Legal Question in Real Estate Law in California

Re: equity purchase contract

If you are buying from somone in foreclosure, the contact needs to comply with the requirements of Civil Code section 2943 et seq., which includes certain disclosures and the right of rescission. If you fail to do so, the agreement can be voided and you can face statutory penalties.

Re: equity purchase contract

Yes, there's a big difference.

A purchase contract would refer to the usual contract between a buyer and seller in a run-of-the-mill house-purchase deal where, at close of escrow, the seller and his lender(s) get paid off and the buyer pays off, or assumes, the debt.

In an equity purchase contract, referred to in the Civil Code as a "Home Equity Sales Contract," the home in question is in foreclosure, the buyer does not intend to use the home as his residence, and certain other conditions must or may exist. See Civil Code sections 1695.1 through 1695.17 for a complete legal description and applicable law, including the seller's rescission rights.

The essence of the home equity sale contract is that the seller is in dire financial straits and the buyer is usually a wheeler-dealer who knows the foreclosure business and hopes to end up making a fast profit by re-selling within a few months for substantially more than he pays.

Not necessarily illegal, but regulated because it takes advantage of homeowners who do not have the short-term resources to save what may be a significant amount of equity in their homes for themselves by holding out a little longer.