A new law, SB458, went into effect last week that prevents junior lien holders in California from pursuing deficiencies from homeowners after a short sale. The law was sponsored by the California Association of Realtors, and approved by Governor Jerry Brown on July 15.
Under the new rules in SB458, neither senior nor junior lien holders can pursue the balances owed to them from borrowers after an approved short sale. The law applies to residential properties, from single family homes up to four unit properties. The law goes into effect immediately, and will apply to escrows that close any time after July 15.
Realtors are touting this new short sale law as a victory for homeowners, saying they will be able to avoid foreclosure proceedings, and incur less damage to their credit. Supporters of SB458 also believe that the number of short sale transactions will increase, and the number of foreclosure sales will be reduced, which will protect property values by yielding higher home sale prices in California.
Of course, a short sale must still be approved by both the senior and junior lienholders. If junior lien holders are now unable to pursue the remaining monies owed to them through deficiency judgments, they may push harder during negotiations to recoup the amounts owed to them by the borrower.
The short sale process for California homeowners and buyers is already a long and frustrating process when multiple lenders are involved. SB458 may encourage homeowners to follow through with a short sale, rather than go through foreclosure. The law may also add incentive to junior lien holders to demand larger sums of money before they will approve a short sale, extending the negotiation process even further.
A short sale can still be a great value for a persistent, patient homebuyer. An experienced agent can help you successfully navigate the complicated short sale process. Contact a San Diego Condodomain agent to find available San Diego condo properties, including short sales and foreclosures, and save thousands on the commission in the process. Call 877-852-6636 to speak with a representative today!
Photo courtesy of respres, via Wikimedia Commons