Short Sale Transactions and Non-Judicial Foreclosure Proceedings
With so much anxiety regarding our current economy and real estate market, a common question property owners ask is: What are my rights and obligations if my property goes into foreclosure, or if I decide to sell my property and it is in a Short Sale position with the bank? The answer is somewhat complex, and may surprise you.
The real question comes down to whether your loan is covered by California’s Anti-Deficiency laws, i.e. whether it is a recourse or non-recourse loan. California has several statutory protections in place for certain kinds of loans, which limit a lender’s ability to pursue a borrower personally in some circumstances.
The protection offered by the group of Laws that make up California’s Anti-Deficiency laws are complex, but a brief and somewhat incomplete overview or checklist for whether a loan is non-recourse is:
1. Is the loan for Purchase-Money or Non-Purchase Money?
2. Was the loan made for a residential property of one to four units?
3. Is the borrower living at the property?
4. Did the Lien Holder pursue Judicial or Non-Judicial Foreclosure of the property in question?
The answer to these and other more complex questions will help determine whether the loan falls under California Anti-Deficiency Laws and thus, the Lender is and would be limited to taking back the property and not allowed to go after the borrower personally. In many cases similar rules may apply to short sale situations.
As mentioned above, the actual rules surrounding California’s Anti-Deficiency Laws are complex, and require individual assessment by a qualified and experienced legal professional, particularly in situations where a borrower finds themselves in collections after a short sale or foreclosure. In such situations, a complete review of the borrower’s situation would be necessary to determine the validity of any amounts alleged to be due by a lender or collection agent. The requisite review of the borrower’s situation would include a review of the original loan documents, title documents, any modifications of the loan(s), and if applicable, short sale approval letter(s), and surrounding documentation.
If you are currently in foreclosure process, in escrow in a Short Sale Transaction, have recently completed a Short Sale transaction, or have lost your home to foreclosure proceedings, please do not hesitate to call for competent and discrete legal counsel regarding these matters. For more information, please call 661-702-4651 and visit www.grouponelegal.com .