Legal Question in Real Estate Law in California

Re: Purchasing foreclosure properties in CA

You are probably referring to Civil Code section 1695 through 1695.17 regarding so-called home equity sales contracts. It is indeed true that some home equity sales contracts can be rescinded...the "taking unconscionable advantage" part is found in 1695.13 and the right of rescission in 1695.14.

I will take some guesses at the answers to your questions based on the apparent frequency of appellate cases and my experience:

I would say such cases are rather uncommon. I found one cited case on WestLaw, Borquilon v. Beckwith (1996) 49 Cal.App.4th 1697. The discussion in Miller & Starr's treatise on California real estate law contains only brief discussion of the law and no case citiations. I have not heard of any such actions.

In the Borquilon case, the Court found that the plaintiff failed to show that the tansaction was unconscionable. I think a sale below market value in and of itself does not establish unconscionability; many sellers who need to unload their property quickly (for reasons not the fault of the buyer) must sell below what they could get through orderly marketing and patience. I think unconscionability takes a lot more than just buying at a discount from market; it takes some undue influence, fraud or deception, something that prevented the seller from shopping around with other home equity buyers. Elder abuse might be a contributing factor.

A legitimate purchaser can protect himself by (1) full compliance with the Home Equity Sales Act, (2) giving the seller ample opportunity to know of and consider other possibilities and other buyers, and (3) giving the seller some information such as a copy of the Act and maybe a third-party market evaluation of the property in foreclosure. Avoid keeping the seller in the dark and avoid pressure tactics. Document what you do well, and at the time.