Legal Question in Real Estate Law in California

I'm sorry to hear about your dilemma and it's really too bad you are left with so little time to work out a deal of some kind. Without knowing all the particulars of your situation, including at least the amount of both loans, the current market value of the property, whether it is rising or not, and what other assets you have which could be impacted by a bankruptcy, it's impossible to give specific advice, but several thoughts do come to mind:

1. Filing bankruptcy to forestall a home foreclosure works out OK for some folks in some situations, but before adopting this as your primary strategy, keep in mind that creditors can and often do go to court promptly thereafter to get relief from the automatic stay so they can foreclose. So, relief as to the home may be short-lived. Also, a bankruptcy puts all your other assets and liabilities into the hands of the trustee and the court, with results that may go far beyond what you intended. Finally, there is perhaps even more stigma attached to a bankruptcy than to a foreclosure, in terms of impact on your credit and your friends.

2. The timetable for foreclosure by trustee's sale starts with your delinquency (or other default). Then, a couple months later, you get a Notice of Default by certified mail, which is also filed with the county recorder. At least another three months must pass before the lender can issue a notice of sale. While the sale can take place 20 days after the NOS, these days they are usually somewhat slower in setting and conducting the sale. So, if the lender followed the law, you should have received plenty of advance notice.

3. Seems to me there was very poor communication between your real estate agent and you regarding the work done and the resulting progress, or lack thereof, on the proposed short sale. While it seems to me that there was some fault on the part of each of the parties (the lender, the real estate agent and you) for letting this drag for months with no action and little or no communication, I'd say it appears the agent must bear the blame. Licensed real estate agents and brokers owe duties to their clients to act professionally, do their jobs as best they can, and to keep the client fully informed as to progress, or the lack thereof. This is especially true when the client is trying to avoid a foreclosure.

4. Finally, lenders are notoriously bad about maintaining lines of communications with borrowers who want to do short sales. The foreclosure is being processed by a beehive of clerks in, say, Green Bay, Wisconsin, while the short-sale possibility is being considered (maybe) by some sleepyhead in Provo, Utah. Do they speak to one another?

While I can't really help you, I do sympathize. I hope there is something in the foregoing cluster of thoughts that might be helpful. My closing suggestion is to find someone (an attorney or real estate advisor) in your community, with whom you can share the actual numbers, the real estate (short sale) contract, and the formal notices you've received, as well, perhaps, as some information about your other assets, liabilities, income and expenses.