Legal Question in Real Estate Law in California
If I bought a house as a primary residence and later rented it out, am I liable for the difference between what it's worth and what I owe if it's foreclosed on?
2 Answers from Attorneys
What your question really is, is whether California's purchase money anti-deficiency prohibition contained in Code of Civil Procedure section 580b prevents the lender or seller from obtaining a deficiency judgment against you.
Of course, if the lender nonjudicially foreclosed, they are barred from obtaining a deficiency judgment (the difference between the amount realized at the trustee's sale and the amount of the debt) by operation of Code of Civil Procedure section 580d. This would apply regardless of whether you occupied the house the entire time or not.
Arguably, section 580b purchase money protection remains if the original deal qualifies, regardless of the fact that you later rented it out. You do not provide enough facts, however, to make the determination of whether the original loan was a purchase money loan, or seller financed.
I don't think there has been any conventional lender Judicial foreclosures in the last 15-20 years other than for big scams; but few if any that are single 1 property type Judical Foreclosures.
If it was private money and you intentionally lied to the lender or seller, they might do something but even that is tough...