaser, Lawyer
Category: Real Estate Law
Satisfied Customers: 38901
Experience:  Attorney and Real Estate broker -- Retired (mostly)
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I have a Real Estate Question: A good friend of mine owns

Customer Question

Hi, I have a Real Estate Question: A good friend of mine owns a small investment company in Southern California(buys and flips property on a small scale...2-3 per yr). He recently bought a home from a seller that was behind on their payments(NOD recorded) and on their way to loosing their home to foreclosure as they had no employment, home did not qualify for a loan modification, they could not do a short sale(no equity at the time to pay for all amounts do on the home) and they were looking for someone to help them out. My friend offered to pay for the balance on the mortgage, all behind interest and payments do, Escrow, Title, Attorney fees to have a recorded lis pendens removed...and he also gave sellers $20,000.00 to find a place to live after the close of escrow.
They went through the process with no Realtors involved and escrow took care of the transaction from opening to close. Once the property closed and recorded under my friends corporation, I found out through another friend that had bought a property in similar status that they missed the Equity Purchase Agreement and not made it part of this transaction. My friend says that he was not aware of the need for that contract and even escrow said they were also not aware the Equity Purchase Agreement needed to be part of this transaction.
Now the questions...
1. What kind if legal issues can come against my friend for not making the Equity Purchase Agreement part of this transaction.(He was depending on escrow to make sure proper procedure was followed).
2. Can this Agreement be signed now that escrow has closed(seller is willing to sign).
3. What if anything, can be done to remedy the situation now?
I hope I did not confuse you and made myself clear enough to expect some answers from you.
Thank you in advance for your prompt response.
Hugo Arreola (###) ###-####Cell ***@******.***
Submitted: 1 year ago.
Category: Real Estate Law
Expert:  socrateaser replied 1 year ago.
Hello, Cal. Civil Code Section 1695 et seq. provides strict rules for the purchase of equity from a seller currently subject to a foreclosure on their principal residence. The law grants the seller the right to sue for any actual damages (lost profits), attorney's fees, and exemplary (punitive) damages of no less than three times actual damages. Also, the county district attorney can prosecute the purchaser for a misdemeanor with a maximum sentence of one year in jail and a $25,000 fine. That said, it seems as though the seller in your friend's transaction may not have suffered any actual damages. If so, then there would be no viable legal action. And, without an injury to the seller, the district attorney would be unlikely to prosecute the case. So, it would seem from your stated facts, that this is one of those situations where there is "no harm, no foul." Your friend needs to be careful, though. Triple damages can turn even a small lawsuit into a giant one, and there are lots of lawyers would would jump at the chance of representing a seller in this sort of case. I hope I've answered your question. Please let me know if you require further clarification. And, please provide a positive feedback rating for my answer (click 3, 4 or 5 stars) -- otherwise, I receive nothing for my efforts in your behalf.Thanks again for using Justanswer!
Customer: replied 1 year ago.
Hi,Since my friend didn't have any idea that the document was necessary for this transaction and was depending on escrow to make sure they follow proper procedure, can escrow be liable for that mistake? In case of a lawsuit, can my friend go after the escrow company for not including that Equity Purchase Agreement in the transaction and not protecting him.Even though my friend feels he has done nothing wrong and acted in good faith...but the seller decides to file a lawsuit, is there anything that can be done now to prevent that from happening...please advise.How long does the seller have to file a lawsuit if they decides to do so?
Expert:  socrateaser replied 1 year ago.
Since my friend didn't have any idea that the document was necessary for this transaction and was depending on escrow to make sure they follow proper procedure, can escrow be liable for that mistake? In case of a lawsuit, can my friend go after the escrow company for not including that Equity Purchase Agreement in the transaction and not protecting him. A: The escrow agent has no responsibility to protect the buyer in this type of transaction -- unless there was something agreed upon between the buyer and the escrow agent whereby the escrow agent agreed to make certain that the entire transaction complied with California law. There's no way for me to evaluate this without reviewing all of the escrow documents, and without doing so, my answer here can only be, "I don't know."Even though my friend feels he has done nothing wrong and acted in good faith...but the seller decides to file a lawsuit, is there anything that can be done now to prevent that from happening...please advise. A: This particular law does not require intent to trigger liability. Violation is all that's required. Consequently if there is a violation, and the seller can show damages, then he or she can sue to recover damages.How long does the seller have to file a lawsuit if they decides to do so? A: Four years from the date of the alleged violation. Civil Code Section 1695.7. I hope I've answered your question. Please let me know if you require further clarification. And, please provide a positive feedback rating for my answer (click 3, 4 or 5 stars) -- otherwise, I receive nothing for my efforts in your behalf.Thanks again for using Justanswer!
Expert:  socrateaser replied 1 year ago.
Hello again,I see that you have reviewed my answer, but that you have not provided a rating. Do you need any further clarification concerning my answer, or is everything satisfactory?If you need further clarification, concerning this matter, please feel free to ask. If not, I would greatly appreciate a positive feedback rating for my answer (click 3, 4 or 5 stars) – otherwise, I receive nothing for my efforts in your behalf.Thanks again for using Justanswer!