Foreclosure in 90025>Question Details

Cantsellhouse, Home Seller in 90025

In California, if my house is foreclosed on, can the lender then come after me for remainder of loan, attorney fees and/or foreclosure costs?

Asked by Cantsellhouse, 90025 Fri Nov 19, 2010

We permanently need to move to London (new job) & cant sell our CA house for what we owe. Realtor says needs $50K less to sell. Been listed for 3 mnths with no offer, even at $25K below market. We can only rent it for 1/2 the mnthly mortgage/insurance/taxes so after rental income taxes & management fees we would bleed $40K/year on a interest only for 1st 10 yr loan. We have no equity in it & already lost our down payment. So doenst make financial sense to hold on to house. But concerned that lender will not approve short sale since we technically could afford both the CA house and a rental in London (albeit in a slum area living very cheaply with small children for years to come). How do I get rid of house as cheap as possible. E.g.avoid lender require promissory note for short sale or seek remainder/attorney fees, etc after foreclosure or walk away. Dont care about credit since have to start over anyway in Europe. Its a 1st & 2nd to purchase home, no refi or home equity.

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Answers

26
Pebble Singha
Certified Distressed Property Expert
Director of Short Sales Keller Williams RR Gable

Hi ALL,
WOW>>>>>>>>This is crazy. I see so many Real Estate Professionals saying with conviction that CA is a non recourse state if the loan is purchase money?
I bet you guys would give it in writing too huh......................
Well here is an advise people......There are two sides of the coin here. Even though the most of what you say may be true, it depends on who you talk to and who you are dealing with.
REAL Estate agents who call themselves short sale specialists........... I would like to give you friendly advise
READ the 580b law for yourself and have it interpreted by at least 5 attorney's. At least one of them will say that it refers to "FORECLOSURE" only and not Short Sale. Yes california is a one action state but to some Attorney's this may be true for only "Foreclosures" not short sales.
I would not want to get caught saying "Nope they cannot come after you".Yes there may be many of you "You can't tell us that" agents who are going to eat me alive here. I respect you all and am trying to tell you what would you rather go t court with........."I told my client that this is a non recourse state" or I told them that this may or may not be true and that they need to consult a legal professional.
I train Realtors and i would never ever have you say that to a client.Leave that to the legal professionals. Just a food for thought my friends.

Call me personally at 818-919-5656 if you ever have a short sale question. I will help you agents.
1 vote Thank Flag Link Thu Jan 13, 2011
california is a non recourse state. you can basically walk away from the property and the bank cant come after you (if it was your primary residence)
1 vote Thank Flag Link Fri Nov 19, 2010
Best advice will be to speak to your real estate attorney on the deficiency. For informational purposes only - if you have to move to another country, you almost have no choice but to sell your home and if it is upside down you either short sell or foreclose. You are trying to do the right thing and sell. Allow your agent to advise you on the list price based on comparables, I trust she knows what she is doing. What is the condition of the home? Does it show well to sell? Best of luck to you. Enjoy London.
Web Reference: http://www.saveahome.net
0 votes Thank Flag Link Tue Apr 3, 2012
one last thing...the going settlement rate for a foreclosure balance is 10%. that means if the bank comes at you will a bill for $50k, you can probably settle it for $5k....that is if you want to settle with them. if i were in your shoes i wouldnt even bother
0 votes Thank Flag Link Fri Feb 4, 2011
the banks are getting bailed out. who is bailing you out? just drop the house and run. the bank cant do anything in the state of california
0 votes Thank Flag Link Fri Feb 4, 2011
no they cant come after you for the deficiency balance in california
0 votes Thank Flag Link Fri Feb 4, 2011
Attorney can answer the legal questions, but your conscience should be able to answer the ethical one, you do owe the bank money. This is called strategic foreclosure, and you want to limit your loses in spite of your ability to pay. Foreign nationals do this all the time and I hate it. IMHO, negotiate 50/50% on the shortage amount and be grateful you can move-on. What makes you think that London won't see that you were derelict with loan here? Really cracks me up when a tea party type of person is trying to get the government to bail them out. Yes I am cynical, seen to many people try to game the system
0 votes Thank Flag Link Thu Jan 20, 2011
In a short sale, if you can afford to contribute extra dollars the bank will most likely ask you to do so. Be prepared to come up with some extra cash. Good luck.
0 votes Thank Flag Link Thu Jan 20, 2011
Dear Can't Sell,

As a licensed attorney and a Realtor, I agree with Pebble. The law is very gray when it comes to short sales, especially with purchase money/second loans. It is wise to speak with an attorney, but be sure to find one who is familiar with these issues. I say this because most real estate attorneys will tell you they can handle your problem, but you really need one who has a lot of experience in this particular field and can teach you the available options.

Best of luck,

Rachel LaMar, J.D.
LaMar Real Estate, Inc.
0 votes Thank Flag Link Wed Jan 19, 2011
Talk to an attorney, But I think Terri has some valuable input.
0 votes Thank Flag Link Wed Jan 19, 2011
Talk to an attorney, But I think Terri has some valuable input.
0 votes Thank Flag Link Wed Jan 19, 2011
Listen to Pebble. It is not a simple answer and you are asking a legal question which needs to be answered by an attorney.

I'm so sorry for what you are going through. I had a client with a similar situation as you, except they didn't have any money, they had to leave the country. They had no option but to go, regardless of what the banks were throwing at them. Their first was a purchase money loan and in their approval didn't state a deficiency judgment. Not so with the second, it was a line of credit and they reserved a deficiency judgment. I reviewed this with my clients, suggested they discuss it with an attorney and CPA, but in the end they sold short and took the risk. It is heart breaking.

Best of luck to you.
Web Reference: http://terrivellios.com
0 votes Thank Flag Link Sun Jan 16, 2011
Hi ...I'm confused. Your current realtor should have been known you were in a short sale situation and suggested you do a short sale. For you to be asking these questions, it seems your realtor is not a short sale specialist at all.
First off, Ca if a NON RECOURSE state, the lender cannot come after you if this was your primary residence and the money was used for purchase. Also, in a short sale, you are asking the lender to walk away from your debt, and they are allowing you to do this.
In a short sale, you pay ZERO! No commission, no title fees, escrow fees, you do NO repairs to home, or termite, warranties..NOTHING! You get to stay mortgage free til home is sold. Or vacate home at any time, if you can't be around til it is sold.
It doesn't matter if you have money to live in London, there are ways to still show that you are in a
financial HARDSHIP. I have done tons of short sales and continue to do them every day and was a short sale negotiator for a short sale negotiation company...
My current short sales, owner had over $500,000 cash in 401k and other accounts. Owner continued to make payments thru short sale process and maintained an 800 fico and bank did short sale. She is able to buy another home right away with the short sale and buy program .
Call me 310-429-4170
Sheyenne Schultz
Real Estate Network Group
http://www.torranceshortsales.info
Short sale specialist!
Web Reference: http://www.shysells.com
0 votes Thank Flag Link Sun Dec 5, 2010
nope, its a non recourse state. banks have no right to the balance
0 votes Thank Flag Link Wed Dec 1, 2010
You've got non-recourse loans. In California, lenders can't come after you for deficiency on a purchase money loans. You're safe.
0 votes Thank Flag Link Sat Nov 20, 2010
Dear Cantsellhouse,

You seem to have made up your mind that you don't want to keep the house so you have three options available to you.

1) deed in lieu of foreclosure. this is the fastest and most pain free for both you and your lender and essentially involves voluntarily handing over your property to the bank. No selling involved. Seems easy enough however the bank, as a creditor, may not look to kindly to a borrower with no financial hardship deciding to walk away and may look for some financial sacrifice on your end. This would require an attorney to help you navigate the settlement and insure that no deficiency or promissory note is involved.

2) walk away, let it go to foreclosure. Rarely if ever a good choice. Definitely the least popular with your lender and essentially wreaking havoc on your credit; which i know you mention you are not too concerned about at the current moment.

3) Short Sale. As my colleagues below mention, you want to make sure you have an experienced broker representing you because your situation requires not just selling a home but skillfully negotiating a debt settlement with the bank. Reading between the lines above you do seem to present a financial hardship, a seasoned negotiator will spot that issue and artfully present your case to the bank.

In terms of deficiency judgments and promissory notes, California is a single judgment state. This means the bank gets one choice to pursue their bad debt. More Plainly, if the bank forecloses with a non-judicial foreclosure there will be no deficiency judgments or promissory notes. Short sales most often present the banks with a better financial alternative than foreclosure (eg. they recover more loss). Recovering the most money is their primary concern.

Therefore, the banks should always accept a short sale offer at fair market value, if the buyer is able and qualified, the agent is honest and capable, and the negotiator is skilled and diligent. Knowing that they cannot pursue a deficiency after the foreclosure sale, any deficiency language can also be negotiated out of the approval letter (again this is specifically for California properties).

Best of Luck and enjoy London!

--
Allan S. Glass
President
ASG Real Estate Inc. ®
149 S. Barrington Ave, Suite #660
Los Angeles . CA 90049
Mobile: 213.952.9052
Direct: 213.973.8637 (213.97.FUNDS)
Fax: 213.947.4461
E: asg@allanglass.com
http://www.asgreinc.com
CA License: 01154002

Twitter: http://twitter.com/asgreinc
Linkedin: http://linkedin.com/in/allanglass

Visit Allan’s Blog: http://allanglass.featuredblog.com

ps: you've made no reference to a 2nd or junior mortgage. Although deficiencies can also be negotiated out of a junior lender settlement, it requires additional reasoning and language on the part of your negotiator
0 votes Thank Flag Link Fri Nov 19, 2010
Cantsellhouse,
You should seek legal council in regards to collections, etc. There is no deficiency on the 1st, however, the lender could still ask for a contribution in order to approve. Any additional liens, 2nd's 3rd's, etc can ask for additional money. There are many factors that may come into play. However, in the case of your home... you should take your agents advice and reduce the price.

Depending on the lender, they have a formula they use in order to approve a shortsale. It is based on TODAY'S market value, not on what you owe... then the offer amount, less costs to close, and they the investors approval. Again, depending on the lender, I have personally gotten shortsales approved as low as 80% of todays market rate less costs.

Once approved, and hoping your agent is experienced with shortsales, you should have 0 costs, in writing and will be free on any continuing liability.

Always happy to assist.
Sincerely,
Richard "RJ" Kas (SFR, SRES)
"Representing the finest properties from Los Angeles worldwide"
KAS Properties - Coldwell Banker Previews International - Beverly Hills East
9388 Santa Monica Blvd, Beverly Hills, CA 90210
310.859-5334 office - 310.488.9826 mobile - 310-273-0670 fax ATT: RJ
RichardKas@gmail.com - http://www.RJforLA.com - DRE: 01352771
Sellers Buyers Investors Leasing Consulting
0 votes Thank Flag Link Fri Nov 19, 2010
Pebble Singha
Certified Distressed Property Expert
I work with Realtors and homeowners Short Sale their homes


Hello Can't sell house,
If you were 25k below the market value you would have activity or an answer. If you have been on the market for 3 months and no offers then drop your price.
As far as can the bank come after you even after foreclosing or short selling the home?

Well that depends on a lot of factors and to name a few important ones: Purchase Money or Non purchase money, what is written in the note you signed when you took the loan and the ability of your agent to negotiate with the bank to let you off completely as paid in full.
Please see this article by California Association of Realtors and this will answer your questions

http://pebblesingha.com/RealtorWebPage?custompage_id=1360658498

I wish you luck .
Web Reference: http://www.pebblesingha.com
0 votes Thank Flag Link Fri Nov 19, 2010
Let me clarify anti deficiency protection is only on your first lien. Step up the short sale, lower the price substantially to create a lot more interest. If you can really afford to pay both be prepared to be asked for seller contribution and depending on the amount decide if it is worth it. Good Luck!
0 votes Thank Flag Link Fri Nov 19, 2010
Each case is different. You need to work with an experienced agent who can help you market you home and help negotiate a short sale agreement that protects you from further pursuit. You may also be well served talking to an attorney, to review any other assets you have that may be effected.

Feel free to call me if you would like to have a conversation and discuss your different options.

Regards,
Catherine Bedrossian
Home Sales Pro
(310) 383-4212
0 votes Thank Flag Link Fri Nov 19, 2010
First you should exhaust all options it will show the lenders that you are making an honest effort to settle with them. You must be able to show hardship to qualify for a short sale. The lender may require a promissory note and they may not, but If you let the property go to foreclosure then you will have the defaulted amount and other fees to address
0 votes Thank Flag Link Fri Nov 19, 2010
Just do a short sale, get it priced RIGHT now & get on the ball to get the short sale done. PLEASE ask for PROOF from your agent that they have closed at least a dozen short sales. Every agent out there these days all say they can list short sales, but believe me if they could ALL successfully close them you wouldn't see so many Bank Owned listings out there. Bank owned listings are basically failed short sales.

You have an excellent hardship reason & YOU would just refuse to sign a short sale approval letter if there is language in there about the bank reserving any right to a future deficiency judgment! Believe me they do NOT want to foreclose & will work it out with you, the listing agent needs to Negotiate this Language OUT of any short sale approval letter!!

If your 1st & 2nd loan were never refinanced & you get foreclosed on they can't pursue you for a deficiency judgment. You Will qualify for the Mortgage Debt Forgiveness act however if you short sell or go to foreclosure sale, so that's a plus.

If you have any other questions at all, feel free to shoot me an email directly. Between my negotiator & I we have closed over 500 short sales.

EmilyKnell1@yahoo.com
562-430-3053 cell
0 votes Thank Flag Link Fri Nov 19, 2010
Only an attorney can give you legal advice. I am not an attorney, however, I specialize in Distressed Property and so keep on top of issues related to this topic. From what you are saying, this is your home (primary residence) and the loans were used to purchase it. On that basis, here is some information I have received from the various attornies and lenders I network with.

1. If the loans were used to buy the home (purchase money), then in California the lender cannot come after you for a deficiency judgment.
2. Effective January 1, 2011, a California law goes into effect that states if a lender accepts a short sale offer then they waive their right to a deficiency judgment, even if this is NOT a purchase money loan. (Unfortunately, this law only applies to a 1st Trust Deed.)
3. If both loans are with the same lender, there is case law in the State of California that precludes the lender from foreclosing on the 1st and then suing for a deficiency judgment on the 2nd.
4. Moving over 100 miles away from your home, for job reasons, is a sufficient hardship for the lender to accept a short sale. (I have recently helped two couples whose only hardship was a move required for work. They actually remained current on their loan throughout the short sale process.)

Of course, all bets are off is there is any fraud. So...., you need to work with a Realtor who has a lot of knowledge and experience in negotiating short sales. You may even qualify for a $3,000 moving allowance from your lender, if you do a short sale.

Every circumstance and set of facts is different. Feel comfortable giving me a call to discuss your specific situation. This is a service I offer at no cost or obligation to every homeowner. Get the information you need to make an informed decision. You know that informed decisions are the best decisions. Hope to hear from you soon. You can reach me at 424-2HELP12 (424-243-5712). Dare to Dream.

Shel-lee Davis, QSC®
Certified Distressed Property Expert – CDPE®
Short Sale & Foreclosure Resource – SFR®
Certified HAFA Specialist – CHS®
SSG Pro®
Your Real Estate Consultant for Life
RE/MAX Palos Verdes Realty
http://shel-lee.listingbook.com
0 votes Thank Flag Link Fri Nov 19, 2010
Hello Cantsellhouse, I think you and your agent need to re-evaluate the prices in the area if you have not received any offers, short sales are selling-so do not give up! I know it may seem very hard to deal with all the waiting, but in the long run you will be much more satisfied with the outcome as your credit will not be impacted as strongly as receiving a foreclosure and you will not have just walked away from your responsibility to pay the mortgage you had received. I would recommend you speak with your tax professional and attorney on those fees, however currently if you are having a hardship, even if the lender sends you a 1099 for the amount of debt released, you can possibly receive an exception for this tax and no owe a penny or it be pro-rated. Most primary lenders, "1st mortgages" are not sending the promissory notes, it's usually the 2nd or 3rd that will do this. There are different rules for the secondary lenders. Also, it is a lot better to receive a possible promissory note that to receive a foreclosure.
0 votes Thank Flag Link Fri Nov 19, 2010
I agree with Scott below. You are the prime candidate for short sale. you do have to realize that your house is not priced under market malue. By definition market value is the price that a willing, ready and able buyer will give you for the house.

The answer to wether or not the lender or lenders can come after you for deficiency, is probably. However it depends on the type of loan that you have. if it is a purchase money loan, then the lender's only recourse is to foreclose and they cannot come after you... however" purchase money loan" is defined very narrowly and is difficult to answer the question without sufficient information.

You need professional help in assisting you with your short sale. best of luck!
Web Reference: http://shortsalecentral.org
0 votes Thank Flag Link Fri Nov 19, 2010
You should at all costs try and avoid foreclsoure, becuase you are forced to sell, you are a prime candidtae for a short sale, hire an agent who is experience din short sales and make sure they have a professional negotiator that will work on YOUR behalf. The bank iwll have its owne negotiator so you need soemone looking out for you.

Please see my blog on how to get your short sale approved.
0 votes Thank Flag Link Fri Nov 19, 2010
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