The California Supreme Court recently made a precedent-setting ruling impacting homeowners who opt to pursue a short sale with their lender’s approval. The California Supreme Court justices unanimously ruled that distressed property owners cannot be sued for any remaining debt, in effect implementing a ban on short sale deficiency judgments in California. And while this ruling only impacts residents of California, it’s very significant as it could serve as a precedent for similar rulings in other areas of the nation.
What Are Short Sale Deficiency Judgments?
In many states and in the past, lenders had the option to file a lawsuit against homeowners for the balance of their loan — the remaining debt that is not covered by the sale of the home in a (lender-approved) short sale.
Therefore, if a homeowner owed $400,000 on their home loan, and the property was sold for a sum of $300,000 in a lender-approved short sale transaction, the lender could previously file suit to recover the remaining $100,000 balance.
But now, this new ruling means that Californians will no longer need to worry about these deficiency judgments.
This California state Supreme Court ruling impacts approximately 200,000 California borrowers who’ve completed a short sale in the past five years.
In California, the state law prohibited deficiency judgments in the case of foreclosures, but there was a loophole: the law did not address short sales. This new ruling is precedent-setting, not only in California but it could also serve as an important precedent in other states where lenders can still seek to file a suit against borrowers who opt for a short sale.
The Importance of Working With a Short Sale Expert
There are a number of unique steps and processes involved when buying a short sale property or when selling your home through a short sale instead of a traditional real estate transaction. You’ll have lots of advantages in this regard when you work with a short sale expert like Kristine Zelazo, better known as The Short Sale Gal.
Based in Florida, Kristine works with both buyers and sellers and she is an experienced negotiator. So if you’re an investor seeking to get started in buying short sales and need a great mentor or wish to pursue a short sale transaction for the sale of your property, turn to Kristine Zelazo, the Short Sale Gal!
To get started with selling your home, simply complete the home pre-sale form to provide Kristine with additional information on the property in question. Questions? Call 800.664.0616, x802.