Jeff Hansen & Arvin Paredes

408-657-9837

Downtown San Jose Condo & Townhouse Living

If You Are a Homeowner, This May Help You Out

New Short Sale Law Effective Immediately

On July 15, in a major victory for REALTORS®, Governor Jerry Brown signed into law California Association of REALTORS® (C.A.R.)-sponsored bill SB 458 (Corbett), which extends the protections of SB 931 (2010), to ensure that any lender that agrees to a short sale must accept the agreed upon short sale payment as payment in full of the outstanding balance of all loans, regardless of whether the lender is a senior or junior lien holder.

Under previous law (SB 931), a first mortgage holder could accept an agreed-upon short sale payment as full payment for the outstanding balance of the loan, but unfortunately, the rule did not apply to junior lien holders. SB 458 extends the protections of SB 931 to junior liens and ensures that once a lender has agreed to accept a short sale payment on a property, all lien holders – those in first position and in junior positions – will consider the outstanding balance as paid in full and the homeowner will not be held responsible for any additional payments on the property.

SB 458 contains an urgency clause making it effective upon signing.

This new short sale law protects homeowners from junior lien holders coming after their money and/or assets. Even if a second or third loan is a recourse loan, the homeowner will not be forced to make any payments toward the lender to make this a successful short sale process. However, lien holders who are not in the first position still have the choice of whether to do the short sale or not. Homeowners could benefit from this new law depending on the perception junior lien holders’ have on the current situation they are faced with the property. In other words, once there is approval on the first loan for a shortsale, the homeowner will benefit from this law if the other junior lien holder(s) agree to do the shortsale.

Throughout my 18 years of being a Realtor, I have successfully closed every short sale that I have dealt with. If you have any questions about the short sale process or you think you might be leaning towards making that decision, please don’t hesitate to contact me.

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