Legal Question in Real Estate Law in California

Can I consult and help people out of foreclsoure
I want to do mailings to people who are facing foreclosure and give them options to avoid it.

I don't do mortgages or lend money, but I can refer them to someone who can. I don't take any money for the referral. I'd like to say so in the mailer.

I don't do bankruptcies but I know an attorney I can refer them to. I don't take any money for the referral. I'd like to say so in the mailer.

I want to sit with them, figure out their family budget and what went wrong and work out a forbearance agreement with their lender for them. I know, they can do this themselves, but many won't just as many people prefer to have a mechanic work on their cars rather than do it themselves.

I want to charge $1,000 flat fee, even if it means ultimately sending them to a mortgage broker or attorney.

If someone wants to sell their house to me, I want to be able to buy it legally and ethically. I wouldn't charge a fee for the consulting if they chose to sell to me.

How do I avoid conflict of interest, fiduciary responsibility or the other traps of of this kind of consulting?

Asked on 5/13/08, 12:09 am

2 Answers from Attorneys

Bryan Whipple Bryan R. R. Whipple, Attorney at Law

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Re: Can I consult and help people out of foreclsoure

The biggest problem area I see with your proposed business is that it interfaces so closely with regulated professions and activities that you are likely either going to find yourself practicing those professions without the required license, or your modus operandi of referring clients will transgress the business-solicitation rules of the profession to which you are referring the client.

Lawyers, for example, cannot employ or contract with people who hang around auto body shops for the purpose of getting car-accident injury cases.

Further, I'm pretty sure that a non-lawyer charging a client to negotiate, or participate in negotiating, a forbearance agreement would be the unlawful practice of law.

Overall, while I see a need for this kind of service, I think a person doing this is either going to need a license, or need extremely careful advance coaching as to the bounds of legality, or both.

This is without even looking into whether California licenses or regulates the business of credit counseling, nor telling you about the laws regulating so-called home-equity purchase contracts, which is another part of your concept ("if someone wants to sell their house to me"). You can go to jail for certain mis-steps in the home equity contract business.

Answered on 5/13/08, 1:09 am

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