Homestead Exemptions: Is it possible to end up with $75,000+ from your short sale or foreclosure?
During the last 2 courses I'm completing towards my broker's license, some of the material I'm going through is quite interesting.
I'm going through a section regarding Homesteads, how they work, and the legalities surrounding them.
Here is some initial info:
A homestead declaration does not restrict or limit any right to convey or encumber the declared homestead. [CCP §704.940]. If a property owner records a declaration of homestead against their primary residence, it in effect drains the property of its equity up to the statutory limit of the homestead. Subsequently, if the owner seeks to borrow against the property, a lender may want the property owner to subordinate the homestead to a new loan’s security instrument before the lender will give a new extension of credit.
A properly recorded declaration of homestead allows exempt funds received from the voluntary sale of the property to remain exempt from debt collection attempts for six months. In addition, they can be used to purchase another residence.
· $75,000 for an individual
· $100,000 if the homeowner lives with at least one family member who has no interest in the house
· $175,000 if the homeowner is 65 years of age or older or is physically or mentally disabled
· $175,000 if the homeowner is 55 years of age or older and single with an annual income of $15,000 or less
· $175,000 for a married couple with a combined annual income of $20,000 or less
(data above is based on California Real Estate guidelines)
Now I realize that the words "equity" and "short sale" are like vinegar and oil - they just don't mix.
But what if you're on the border of the short sale? In other words, there's just enough equity, but the selling expensions and commissions would make it a short sale?
What if, as the description about the homestead declaration above, the homestead was NOT subordinated during a refi?
I'm going to do some more investigating to find out more about how/if a declaration of homestead would come into play not only for a short sale, but a foreclosure with equity.
More to come........