Legal Question in Real Estate Law in California

Re: liens on a real estate property in CA

The party on the buying end of a short sale as that term is usually used is the lender who is buying the borrower out in lieu of going through foreclosure. If you are not the lender, but instead are a third party, there is another set of rules and terminology that applies. You would be considered an "equity purchaser" (see Civil Code section 1695.1(a)) and probably subject to all of Civil Code sections 1695 to 1695.17. Your first concern here should be to understand whether your deal would be a home equity purchase as defined in this statute, and if so, what you need to do to make your deal fully compliant with the law.

The next question is, with whom are you dealing? I guess you're a third party dealing with the borrower who is about to be foreclosed...that puts you under 1695, by the way.

If you buy from the borrower, you step into his shoes and take title subject to existing liens, with this qualification: some liens affect the property itself, while others attach only to the owner's excess equity in the property, and if there is none, they no longer affect the property upon a sale.

I cannot reliably and safely give you a complete discourse on how the liens might line up in priority on this deal or which wouldn't affect a bona fide purchaser. This is work for a title company, and as a prospective buyer you should have a reputable local title company assist you to make sure you get either "marketable title" or that if title is going to be impaired that you know what stands in the way of clear title before you close.

Re: liens on a real estate property in CA

In a short sale, no liens against the property are wiped out unless the lienholder agrees in writing in advance for the payment offered.