Legal Question in Real Estate Law in California

In a California dissolution of marriage (divorce), the court must usually attempt to apportion the community assets equally between the divorcing spouses, and similarly, each ex-spouse is expected to bear half of the community liabilities (debts).

A "short sale" is a sale of real property where the selling price received is insufficient (short) of the amount necessary to pay off the loans and other liens against the property, and where there is no cash left to pay the selling owners anything. Sometimes, the lending institution agrees to waive the deficiency, and take the loss. Sometimes not -- the lender may expect or demand some eventual compensation or additional pay-off from the borrower(s).

A threshold question here must be whether the house being sold is 100% community property, which is probably the commonest situation, or whether it is entirely or partly the separate property of one or the other of the spouses.

Assuming the house is community property, and that the loan is a community liability, results of a short sale prior to a dissolution, but which the dissolution process is under way, should be disclosed by any party that knows more about the deal than the other, and reported to the court as a significant development affecting the couple's assets and liabilities.

The loss of the house as an asset will be offset by the shedding of the liability on the loan, or some of the liability. Both the asset side and the liability side of each spouse's disclosures to the other would be reduced.

So, in essence, I'm not sure that you or your spouse has any particular "rights" relating to the short sale of a community-owned house, except the right to be informed of things known to the other spouse. If I'm missing your point, please feel free to contact me.

You presumably can interfere with the short sale by withholding consent, and force the foreclosure to proceed. While such an action is not usually beneficial to either owner ( since the bank ends up with all the proceeds in either case) , it would be necessary to know all the circumstances to be sure. You may be better off with a short sale on your credit history than with a foreclosure. You will neeed to have your dissolution counsel determine the effect of the short sale on any deficiency.