San Diego short sale

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Sunday, December 30, 2007

california short sale - Google Search

f you are looking to do a short sale in San Diego or anywhere else in California, I say buyer beware. Do not work with a newly minted short sale specialist. Do now work with a Realtor who claims to loss mitigator or any of the other terms they like to put on their cards, unless they truly have the experience to get the job done. And even then you still have to have a back up plan. Ask your Realtor what you are going to do you don't find a buyer or the lender does not accept your offer. Ask them what percentage of their short sale listings have sold in the last there months.

A short sale is only one part of the pre-foreclosure workout. For reference I put the sponsor searches for California short sale below. The first paid advertiser was in the horizontal space. The next group was on the side and can be seen below.


california short sale - Google Search: "Sponsored Links
National Short Sale Inc.
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California

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RETRAN Foreclosure Lists
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California

Short Sales Course
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Friday, December 21, 2007

Deed-In-Lieu of Foreclosure

Deed-In-Lieu Frequently Asked Questions - HUD: "A Deed in Lieu of foreclosure (DIL) is a disposition option in which a mortgagor voluntarily deeds collateral property in exchange for a release from all obligations under the mortgage. A DIL of foreclosure may not be accepted from mortgagors who can financially make their mortgage payments.

QUESTION 1 - When a mortgagor has been approved for utilizing a DIL of foreclosure, how much time does a mortgagee have to complete the DIL?

ANSWER -A DIL of foreclosure must be completed within 90 days of initiation of the process.

QUESTION 2 - Does HUD allow $2,000 to pay off second liens when determining if a mortgagor is eligible for a DIL?

ANSWER - Effective with Mortgagee Letter 2002-13, HUD increased the DIL of foreclosure consideration to not to exceed $2,000. Therefore, with the mortgagor's consent, this consideration may be utilized to pay off junior liens to clear the title as stated in Mortgagee Letter 2000-05."

California Deed in Lieu of Foreclosure

What is a Deed in Lieu of Foreclosure?

As defined by HUD a A Deed in Lieu of foreclosure (DIL) is a disposition option in which a mortgagor voluntarily deeds collateral property in exchange for a release from all obligations under the mortgage. A DIL of foreclosure may not be accepted from mortgagors who can financially make their mortgage payments.

A mortgagor and lender have about 90 days to complete the process.
Once you have decided to offer a deed in the lieu, the lender will probably wish to send out an appraiser.

Can a deed in lieu be done if there is more than one lien holder.
Yes, but it takes negotiation and we recommend that you have a lawyer drafting or at least reviewing all the paperwork. Working with the second can be especially tricky and you might wish to get your attorney involved before you stop paying your loans.

Thursday, December 20, 2007

San Diego short sale Specialist - watch out for scams

If your Realtor is claiming or claimed to be short sale specialist or short sale expert. The problem with the Real Estate industry is that it is not well self regulated. The association of realtors is self regulating to a large extent and they allow their Realtors to make all sort of scary claims.

Ask your short sale specialist how many short sales he or she has closed in the last three months and in their career. Ask to see their short sale package. Ask them if they have a lawyer reviewing the closing paperwork.

Ask what clauses you should add to the listing agreement in addition to the Short Sale Listing addendum.

Ask them what clauses you should have in your purchase and sale agreement in addition to the Short Sale addendum.

Ask them if you can speak with the attorney on their team about alternatives to a short sale such as a deed in lieu. Ask the attorney what you should do when the Notice of Default shows up and the notice of sale.

Ask the realtor what to do if the loan broker inflated your earnings on the loan app.

Ask you Realtor if he or she understands why you should or should not be concerned about a sold out junior.

The list goes on and on. You Realtor should have experience negotiating a sale with the lender and your Realtor should also have a lawyer on to make sure you are protected as well. A short sale specialist without a lawyer is hack.

Ask your short sale specialists a few questions.

Wednesday, December 19, 2007

san diego short sales - tax liablity

GovTrack: H.R. 3648: Text of Legislation: "Resolved, That the bill from the House of Representatives (H.R. 3648) entitled `An Act to amend the Internal Revenue Code of 1986 to exclude discharges of indebtedness on principal residences from gross income, and for other purposes.', do pass with the following

AMENDMENT:

Strike out all after the enacting clause and insert:

SECTION 1. SHORT TITLE.

This Act may be cited as the `Mortgage Forgiveness Debt Relief Act of 2007'.

SEC. 2. DISCHARGES OF INDEBTEDNESS ON PRINCIPAL RESIDENCE EXCLUDED FROM GROSS INCOME."

Thursday, December 13, 2007

San diego short sales and short sales in San Diego county

Should you short sale a San Diego property if you have purchase money protection under california code of civil procedure 580b.

Have negotiated a release from deficiency in writing
Has the bank agreed in writing to not report a 1099.
Do you have a letter from a lawyer explaining you don't have to self report the loan forgiveness as income
Did you get a lawyer to draft specific language in the purchase agreement - language which is not in any Caliornia Association of Realtors addendum?

Are you legally insolvent?

Sunday, December 2, 2007

Short sales and non recourse loans

This topic is discussed in the comments a many blogs. Below is a sample. I think the post author probably has a good understanding of the issue. If the security does not go back to the lender, why would the entire debt be wiped out. Consequently loan forgiveness tax liability might attach.

Why would Seller with non recourse loans agree to do a short sale without legal advice. A non recourse seller may be able to protect her/himself by negotiating certain language into the transaction, but I am willing to bet not one transaction done without the aid of california real estate attorney has that language.

Below is the quote:


L.A. Land : Los Angeles Times : Sept. sales: 67% below bubble peak: "he non-recourse deal doesn't just apply for short sales where the borrower sells before they lose title to the property. It applies for foreclosures/trustee sales too, where the bank takes possession, and sells it at auction or as an REO. If their recovery from that process still does not cover loan amounts due, the borrower is still personally liable for the debt, except when the loan is non-recourse. Short sales can occur on recourse loans too. If the note-holder wants to cut its losses and avoid costs of later litigation and rapidly declining asset value, it can approve a short sale AND forgive the personal liability of the loan. Forgiveness is possible but not likely, since it costs relatively little to get a debt judgment in court, then monitor property records to make sure the borrower doesn't win the lottery or something."

Cancellation of debt income - non recourse loan

Should a California homeowner with purchase money loans - agree to do a short sale?
One of the major issues is whether the short sale will create tax liability for loan forgiveness.

As I review some of the case law on this issue - my first question would be whether the loan is a non recourse loan on its own. (non necessarily as a result of California anti deficiency statutes). A careful and detailed review of the situation should be conducted by an attorney before an owner consents to a short sale.

Debt Forgiveness - Deed in lieu of foreclosure

Note the information below is consistent with the information provided by the legal department of the California association of Realtors. Please consider there are at least to concerns. You must consider capital gains and loan forgiveness.


Debt Forgiveness Outside the B Word: "In a true nonrecourse situation, there is no debt forgiveness because the debtor never has any legal obligation to respond personally on the debt. IRC § 61(a)(12) is, therefore, inapplicable. That does not mean, however, that no adverse tax consequences exist as a result of a nonrecourse foreclosure, because they most certainly do. A foreclosure on a nonrecourse debt is treated the same as a sale or exchange of the property securing the nonrecourse debt [Treas.Reg. § 1.1001-2(a)(1)]; a 'sale' also occurs when a debtor voluntarily conveys (e.g., deed in lieu of foreclosure) [Freeland v. CIR, 74 TC 970 (1980)] or abandons [Middleton v. CIR, 77 TC 310 (1981) aff'd per curiam, 693 F2d 124 (CA11 1982)] the property. The amount of the nonrecourse obligation extinguished is treated as the amount realized. A taxpayer computes the amount of the gain (or loss) realized and recognized by comparing the tax basis in the property to the amount of the nonrecourse obligation extinguished at the time the foreclosure sale is completed [Commissioner v. Tufts, 491 US 300 (1983)]. The character of the entire gain (or loss) is determined by the character of the property securing the obligation: if the property is a capital asset, the gain (or loss) is capital [subject, of course, to the recapture rules of IRC §§ 1245 and 1250]; if the"

Sunday, November 25, 2007

San Diego Short Sale - Notice of Default

Real Estate Blog - San Diego Short Sale - Notice of Default: "And then she sort of asked if the short sale process takes about 4 months in CA. I said that would be about the minimum but I said it looks to me like you send out notices but don't always start the process right away. Which brings up a difficult choice for all owners... Right now countrywide has a deed in lieu track and a separate short sale track. How can anyone (lawyer or Realtor) make that choice for a client. All you can do is give them good info. And some of that info must include the ways they can use the court process to slow down a sale. There are legal ways to slow or perhaps even prevent a foreclosure sale. But you can't wait to the last minute to bring a lawyer on board. Most lawyers will not review a case if they do not have time to come up to speed. Once that NOD shows up, someone who holds themselves out as a fiduciary - has to start making sure the client is properly advised. This whole process is filled with traps. If your seller all of a sudden your seller gets upset and says why wasn't I on the deed in lieu track - how they heck can a Realtor even respond? No response will satisfy a plaintiff's attorney. (actually all your responses but one will please the plaintiff's attorney)."

Wednesday, November 21, 2007

California short sale attorney

I asked the following questions about California short sale law to one of the lawyers at the California association Realtors. I look forward to the answer. Almost everyday I am challenged by a short sale issue which brings up a huge range of legal complications. I am concerned for all the non represented sellers out there. This is a difficult field and mistakes may costs the short seller 10s of thousands of dollars.

Questions

At what point in the process should the agent make sure the seller has legal advice. For instance - Can the Realtor review the financial paperwork to determine what to disclose to the bank? Can an agent legally represent the homeowner in Negotiations with the bank or review the paperwork with respect to deficiency and loan forgiveness?

How about when the NOD is filed - you know sellers are going to say the Realtor said don't worry we will sell the house - Shouldn't the agent make sure the seller has legal counsel at the time and NOD is filed?

In fact being that a short sale is really part of a set of pre-foreclosure options which have serious and diverse legal and financial impacts should a Realtor even list a short sale before the owner consults an attorney?

Monday, November 19, 2007

Lawsuits - Los Angeles Times - protection from creditors

Homeowners considering short sales in California are starting to wonder if their other assets are exposed to potential deficiency judgments.

Here is an L.A. Times story on the subject. Please note - the IRS may be able to collect in situations where a third party creditor might not.



IRAs Could Be Fair Game in Lawsuits - Los Angeles Times: "Wong was all set to do just that when a co-worker warned him that, in California, IRAs were more vulnerable than 401(k)s to lawsuits. 'He said a qualified 401(k) plan is safe from any court taking it in the event of a personal liability case, such as if someone slips and falls on your property, whereas IRAs are subject to available assets to pay out such claims,' Wong said. Actually, California law does shelter money in IRAs and Roth IRAs that is deemed necessary to support the saver and his or her dependents in retirement, said Bill Norman, a certified tax specialist and estate planning attorney in Century City. Any excess, however, is indeed subject to creditors' claims in a lawsuit or bankruptcy. Exactly how much would be protected is open to a judge's interpretation, Norman"

Short sales and tax liability

Below is a link to an excellent page from the IRS. Please note that when a short sale happens the loan does not go back to the lender as full satisfaction. So it seems to me the correct legal strategy would involve something much more complicated that saying this is a non recourse loan so no loan forgiveness liability for a short sale. Also do not forget to factor in the potential for capital gains liability.

Questions and Answers on Home Foreclosure and Debt Cancellation: ". Can you provide examples? A borrower bought a home in August 2005 and lived in it until it was taken through foreclosure in September 2007. The original purchase price was $170,000, the home is worth $200,000 at foreclosure, and the mortgage debt canceled at foreclosure is $220,000. At the time of the foreclosure, the borrower is insolvent, with liabilities (mortgage, credit cards, car loans and other debts) totaling $250,000 and assets totaling $230,000. The borrower figures income from the foreclosure as follows: Use the following steps to compute the income to be reported from a foreclosure: Step 1 - Figuring Cancellation of Debt Income (Note: For non-recourse loans, skip this section. You have no income from cancellation of debt.) 1. Enter the total amount of the debt immediately prior to the foreclosure.___$220,000__ 2. Enter the fair market value of the property from Form 1099-C, box 7. ___$200,000__ 3. Subtract line 2 from line 1.If less than zero, enter zero.___$20,000__ The amount on line 3 will generally equal the amount shown in box 2 of Form 1099-C. This amount is taxable unless you meet one of the exceptions in question 2. Enter it on line 21, Other Income, of your Form 1040."

Sunday, November 11, 2007

san diego short sales seminar (part 1)

Yesterday I had the opportunity to attend a short sale class for san diego realtors give by an attorney and realtor. She sits on boards for Realtor associations, does some short sales and defends Realtors when they get sued.

She had a great deal of credibility with the audience of close to 200 as many had seen here lectures previously.

The take away from the class for me and I am sure for almost every Realtor there, is that a Realtor should not take a short sale listing until the client sees an attorney and tax advisor.

Here is just a beginning list of considerations why a Realtor should not list a short sale until the seller has spoken with an attorney and perhaps a tax advisor:|

1. No amount of disclaimers can make up for the fact that a short sale may harm many sellers and no amount of signed disclaimers will allow a Realtor to practice law, analyze the situation and declare a short sale is the right choice for the seller. A seller must consider and weigh the consequences of a deed in lieu of foreclosure and foreclosure.

2. No amount of disclaimers will avoid the fact that a lawyer needs to go over the paperwork to ensure the seller is well advised and protected. A short sale without agreements will probably get the Realtor sued.

3. A Realtor may not advise the client on deficiency. To do so could get the Realtor sued.

Just think about the fun plaintiff's attoneys will have. Did you get paid for the short sale? Were you an agent? For whom, the lender? Did you have any duties? What were they? Was your client at risk for a deficiency? (you lose when you answer this one) How did you know? Do you ever mention anything about deficiency to the seller? Why not? So you made a legal choice for the seller? Are you licensed to make legal choice? Give counsel on California law? Why don't you explain 580b to me. So prior to the property going back to the bank does the owner have personal liability on the loan? So why do the short sale? Did you negotiate with the bank. As a representative, isn't that what attorneys do? Do you draft the release? Do you understand the legal consequences, did the seller etc, etc.

4. A Realtor may not advise the client on taxation for loan forgiveness. Even if they could they are not license to suggest that a short sale may be a better solution than a foreclosure. So again how can a short sale happen without legal advice?

5. A Realtor may not advise the client on taxation for capital gains. To do so or not do so could get the Realtor sued for the reasons seen above.

1. I think it is safe to say no Realtor should take a short sale until the client has been advised by a lawyer and perhaps a tax advisor. No amount of disclaimers will get around the fact that without proper legal advice a Realtor is taking on way too much liability.

Why? because a short sale is just one of the pre-foreclosure remedies a homeowner can consider. And for many it is not the best option. A short sale may introduce liability for deficiency and taxes to many homeowners who would not be exposed to such liability if a foreclosure or deed in lieu of foreclosure is selected.

In our next blog we will talk about the liability associated with the short sale package.

In future sales we will speak about negotiations and releases.

Friday, November 9, 2007

San Diego short sale specialists

When you search on San Diego short sales - check out the google adwords --


Sponsored Links
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Real Estate Short Sale
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Now I ask - if you are going to dispose of an asset worth hundreds of thousands of dollars for which you could be held responsible for the the banks losses - or for which you could pay taxes on the the losses. Are the Students of these courses really the type of people you can trust as your San Diego short sale expert?

California has a very complex set of consumer protections, protecting homeowners against lenders and protecting people in "foreclosure" from realtors and investors. Before you sell your house and perhaps change your status from fully protected to fully exposed - speak with an attorney. It does not matter if the attorney is a foreclosure attorney, a real estate attorney, or a bankruptcy attorney. If you get your answers in writing and the attorney has mal practice insurance it will be the best use of your time -- period.

Tuesday, November 6, 2007

short sale tax consequences - recourse vs non recourse

Hi I'm a REALTOR & Certified Mortgage Planning Specialist in San Diego. Thank you for this valuable info.

Question 1:

I read somewhere that you may still have tax consequenses for the deficiency amount even if foreclosure was non-recourse(purchase money & lender chose NON judicial process), because although lender understands you are protected from being sued/judgement actions, it does not prevent them from taking a tax deduction, which from what the article mentioned is required by law(as I understood). Being that tax consequences based on lender taking a deduction & suing you for deficiency are two different things, this leads me to believe that it does not matter wether you have Deficiency protection from from lender going after you personally, you still may face the equivalent in taxes due to lender having the right to claim a tax deduction. Please correct me?

I have researched the IRS rulings and publications. I am comfortable giving my client an opinion letter saying they are not subject to loan forgiveness taxation after a foreclosure or deed in lieu. A short sale is very different. Since the property does not go back to the lender - I am truly surprised to talk to realtors who think they can advise their clients that are protected from tax liablity for loan forgiveness.

Those are arguments for California license Real Estate attorneys.

If you send me an email I will try to locate some of my research for you

anti deficiency case law

FindLaw for Legal Professionals - Case Law, Federal and State Resources, Forms, and Code: "Cal. Civ. Proc. Code S 580b. California's anti-deficiency statutes are intended 'to limit strictly the right to recover deficiency judg- ments, that is, to recover on the debt more than the value of the security.' Brown, 259 P.2d at 426. The bankruptcy court reasoned that S 580b applies only when there is a deficiency, defined as ' `that part of a debt secured by mortgage not real- ized from sale of mortgaged property,' ' and thus concluded that S 580b did not apply to prohibit East Bay's unsecured"

Recourse vs non recourse loan

The 9th circuit stated that California anti deficiency laws did the following including "requring the debtor be credited with the fair market value of the secure property before be subjected to personal liability.



FindLaw for Legal Professionals - Case Law, Federal and State Resources, Forms, and Code: "Moreover, even if the creditor does rely on the security first, his right to a judgment against the debtor for any defi- ciency may be limited or barred by the anti-deficiency statutes found in SS 580a, 580b, 580d, or 726. See Walker v. Commu- nity Bank, 518 P.2d 329, 331 (Cal. 1974). The purposes behind these provisions are 'to prevent multiplicity of actions, to compel exhaustion of all security before entry of a defi- ciency judgment and to require the debtor to be credited with the fair market value of the secured property before being subjected to personal liability.' Id. at 333."

Friday, November 2, 2007

Questions and Answers on Home Foreclosure and Debt Cancellation

If you are selling a san diego short sale property short you should compare your position on short sale to you or your clients status after a foreclosure

Questions and Answers on Home Foreclosure and Debt Cancellation: "2. Is Cancellation of Debt income always taxable? Not always. There are some exceptions. The most common situations when cancellation of debt income is not taxable involve: * Bankruptcy: Debts discharged through bankruptcy are not considered taxable income. * Insolvency: If you are insolvent when the debt is cancelled, some or all of the cancelled debt may not be taxable to you.You are insolvent when your total debts are more than the fair market value of your total assets.Insolvency can be fairly complex to determine and the assistance of a tax professional is recommended if you believe you qualify for this exception. * Certain farm debts:If you incurred the debt directly in operation of a farm, more than half your income from the prior three years was from farming, and the loan was owed to a person or agency regularly engaged in lending, your cancelled debt is generally not considered taxable income.The rules applicable to farmers are complex and the assistance of a tax professional is recommended if you believe you qualify for this exception. * Non-recourse loans:A non-recourse loan is a loan for which the lender’s only remedy in case of default is to repossess the property being financed or used as collateral.That is, the lender cannot pursue you personally in case "

Saturday, October 27, 2007

san diego short sale vs foreclosure - IRS tax billl

The first question an upside down homeowner must ask themselves is why do a short sale.
Do I wish to help the lender?
Do I wish to help the buyer?
Do I wish to make money for the Realtors?

What am I doing for myself?

Am I really saving my credit?
Maybe, for now it looks like a short sale is better for your credit score, but that could change.

Am I risking tax for loan forgiveness by doing a short sale?
If you are a california homeowner you may be hitting yourself with a very large tax bill for loan forgivness. If the bank writes off $100,000 you could get hit with a tax bill as if you received $100,000 in income. That might even jump your tax bracket.

I have heard many realtors and loan brokers say there is no way around it.
Wrong, a foreclosure or deed in lieu does not cause loan forgiveness for some california home owners where a short sale does. (there are other ways to eliminate or minimize the tax bill)

In our next post will show how some short sales have credited deficiencies for home owner where none existed before.

Sold out juniors in California foreclosure law

A further exception to consider is that 580 d does not bar recourse seconds from pursing deficiencies against homeowners.

We have read that Indy Mac says it is going to seek deficiencies against California homeowners.

Because properties values have slid about 20% many of those 100% financing 80 20 loans will put the second into a sold out junior status. If you do not have purchase money protection you might want to review all our pre-foreclosure solutions including a short sale.

Sold out junior situations are one of the situations in which a San Diego homeowner could really benefit from a short sale

Exception to Recourse loans and deficiencies

A lender may have the right to pursue a deficiency but it still has to decide whether to go the longer tricker route of pursuing a judicial foreclosure or using a non judicial foreclosure or trustees sale.

Many if not most people tell homeowners not to worry about deficiency after a foreclosure. (watch out for short sales, many lenders do seek a deficiency after a short sale to the financial ruin of the homewowner and dismay of Realtors who practice law without a license and call themselves short sale specialists and loss mitigators)

It is true that most banks sought non judicial private sales in the early and mid 90s, but back then the amount were much smaller and much of the real estate mess in san diego was caused by restructuring and relocation.

This time around many people still have high paying jobs whose salaries could be attached and whose deficiencies are greater than six figures.

We have already seen many banks say they will seek deficiencies on seconds.

California Recourse loans and Short Sales

If you loan does not fit within one of the exception cited in the previous post, you most likely have a recourse loan. (some loans may be written as non recourse loans as part of retirement planning vehicles so you may wish to read your loan document)

What does it mean if a San Diego homeowner has a recourse debt. It means the lender could elect to go after the homeowner for a deficiency between the amount of the loan and the amount it got paid after a foreclosure sale.

Recourse vs non recourse loans and short sales

As seen in a previous blog entry -

barring certain exceptions a loan is a non recourse loan when the loan is made to purchase 1-4 units, the money goes into the purchase and the owner intends to occupy at least one of the units.

or, when the seller "carries back" some or all of the financing for the purchase of real property.

It has been noted that some exceptions to the purchase money protections might be waste, and fraud.

Practice tip, a short sale might be an opportunity to draft a release which could extinguish any problems which may have been part of the original loan transaction for both the lender and the borrower.

Now some people contemplating a short sale may have to consider whether their loan applications were less than perfect.

If there were problems with your loan application do not despair. Speak with your San Diego attorney. You have many options including short sale, deed in lieu or perhaps even looking into whether the loan broker made mistakes

Deficiency - Sold out juniors

Deficiency After Nonjudicial Foreclosure: "Cal. Code Civ. Pro. 580d does not bar a deficiency for a sold out junior (see Walter E. Heller Inc. v. Bloxham, 176 Cal.App.3d 266 (1985)), although, as we have seen, section 580b will bar some sold out juniors from recovery of a deficiency. However, the holder of a junior deed of trust that has sold itself out through non-judicial foreclosure on its senior lien will be barred from a deficiency on the note secured by the junior lien. In Simon v. Superior Court, 4 Cal.App.4th 63 (1992), a bank gave two separate, sequential loans to a debtor. The first loan, for $1,575,000, was secured by a first deed of trust on the debtor's personal residence. The second loan, for $375,000, was secured by a second deed of trust on the same property. Neither loan was purchase money. After default, the bank non-judicially foreclosured the first, credit bidding less than the amount due, and then sued the debtor for $375,000 on the second note. The court barred the bank from recovery on the second note, holding that it amounted to a deficiency barred by 580d."

Deficiency After Nonjudicial Foreclosure

Deficiency After Nonjudicial Foreclosure: "Cal. Code Civ. Pro. 580d bars a deficiency following a non-judicial foreclosure. Prior to its enactment in 1940, creditors could obtain a deficiency (unless barred by Cal Code Civ. Pro. 580b) following either judicial or non-judicial foreclosure, but judicial foreclosure was (and still is) subject to redemption for a year following sale and non-judicial foreclosure was (and still is) free of any right of redemption following sale. Enactment of Cal. Code Civ. Pro.580d is therefore said to have created a 'parity of remedies,' allowing the creditor to elect between judicial foreclosure (with a right to a deficiency but subject to a statutory right of redemption) and non-judicial foreclosure (with no right to a deficiency but free of the right of redemption). By barring a deficiency following non-judicial foreclosure, the hope was to discourage underbidding, a result supposedly accomplished for judicial foreclosure sales by the statutory right to redeem, following foreclosure, for the amount bid at the foreclosure."

Short sales vs. non judicial foreclosure law

When considering a short sale a san diego homeowner should assess whether the lender will be able to utilize a judicial or non judicial foreclosure.


580: "580d. Rendition of deficiency judgment after foreclosure under power of sale forbidden; Exceptions No judgment shall be rendered for any deficiency upon a note secured by a deed of trust or mortgage upon real property or an estate for years therein hereafter executed in any case in which the real property or estate for years therein has been sold by the mortgagee or trustee under power of sale contained in the mortgage or deed of trust. This section does not apply to any deed of trust, mortgage or other lien given to secure the payment of bonds or other evidences of indebtedness authorized or permitted to be issued by the Commissioner of Corporations, or which is made by a public utility subject to the Public Utilities Act (Part 1 (commencing with Section 201) of Division 1 of the Public Utilities Code)."

San Diego short sale law purchase money protection

This law is one of the basic consumer protection laws for owners of California real estate.

It is the basis of purchase money protection. And no short sale should be considered unless an recourse non recourse evaluation is undertaken.

A person with protection on this statue could be left much worse off after a short sale vis a vis a foreclosure. A upside down homeowner must make sure the short sale transaction has releases which leave them in an protected position.



580: "580b. Conditions under which deficiency judgment forbidden No deficiency judgment shall lie in any event after a sale of real property or an estate for years therein for failure of the purchaser to complete his or her contract of sale, or under a deed of trust or mortgage given to the vendor to secure payment of the balance of the purchase price of that real property or estate for years therein, or under a deed of trust or mortgage on a dwelling for not more than four families given to a lender to secure repayment of a loan which was in fact used to pay all or part of the purchase price of that dwelling occupied, entirely or in part, by the purchaser. Where both a chattel mortgage and a deed of trust or mortgage have been given to secure payment of the balance of the combined purchase price of both real and personal property, no deficiency judgment shall lie at any time under any one thereof if no deficiency judgment would lie under the deed of trust or mortgage on the real property or estate for years therein."

California law 580a - deficiency judgments

580: "580a. Deficiency judgments Whenever a money judgment is sought for the balance due upon an obligation for the payment of which a deed of trust or mortgage with power of sale upon real property or any interest therein was given as security, following the exercise of the power of sale in such deed of trust or mortgage, the plaintiff shall set forth in his or her complaint the entire amount of the indebtedness which was secured by the deed of trust or mortgage at the time of sale, the amount for which the real property or interest therein was sold and the fair market value thereof at the date of sale and the date of that sale. Upon the application of either party made at least 10 days before the time of trial the court shall, and upon its own motion the court at any time may, appoint one of the probate referees provided for by law to appraise the property or the interest therein sold as of the time of sale. The referee shall file his or her appraisal with the clerk and that appraisal shall be admissible in evidence. The referee shall take and subscribe an oath to be attached to the appraisal that he or she has truly, honestly and impartially appraised the property to the best of his or her knowledge and ability. Any referee so appointed may be called and examined as a witness by any party or by the court itself. The court must fix"

San Diego Short Sale Definition

You see lots of definitions of a short sale in which people state that the Lender agrees to accept less than what it is owed as full settlement of the loan.

That is a very dangerous definition. It is found in most of the websites on the net, it is found in most of the training materials I have seen for Realtors. And it is certainly stated by most Realtors.

It is also proof that you need an attorney to oversee your short sale transaction. The lender is trying to get its best deal and so is the buyer. The listing Realtor has to have the sale go through to get paid.

So who is going to be smart enough to make sure the seller is released from the deficiency. I have seen paperwork in which the lender states that is releasing he lien against the property but it is not releasing the seller from his or her liability on the note.

Whose is being paid to watch out for the sellers interest. More than one seller has contacted me and said, I sold my property via a short sale and now the bank is trying to collect the deficiency.

A short sale should be protecting your future not destroying it.

The note does not even have to part of the dea