Homesteads - What they are, and how they work

Real Estate Agent with Maui Life Homes / Metro Life Homes RS-78439 / BRE #01708344

Homesteads - What they are, and how they work

California is one of the many states that have Homestead laws to protect the equity in an owner's primary residence.

There are two homestead statutes in California:

1. Articles 4 and 5 of Chapter 4, Division 2, Title 9
2. Part 2 of the California Code of Civil Procedure

A Homestead property is the primary residence occupied by a family that is exempt from the claims of, or eviction by, unsecured creditors.

A homestead exemption is a lien that protects a certain amount of equity in someone's home by limiting the amount of liability for certain debts that can be used against the home to satisfy a judgement.  The amount of equity protected varies depending on age, marital status, and income level of the property owner.

A homestead exemption does not stop the sale of the property.  A homestead exemption was designed to ensure that the homeowner receives the amount of the exemption before the creditors are paid from the sale proceeeds.

A homestead property can be sold if the sale proceeds are sufficient to:

  • Pay all outstanding liens on the property
  • Pay off all mortgages and loans secured by the equity in the home
  • Pay the selling costs of the home
  • Allow the homeowner to keep the amount of equity protected by the homestead exemption

Because homestead exemptions are subject to the general rule regarding liens that "first in time is first in right", they are not effective against prior liens, such as a purchase money deed, trust, or mortgage.  They are also not effective against tax liens, mechanic's liens, or judgement liens for child, family, or spousal support.

I'm a little curious.  I'm going to run it by one of my mortgage brokers to see what the scenario is when someone wants to refinance their property that has an existing homestead exemption.


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Barbara Hensley
RE/MAX Properties - Rockwall, TX
Homes for Sale in Rockwall County, Texas

Ralph - this is excellent information about the California Homestead laws.  Texas is a homestead state also.  

Jun 04, 2012 03:02 AM #1
Jayne Esposito
Coldwell Banker - Morgan Hill, CA

Ralph, thanks so much for refreshing my memory.  Great job laying it all out. Did you get your answer regarding a refi?

Jun 04, 2012 04:42 AM #2
Gary Frimann
Eagle Ridge Realty / Signature Homes & Estates - Gilroy, CA
REALTOR and Broker

Ralph, good post on a rarely discussed topic.  I know (have heard) in FL that the homestead law protects the owner for an unlimited amount.  This is what attracts seniors to FL.  Maybe CA should have a special homestead law for people over 60 or something, and attract seniors to our warm climate.

Jun 04, 2012 04:51 AM #3
Jennifer Chiongbian
Specializing in all types of Manhattan apts & townhouses - Manhattan, NY
Real Estate Broker - NYC

At least it protects the homeowner form credit card debt since those are unsecured loans.  I remember I had this when I lived in NV as well.  It was cheap "insurance" to protect one's equity.

Jun 04, 2012 05:39 AM #4
Carla Muss-Jacobs, Principal Broker (503) 810-7192 | Portland Metro Exclusive Buyers Agent | 100% Buyer Representation ~ 100% of the Time - Portland, OR
Buyer Focused ~ Buyer Results

We have homestead in Oregon too, up to $40,000 though and only on primary residence and unsecured creditors.  Good post and infomration for anyone who leaves in a homestead state. 

Jun 04, 2012 06:31 AM #5
Kevin Sembrat
Diversified RCS Inc; - Manhattan, NY

Hi Ralph,

Thanks for this very helpful post re: homesteads!



Jun 04, 2012 08:12 AM #6
Lloyd Binen
Certified Realty Services - Saratoga, CA
Silicon Valley Realtor since 1976; 408-373-4411

Ralph, good information about Homesteads.  Long ago I was told to not record one because as long as it's recorded prior to the recording of a judgment, the home owner is protected.  Having a homestead recorded can raise the alarm signals for creditors who wonder why it's there.  I don't know if that's true, or not.

Jun 04, 2012 09:21 AM #7
Debbie Reynolds
Platinum Properties - Clarksville, TN
Your Dedicated Clarksville TN Real Estate Agent
Ralph, great blog and very clear explanation. Good job and congrats on the feature.
Jun 04, 2012 11:40 AM #8
Joan Whitebook
BHG The Masiello Group - Nashua, NH
Consumer Focused Real Estate Services

This is a very good post and it clears up a lot of questions about what a homestead can do and what it cant' do.

Jun 04, 2012 12:25 PM #9
Christine Donovan
Donovan Blatt Realty - Costa Mesa, CA
Broker/Attorney 714-319-9751 DRE01267479 - Costa M
Ralph - That's an interesting question regarding a refi. I wonder if it's covered in the loan docs.
Jun 04, 2012 03:32 PM #10
Phil Leng
Retired - Kirkland, WA
Phil Leng - Retired

Hi Ralph,

Interesting post.

And interesting question.

Am sure the answer will be the subject of another blog


Jun 04, 2012 08:41 PM #11
Sandy Acevedo
951-290-8588 - Chino Hills, CA
RE/MAX Masters, Inland Empire Homes for Sale

Hi Ralph, good explanation about  a topic I know exists in California, but one I don't encounter very much. 

Jun 05, 2012 02:05 AM #12
Rob Spinosa
Guaranteed Rate, Marin County, CA - San Anselmo, CA
Vice President of Mortgage Lending, Marin County

I have never had a homestead exemption trip up a refinance here in California, however, I do recall that cash-out refinances are generally not permitted in Texas, another homestead state. 

Jun 05, 2012 02:20 AM #13
Frank Iglesias
Working With Houses, LLC - Atlanta Real Estate Investments - Lawrenceville, GA
Atlanta, GA Real Estate Investor

Good read.  Thanks for sharing.

Jun 05, 2012 03:13 AM #14
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Ralph Gorgoglione

Hawaii and California Real Estate (800) 591-6121
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