Legal Question in Real Estate Law in California

Re: Real Estate Short Sales

First of all, a short sale can only be done if the lender approves it and agrees to permit you to do a short sale--thus, they certainly will not agree to a short sale if they intend to seek a deficiency from you. This is a complex area, but generally, a lender cannot seek a deficiency judgment against a borrower if the loan was a "purchase money" loan and secured by a residence. Please note, if the loan was originally made at the time of purchase but was later refinanced, it LOSES its purchase money character, and also, if there is any misrepresentation in the loan documents signed by the borrower (i.e., income was inflated, borrower said he was going to occupy home but did not intend to, etc.), then the lender may seek a deficiency.