Just the other day, a former short sale seller from another part of the state contacted me because she had questions about Senate Bill 458 and the anti-deficiency regulations for those short sale sellers that participated in a short sale prior to July 15, 2011.
Senate Bill 458 protects short sale sellers (borrowers) because it waives the rights of any short sale lenders who agree to a short sale from pursuing a deficiency judgment (essentially collecting the unpaid balance) from the seller (borrower). (Disclaimer: Discuss with an attorney whether this bill applies to your particular situation.)
This particular short sale seller sold her home in a short sale in February of 2011. She has two liens on the property, and the second lien was not satisfied in the short sale. Apparently, the second lien had been sent to a collection company that has been aggressively attempting to collect on the debt.
Prior to July 15, 2011, short sale sellers in the state of California were protected from deficiency for first liens only. The beauty of Senate Bill 458 is that it extended that protection to all junior liens.
For this particular short sale seller, she had some questions about recourse and non-recourse debt and whether she would be liable for non-recourse debt. Since real estate agents (unless they are attorneys, too) should only advise on what they know best (real estate, not California law), we advised her to seek the advice of an attorney—who might actually be able to help her get that collection agent to stop calling 24/7.
If you are considering participating in a short sale versus letting your home go to foreclosure, in California there are now some unique benefits to the short sale. Check out this handy chart and learn about the short sale incentive programs. Believe it or not, your lender may actually pay you to participate in a short sale.
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