Legal Question in Real Estate Law in California

PMI is going to have to pay off on the lender's claim. That will subrogate them to the lender's rights. So they effectively stand in the shoes of the lender as soon as the lender accepts the payment. So for the entire deal to go through, they have to sign off. They can make the seller come up with a payment to offeset some of their loss if they want to. That is the problem with being a short sale buyer. If everyone who has a claim on the property and the seller doesn't sign off, the deal goes away.

Here's a guess. The PMI company may not have such a right, in the strictest analysis. However, doing a short-sale purchase puts you into negotiations with a den of thieves who have already been burned by losses on their improvident lending and insuring practices, and they have their knives sharpened. Also, the various institutional players are all sort of looking out for each other, even though they may have opposing bottom-line interests. When you are the lone U.S. Cavalryman riding into Indian Country, the Cheyenne and Sioux and Arapahoes will put away their differences and go after your scalp. In the rough-and-tumble of short sales, you get what you can negotiate. Everything is on the table, but you may be outnumbered. Bargain hard, but remember there either aren't any rules, or they aren't written in your favor, or they will try to bluff you as to what the rules are. Think of it as buying a used car from someone who looks like Richard Nixon.