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Home Deficiencies and Short Sales in California

Deficiencies and Short Sales in California

It's been written about before, but judging by the questions that my Short Sale Sellers are asking, it's still a gray area.

"Can my Lender come after me for the difference?"

In California, the answer is a resounding "NO!" (Exceptions of course..read on)

Jan. 1, 2011 saw Section 580e of the Civil Code of Civil Procedure come into effect. July 15, 2011 saw it expanded to offer more Seller protections..

What types of Loans are covered under section 580e? (One to four residential units)

  • PML (Purchase Money)
  • Rate and term refinance
  • Cash out refinance
  • Owner occupied
  • Rental
  • Second home or Vacation home
"Does this law stop my Lender from pursuing me for other Liens?"

'NO!" Other types of security interests such as judgment liens, tax liens or HOA Liens are considered personal liens and they absolutely may pursue you after the Short Sale Closes. All these liens can be negotiated by your Short Sale List Agent. Negotiated being the key word!
Short Sale SELLER Tip:
  • Although your Lender cannot REQUIRE you to contribute money, you may voluntarily offer a cash contribution to get the deal done.
Short Sale BUYER Tip:
  • Before writing an offer, see how much the Lender is going to write off. Huge deficiences may become an issue in getting an approval.
California Assn. of Realtors Short Sale Deficiency Fact Sheet for more info..
Posted Monday Jan 23