New California Law For Folsom Home Sellers

Important for those Folsom home sellers contemplating a short sale.

For the past few years, there have been a few options for Folsom homeowners that were underwater with their mortgage, and could no longer make payments.  Let their home go into foreclosure, and suffer the credit hit, or try to do a short sale.  Short sales can be a better option, sometimes.  Part of the problem with short sales, from a seller’s perspective, is the bank could still hold you liable for the amount not repaid.    Typically this affected sellers that had refinanced their loans and would have no protection from a bank that could file a deficiency judgment against you.  When doing a short sale, if we could not negotiate full settlement language, to include no defiency judgment against the seller, it almost always does not make sense for a seller to do a short sale.  Why?  If the bank could still come after you for the remaining amount?

Starting January 1, 2011 California Senate Bill SB 231, California Short Sale Anti-Deficiency Law,  removed that concern for sellers.  Now sellers with a refinanced first mortgage loan, can consider doing a short sale, without the concern for the deficiency judgment.  With the new law, lenders(first mortgage) who accept a short sale, must accept the proceeds of the sale as full payment.  They will not be able to file a deficiency judgment against the seller.  This law applies to all first mortgages up to four units.

If you are a home owner who is struggling in this economy, and would like to know more about what your options are when it comes to your home, contact me.  I would be more than happy to explain your options, and how the current market impacts you.