BIG News for California Homeowners!
Posted on Jul 15, 2011 by Trent Chapman
Short sales in CA just became SO much more attractive! BUT CA lawmakers still they left a couple of holes for second lender which may make it harder for some agents (watch the video).
You know how SB931 that was passed last year made so many people confused and others excited? Well, SB458 [now known as CA CCP Section 580(e)] was just signed into law and is effective IMMEDIATELY and makes it so that ANY lender in CA who agrees to a short sale on a 1-4 unit property, MUST FULLY RELEASE THE SELLER OF THE DEFICIENCY.
This means that second lenders can no longer release only the lien if they agree to a short sale. This law was specifically written to INCLUDE the second lien holders that were left out of SB931/CA CCP 726(e).
This makes short sales SO much more attractive for those who own property in California, especially for those who are short selling a second home, investment property or a cash out loan on their primary residence.
There are however TWO LOOPHOLES for lenders to get MORE money that I talk about in this video.”
Hi Trent,
Thanks for the great information, it sounds like thanks to this bill if I get both lien holders to agree to a short sale on my investment property then I should not be liable for the deficiency. The one question I still have is will the IRS tax me on the depreciation of the investment property?
Yes, Jen, that is correct. Unfortunately, I can’t give you tax advice, as I am not a licensed Certified Public Accountant. Seek out help from a local CPA so he/she can give you advice for your specific scenario.
Good luck Jen! Let me know if you need any help finding a competent CA agent as we’ve trained literally thousands of agents in CA and I know the best agents in each area.
-Trent
We are short selling our CA home. Can you tell me if there is deficiency judgements or tax implications for a rental in COLORADO? Thank you!!!!
As far as I know, Colorado is not a State that has good laws that protect sellers… having said that, with a competent agent, you don’t have to worry as they will know how to negotiate a full release of liability as part of the short sale. This is not easy, but I have trained a few dozen agents from all across Colorado. Just let me know what city the property is in and I’ll refer you to the best trained agent in the area to obtain a full release of liability so you can not be sued after the short sale.
-Trent
Seems like it is taking people much longer to fully understand the value of this new law. I wonder if the number of short sales has increased over the last 6 months in southern California? The new HARP 2.0 refinance program may prevent people from considering a short sale if they can reduce their payment a few hundred dollars or pay off their home in 15 years without their payment going up.
I haven’t seen that big of a bump, but it makes sense for most homeowners who are $100K+ negative in equity to sell and buy again in a couple years instead of trying to hang on to a bad asset and paying more money each month just to pay off that extra debt ‘sooner’. Most people are lacking either the income or the discipline to follow a 15 year loan payoff plan while using a 30yr mortgage, just look at the stats. I recommend buyers use a true 15yr mortgage when they buy next time to ensure they can 1-afford to pay it off that quick and 2- don’t buy too much house.
-Trent