First it is important to define the term deficiency. What that means for example, let’s say you owe $500,000 on your home but want to short sale the property for $400,000. We are looking at a deficiency amount in $100,000. Now let’s talk about this deficiency amount if you will owe any money back to the bank after a short sale.
For the past 6 years that I’ve been doing short sales, there were situations and circumstances where the banks could come after you and require you to pay money back. However, there is now a new law that went into effect as of July 19, 2011 which is called the California Civil Code Procedure 580e which is specific to short sales. That law basically state that the lender agrees to a short payoff on any residential properties 1 to 4 units. The bank is no longer allowed to come after the homeowner for the remainder of the balance. This is true for first loans, second loans or any other subsequent lien holder. This is also true for any residence up to 4 units whether it’s your primary residence, an investment property, a second home or whatever. The only exception to this law is if you commit fraud or the owner of the property is an LLC or Corp or the lien secured by a bond or utility bond. Another point of this new law is that banks cannot require a seller or homeowner to pay money in order to do a short sale. So essentially now, in a short sale, a bank cannot come after you for the balance nor ask the homeowner to contribute anything.
What does this mean for you as a homeowner? It means that if you can’t afford you home, you can do a short sale, preserve your credit, not pay any money back to the bank and you won’t owe any money to the bank after a short sale. All of this is free because the short sale is completely free to a homeowner. It doesn’t cost anything whatsoever. Does this means short sales are a bit easier? Yes and no, they are still difficult and there are some loopholes for second loans to be able to ask for more money in order to allow the short sale to occur, but this is where someone like my-self with experience comes in and be able to negotiate with the bank and get them to accept the short sale case. And if you have a unique situation where this might arise, we can talk about this in our free consultation.
Understand I’ll still be proceeding as usual, meaning we will still work towards getting an approval letter in writing from the bank specifically stating that you will not owe any money back after your short sale occurs. Because I am not a real estate attorney, I will offer you to review your approval letter with a real estate attorney for free if you would like. This is to make sure you were fully informed and aware of everything. And if you don’t like you approval letter, you can cancel your short sale for free of charge and you don’t owe me anything. I write all of my contracts such that you don’t owe me any money and can cancel it anytime without any fees paid. This gives people a lot of assurance when working with my office.
This has been my presentation on” Will you owe any money back after a short sale? “. Again I must disclose, I am not a real estate attorney but I do provide them free of charge if you would like and you are my client. So give me a call and set up your free no obligation consultation over the phone or in person. It is completely confidential and you can ask any specific question that you have.
Thank You very much for listening to my presentation on Will I Owe Any Money After A Short Sale?