However what does this mean and what's a ‘dificiency ‘?

Selling real estate via a ‘short sale ‘ used to result in the lender seeking a “deficiency judgment”.

This deficiency judgement is the difference between the sales price set forth in the short sale and the current loan balance.

With the passage of California Senate Bill 931, which was officially passed January 1, 2011, a borrower that proceeds with a Roseville short sale is no longer financially responsible to the lender for the most important difference between the loan balance and the sales price received by the lender.

This implies that if a householder sells the property for $80,000, but essentially owes the lender $100,000, then the homeowner won't owe the lender the $20,000 difference.

The languauge of the bill states, this deficiency protection is afforded only to a loan secured as a primary first lien mortgage.

Additionally, it applies only to a single family residence which is defined as” a dwelling of not more than four units.”

Also, there are limitations to this deficiency buyer protection statute. The 1st limitation is that it does not apply to 2nd mortgages. Thus, the holder of a note secured by a second trust deed would still keep a right to sue for the non-payment of the mortgage. Another limitation is that it applies only to human borrowers (not corporations). Interesting , however , there's no obligation the human borrower be an owner occupant. Ultimately, this statute does not apply if the borrower has been shown to commit mortgage fraud.

This California senate bill is a great solution for the thousands of house owners looking for a California Short sale. Previously, owners were encumbered with the prospects of being sued thru a short sale. Now, real estate inventory should be cleared faster, which will allow the bottom to squash out quicker and limit the way ahead for short sales in California.

Real estate short sales are now a typical practice throughout the US, particularly in California. Sharing short sale information with homeowners is a valued asset this writer deems extremely important. Learn more about this topic with: Tax Implications of a Short Sale and Credit Consequences of a Short Sale.