Buyers looking to scoop up foreclosed properties face new regulations in 2025.

AB 2424 will rein in wealthy, corporate, or all-cash buyers from stripping home equity from homeowners on the brink of foreclosure and allow the owner to find private buyers for their distressed property.

It’s unfair that a 71-year-old woman worked hard all of her life to put equity in her home, build a nest egg, and create generational wealth for her children and grandchildren, only to lose it in a nanosecond at a foreclosure auction.

A real-life example cited in a recent hearing was a homeowner who was religiously paying her mortgage on time until financial hardship fell upon her. Although she had accumulated $800K in equity, the house was auctioned off for $50K, meaning she lost her life savings of $750K.

Even those who represent trustees and those in the banking and mortgage industry have found cases like this appalling and have worked to craft new legislation. The consensus is that foreclosure is the last resort and it is always preferable that when life happens and the owner cannot pay the mortgage, the owner should have the opportunity to find a private buyer to maximize the value of the property while ensuring the lender is made whole.

Watch and listen to those who chimed in.

If you or your clients have tentacles in foreclosure properties, you need to be aware of this new law.

For one, it enhances notice requirements by requiring more clarity for distressed homeowners in terms of their rights, the timeline of the proceedings, and the potential consequences of default.

It also calls for increased transparency in the bidding process to protect homeowners, discourage any collusion among bidders, and ensure that properties are sold at fair market value.

AB 2424 also will tweak how foreclosure sales can be transacted, allowing for more flexibility in using online platforms for auctions so that potential buyers can get greater access and have more active participation.

Finally, real estate brokers in these transactions will be held to higher ethical standards. They must be squeaky clean in avoiding conflicts of interest and disclose their relationship with buyers.

To which we would add that potential buyers need to know whether a foreclosed property is occupied by a tenant or someone else that can claim a right to occupy the premises. Buyers can be horribly disappointed to learn that a distressed property they just purchased is being camped out by someone else.

This raises a host of questions as to whether the person living in the unit is a tenant, a licensee, or a squatter who has no permission to be on the premises. Of course, Bornstein Law can make sense of it all.