Buyers Unearth Old Real Estate Law To Escape Now-Crappy Home Deals

A law implemented in 1968 to protect would-be swampland purchasers is now the best friend of home buyers who went into contract at the height of the bubble and are now trying to escape paying well-above market value and get back their deposits.

Under the Interstate Land Sales Full Disclosure Act (ILSA), minor technical violations can unwind a whole deal. Buyers are getting out of deals because of things like the developer:

* Didn’t give a legal description of the property
* Didn’t register the building with the Department of Housing and Urban Development
* Didn’t inform them of their rights under ILSA
* Didn’t file the contract with the city register

Never mind its name, ILSA also applies to properties in the same city and state as the buyer.

Developers avoid ILSA if they complete the project within two years and are building fewer than 100 units.

Previously judges weren’t very sympathetic to ILSA cases but they’ve softened with the economic downturn.

If you think you have a case under ILSA, you can contact HUD at hsg-respa at hud dot gov to see if it applies to you. And then, lawyer up, cowboy.

A Legal Remedy for Home Buyer’s Remorse [NYT]

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  1. Loias supports harsher punishments against corporations says:

    So, why does it take a sympathetic judge to actually follow the law – albeit an arbitrary one. This law should be upheld even in the best of times.

    • Big Mama Pain says:

      I think the favortism was previously given to developers because building this type of housing was good for the economy back then-plus, a few investors backing out could fold the project altogether, screwing over everyone else.

      • Big Mama Pain says:

        Also sounds like (from the article) people that already are in these homes are retroactively trying to get their deposits back, which is definitely not what the law was about (I could be reading it wrong, though)

        • Loias supports harsher punishments against corporations says:

          Doesn’t matter what the unintended consequences of a law are – the point is to obey the law. Unless this is truly bastardizing the meaning of the law, which is sounds like it isn’t, judges shouldn’t hold bias because it’s “good for the economy.”

          • Billy says:

            “sympathetic” is a term that Consumerist used. It’s not a term that the NYTimes used. There’s nothing in the linked article that says anything about sympathy or bias. It just says that “at first, courts were not receptive to buyers’ claims.” It doesn’t say why (and there could be a lot of reasons why).

            • jefeloco says:

              After you pointed this out I even scrolled to the top to make sure it wasn’t a “Phil” article.


    • sonneillon says:

      Because the intent of the law was to give buyers a way out in cases of blatant misrepresentation, and not minor technicalities. IE you get sold prime beachfront property in Nevada, but the developer has split town because it was a fly by night type gig now you owe 300k to the bank for 15 acres of desert. This allows you to walk away and essentially undo the deal without a decade of litigation.

      • Arimer says:

        You can sure as heck bet that if the law allowed the businesses to do something beneficial due to a “technicality” They wouldn’t think twice about it.

        • Loias supports harsher punishments against corporations says:

          Bingo! Loopholes should always work both ways. You should either adhere to all of them or none of them.

          • DanRydell says:

            If a company was taking advantage of a loophole, you would criticize them. Shouldn’t that go both ways? Where is your criticism of the people who are doing this?

            Judges SHOULD enforce compliance with this law, but the penalty for non-compliance with something that is insignificant and did not at all influence the buyer should not be $500k+. To say otherwise is asinine.

    • 99 1/2 Days says:

      Wow, you are hard core legalistic. “Screw the spirit of the law, the letter is what’s important!” It’s an understandable viewpoint for the severely reason-challenged, but not for folks with IQs larger than 2 digits.

      • Powerlurker says:

        That’s kinda the point of laws. You write them down so that people know what they are and follow them. If laws have undesired consequences, it’s up to the legislature to remedy them.

      • LucasM says:

        The reason we write down laws is so that they can be consistently applied… how is that a difficult thing to understand? Certainly there is a fluidity to how laws are interpreted but the long standing practice of using precedents to shape their implementation has the distinct goal of further narrowing the inconsistencies in the law’s application. Lady Justice herself wears the blindfold, which represents objectivity… how is it objective to apply a law one way when economic times are good and another when they’re poor?

        It’s funny you’d bring up IQ points since yours are clearly lacking.

      • ARP says:

        You don’t think that a business wouldn’t take advantage of a law like this if it was in their favor? Hell they do this right now. If corprorations are really “people” then they need to stop literally complying with the law and also apply the spirit of the law as well.

  2. Macgyver says:

    Read it like 10 times, I still don’t understand it.

    But from the story it says”
    “Rebecca Schlanger, 34, who had used her life savings for a down payment on a $515,000 two-bedroom apartment in Miami, is suing under the law to get her money back. She said she could not obtain a mortgage because the developer had not purchased flood insurance.”
    If the contract say’s that the down payment is non-refundable non refundable, can she even sue over that?
    Shouldn’t she have obtained a mortgage before she put a down payment down?
    And 515k for a 2 bedroom apartment? I can buy a nice house for that much.

    • jason in boston says:

      Location, location , location

    • DoktorGoku says:

      It’s Miami.

      I was so happy to find a 3 Br/2.5 Bath for $2000/month while I was there. It was a ridiculous deal.

    • Gulliver says:

      You obviously do not understand what non-refundable means then. The deposit creates contract., If the deveeloper is the one who causes the breach the deposit contract is considered null and void.
      As for those talking of “technicalities”, there are people who rescind contracts due to them all the time. If an apartment is rented and it is not a legal rental unit, the courts will not enforce the contract. Some cities have roommate ordinances (no more than 2 unrelated people in the same home) and if they rent out their home to the third person, in essence making it a boarding house, the contract is invalid.
      Imagine the courts enforcing illegal contracts. I gave my pot dealer $25k and he did not bring me back any pot. DO you think you can sue for that? I gave the girl $100 for a blowie and she won’t do it.You can’t sue for it.

      • yasth says:

        You can’t sue to force delivery of goods and services, but you should be able to sue for return of some or all of the money. You might also be able to sue for damages if the contracted person knew in advance that the activity was illegal, and thus negotiated in bad faith. (Imagine you contract someone to transport Florida oranges to California. They know that is illegal but accept the contract, and then refuse to do the work or refund the money. You certainly can sue them, and win. ).

  3. Snoofin says:

    I wasnt even aware you could BUY an apartment. In central PA apartments are what you rent when you cant/dont want to buy a house

    • DanRydell says:

      Buying an apartment is common in large cities.

      • OnePumpChump says:

        What’s the difference between that and a condo?

        • tbax929 says:

          An apartment carries a single deed encompassing all the properties. In a condo, each owner has a deed for each individual unit.

          • Difdi says:

            In other words, if that’s true, selling someone an individual apartment constitutes criminal fraud, since it’d be taking money for something the seller cannot own (no deed) and therefore cannot sell.

            • Loias supports harsher punishments against corporations says:

              Look at you, Mr. Lawyer With No Law Experience.

            • DanRydell says:

              No. When someone says they’re buying an apartment (as opposed to an apartment building or apartment complex), it means the same as buying a condo. They’re buying an individual unit with a deed. Different terminology is more common in different places. In NYC they don’t usually use the term condominium, they call them apartments (or co-ops) even if they’re individually owned.

        • DanRydell says:


    • eturowski says:

      Obviously, you’ve never been to New York… or even seen Sex and the City.

  4. Snoofin says:

    ALso this really bugs me when people make a mistake or regret a purchase and then look for loopholes or slimy technicalities to get out of it instead of living with their mistake. It angers me as much of not more than the people who get arrested for having 40 pounds of crack and everyone knows it’s theirs but they get off scott free because a cop forgot to fill out a line on a report or something. Its ridiculous and quite frankly BS. This law was intended to be used when someone buys a house and want told it had a cracking foundation or something. Not when someone voluntarily purchased it for more than it was worth. As a buyer you have a responsibility to know what you are buying when you sign the dotted line and with a house you can even have it appraised yourself instead of trusting the seller.

    • DanRydell says:

      This x1000. Imagine the outcry if developers were using legal loopholes to screw buyers.

      • flbas says:

        yea, good thing developers use the law to everyone’s advantage. it sure is nice having a HOA that can foreclose on you for not mowing your lawn on the correct day; or when the developer sells the “connectivity” rights for 75 years to the small ISP; or when they tack on pesky “you owe us $5k fees” when the title is transferred.

        It is actually nice to see 1 law being upheld in the interest of the consumer.

    • Enduro says:

      I used to think that way until I found that big banks, corporations and even the mortgage bankers association walked away from their commitments when they bought property that was overvalued. I get really mad when corporations get off with minimal fines for ruining lives, polluting neighborhoods and stealing millions when a lowly crack dealer gets the book thrown at him.

      Here, have a laugh:

      Now if you’ll excuse me, I am meeting my wife, the IBM corporation, for dinner.

    • psm321 says:

      If you let a cop get away without filling out the form correctly, or with not having a search warrant because the guy was obviously guilty, etc., then they will consider it optional in the future and you lose the whole protection of whatever that measure was supposed to do.

    • mythago says:

      You need to stop getting your views on law enforcement from shitty TV shows.

      In real life, most of those errors get papered over as ‘harmless error’.

  5. Talisman says:

    I am tired of this whole mortgage mess.
    Read your contract..
    When we purchased our house 9 years ago we did not buy a 300K house..
    Why? We could not afford it.
    We found a 3 bedroom ranch for 115K, five years ago we could have sold it for about 180K.
    Now we would be lucky to get 145K.
    People who purchase over priced homes with the expectation they will be able to resell in a year to 18 months took a gamble…
    Housing market when bust and your house is now worth less.
    People should not buy a house they can’t afford… plane and simple.

    Now on to the foreclosure mess…
    Banks have a right to foreclose when mortgages are not paid.
    They have a legal obligation to ensure paperwork is done properly.

    Simple rule.. if you want to stay in your house… PAY YOUR MORTGAGE

    • AgostoBehemoth says:

      I just finished up my mortgage – and am glad to be done. Still, with that being said, the Banks are bullying a lot of people in this forclosure mess – they are equally to blame as the folks making 50K a year that bought 500K houses – because who in their right mind loans a half-million out without requiring 20% down and proof of income????

      You have a problem with your mortgage, with forclosure notices or with HAMP – I would ask the bank to see the loan note – that says you have a mortgage with them and says you owe them money. If they cannot provide it, get a lawyer – you may well have a case.

    • Evil_Otto would rather pay taxes than make someone else rich says:

      Hmm.. I should save this response in a text snippet..

      I’m sure a lot of people getting foreclosed on WOULD happily pay their mortgage ON TIME, IF THEY WERE BLEEDING ABLE TO. People lose jobs. People get sick without health insurance. People have income-earning family members die. SHIT HAPPENS. How about you grow an iota of empathy, instead of being a self-righteous twit?

    • aloria says:

      Hope you’re never down on your luck.

  6. tedyc03 says:

    Doesn’t seem to me that this law is being used in good faith. A minor error should not unwind a deal if the mistake was unintentional and would have been corrected by the builder…there should be a standard of reasonableness here.

    • peebozi says:

      “The bank neither confirms nor denies wrongdoing but agrees to pay 5 days profits to settle this matter…”.

      Ask a bank if what they did was intentional or unintentional and see what they say.

  7. peebozi says:

    All of these “loopholes” that everyone is disparaging are PART OF THE AGREEMENT. There’s a reason contracts are 40 pages long…

    it seems there a lot of people here who are opposed to consumers reading the contract and then using the terms of the contract to their benefit.

    Most of these people are the same who admonish someone for not reading the TOS of a website (facebook) or the license agreement for a software product.

    It seems these people are simply adhering to the contract documents…the laws of the state/country are typically incorporated in all contracts.

  8. mythago says:

    “Minor technical violation” is corporate-lawyer-ese for “Massive fuckup that I’m trying to talk the judge out of noticing”.

  9. NydiaGeben says:

    Looking for anything to unwind a personal error in judgment.