Provided by Guardian Title

Among several items recently passed by the Colorado Legislature is HB 10-1133 which amends the Colorado Foreclosure Protection Act. This law applies to real estate investors who buy and flip short sale properties in Colorado, also referred to as short sale flippers or equity purchasers.

HB 10-1133 requires now that if the short sale flipper intends to sell the short sale property within 14 days of purchase, they must disclose the subsequent sale to all parties involved in the transactions. In short, there are two forms of disclosure:

1.        Disclosure to the current homeowner/seller and the short sale lender. The buyer must disclose the terms of the subsequent contract including the purchase price and identified buyer within one business day, and never later than the closing date of the short sale.

2.       Disclosure to the subsequent purchaser and mortgage lender when applicable. The short sale flipper or equity purchaser must disclose the terms of the contract including but not limited to the purchase price with the current homeowner/seller and his/her lender. If the subsequent purchaser is paying cash, disclosure is only required to the current homeowner/seller. This disclosure must be made at the time of the subsequent contract and be part of the contract.

There is one other component to HB 10-1133 that should not be overlooked. The Colorado Foreclosure Protection Act currently requires translation of the entire real estate contract into the principal language of the seller. They believe this has discouraged purchases of homes in or near foreclosure if the seller did not speak English. HB 10-1133 now requires that only one paragraph be translated into the language of the seller through a separate notice. The paragraph reads as follows and takes effect January 1, 2011:

“THIS TRANSACTION INVOLVES IMPORTANT AND COMPLEX LEGAL CONSEQUENCES, INCLUDING YOUR RIGHT TO CANCEL THIS TRANSACTION WITHIN THREE BUSINESS DAYS FOLLOWING THE DATE YOU SIGN THIS CONTRACT. YOU SHOULD CONSULT WITH AN ATTORNEY OR SEEK ASSISTANCE FROM A HOUSING COUNSELOR BY CALLING THE COLORADO FORECLOSURE HOTLINE AT 1-877-601-HOPE (CURRENT/CORRECT TELEPHONE NUMBER).”

A copy of this bill is available through the Colorado General Assembly and available to you by clicking on this link.

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