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Permalink Reply by Smitty on April 8, 2011 at 11:41am

Azizeh,  usually you won't know until the approval if they are reserving their deficiency rights.  No one knows until the approval letter is issued.  I'm sorry this happened.  When you are working with homeowners you have to tell them up front this may be a possibility. 

 

Many times lenders issue approvals reserving their deficiency rights and never pursue.  They could, but that's one reason I never put in a buyer's highest offer to start.  It's a negotiating tactic.  If the buyer's are willing to bring more $$ to the table you can have a chance at negotiating that language out of the approval. 

 

You have to expect the unexpected in short sales.

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Permalink Reply by Thom Colby CA Brkr 888-391-5245 on April 10, 2011 at 4:40am

Azizeh,

 

Since you are in California, Google SB931.  If the bank approves the Short Sale, there is no deficiency on the 1st.  The 2nd is a different story.  This became effective on January 1, 2011.

 

THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  Section 580e is added to the Code of Civil Procedure,
to read:
   580e.  (a) No judgment shall be rendered for any deficiency under
a note secured by a first deed of trust or first mortgage for a
dwelling of not more than four units, in any case in which the
trustor or mortgagor sells the dwelling for less than the remaining
amount of the indebtedness due at the time of sale with the written
consent of the holder of the first deed of trust or first mortgage.
Written consent of the holder of the first deed of trust or first
mortgage to that sale shall obligate that holder to accept the sale
proceeds as full payment and to fully discharge the remaining amount
of the indebtedness on the first deed of trust or first mortgage.
   (b) If the trustor or mortgagor commits either fraud with respect
to the sale of, or waste with respect to, the real property that
secures the first deed of trust or first mortgage, this section shall
not limit the ability of the holder of the first deed of trust or
first mortgage to seek damages and use existing rights and remedies
against the trustor or mortgagor or any third party for fraud or
waste.
   (c) This section shall not apply if the trustor or mortgagor is a
corporation or political subdivision of the state.
                                                         
Best of luck,

 

Thom Colby

Broker

Newport Beach CA

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Permalink Reply by Alyce Nelson on April 11, 2011 at 6:40am

I too am a CA agent.   Be careful with this... it works great with original purchase money loans, but if the seller refinanced and pulled money out for purposes other than property improvement you could be challenged and still see them pursue a deficiencey.  Please clarify this with your legal counsel.

Thom Colby said:

Azizeh,

 

Since you are in California, Google SB931.  If the bank approves the Short Sale, there is no deficiency on the 1st.  The 2nd is a different story.  This became effective on January 1, 2011.

 

THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  Section 580e is added to the Code of Civil Procedure,
to read:
   580e.  (a) No judgment shall be rendered for any deficiency under
a note secured by a first deed of trust or first mortgage for a
dwelling of not more than four units, in any case in which the
trustor or mortgagor sells the dwelling for less than the remaining
amount of the indebtedness due at the time of sale with the written
consent of the holder of the first deed of trust or first mortgage.
Written consent of the holder of the first deed of trust or first
mortgage to that sale shall obligate that holder to accept the sale
proceeds as full payment and to fully discharge the remaining amount
of the indebtedness on the first deed of trust or first mortgage.
   (b) If the trustor or mortgagor commits either fraud with respect
to the sale of, or waste with respect to, the real property that
secures the first deed of trust or first mortgage, this section shall
not limit the ability of the holder of the first deed of trust or
first mortgage to seek damages and use existing rights and remedies
against the trustor or mortgagor or any third party for fraud or
waste.
   (c) This section shall not apply if the trustor or mortgagor is a
corporation or political subdivision of the state.
                                                         
Best of luck,

 

Thom Colby

Broker

Newport Beach CA

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Permalink Reply by Alyce Nelson on April 11, 2011 at 6:46am

Chase... I groan when we get a Chase, They are one of the worst in my experience.  They have been doing this for years... nothing new.  Just make it part of your initial lender interview to clarify their position up front on deficiency and release of lien; and then have the discussion AGAIN once you get your negotiator.  We always ask the offer to contain the words "with no recourse to the seller" so we can force the issue with the negotiator if we run into problems.  It doesn't always work, but sometimes it does.  Good luck!

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