California’s New Short Sale Law Offers Hope to Underwater Homes!

As a Lake Nacimiento Real Estate agent, my goal is to provide you with the most current real estate informationthat’s available.  I know that buying or selling a home in Oak Shores or Heritage Ranch is a big decision and I want you to be able to make the most informed decision possible!

We’re all aware that the national housing market has seen some ups and downs the past few years and that short sales have been on the rise.  Our economic downturn has forced many people out of jobs which makes holding onto their current home nearly impossible.  And, while many sought out a short sale for their home to avoid foreclosure,  a number were not able to go through with a short sale because of the money that was needed.

If you or someone you know was or is currently in that situation; there’s good news!  California’s Governor Brown just passed a new Short Sale law that will play a major role in the Califonia Real Estate market!  Take a look at this recent article by Alexis McGee.

New Short Sale Law is a Game Changer

by Alexis McGee

Ever since the robo-signing debacle, major banks have been forced to let severely delinquent homeowners sell their houses short (for less than the loan amounts owed) as part of a broad settlement of federal and state investigators. However, many short sales have not gone through because junior lenders have required the borrower contribute financially towards the deficiency. Even in non-deficiency states (such as California) where the senior lien holder typically doesn’t have the right to pursue of the deficiency, the junior lienholders usually do.

Not any longer in California. Thanks to Governor Brown and the newly passed bill SB458, which requires any lender that accepts a short sale (in a senior or junior position) must release the borrower from any liability for the deficiency. With this legislation, which is in effect immediately, regardless of what’s owed or if the lender has the right to pursue for it, if they accept the short sale, the amount they receive from the transaction will be all that they’re able to collect.

This is a good move.  A large number of homeowners will now re-consider a short sale, knowing that they won’t be forced to contribute more money in the form of cash payment or promissory note, which are often requirements of lenders. Also, many people who can barely afford their payment but don’t have the funds to contribute cash at closing (or via a promissory note), could now consider a short sale as well.

For the distressed real estate investor this is also good news. Short sale approvals will skyrocketed. And for investors looking for great deals, my suggestion is you focus on the fixer-type properties that have a higher chance of an aggressive short sale price being accepted.

There are four basic reasons this is true:

1. From the robo-signing problems of the past, banks continue to struggle with clear title issues post foreclosure. A short sale is a title guaranteed sale with a grant deed. Good for both the bank, the seller and the investor.

2. Properties with heavy deferred maintenance cannot be sold without either additional rehabilitation costs or deep discounts to cash buyers. A short sale allows the bank to sell to an investor without flooring a dilapidated liability.

3. Previous bank culture considered a short sale a negative action. Laws which force the action will remove the stigma and the banks will actually realize it is cheaper to short sale. Investors will find even more streamlined roads for cash purchases.

4. Homeowners who avoided short sales in the past because of second lienholders who held them hostage to promissory notes, additional cash at closing, or deficiencies after closing… will no longer have those obstacles. There will be more motivated sellers ready to make a deal and more great deals for us to buy… while helping the homeowner with their fresh start.

As you can see, this is a burden lifted for many seeking a short sale for their California home!  If you have questions about this new law or are considering a short sale for your Oak Shores or Heritage Ranch home; please contact me today!  I’d love the opportunity to talk with you and discuss your options.  Going through a short sale is a positive alternative to foreclosure and can save you years of heartache and financial loss.

Please feel free to contact me today for more information about short sales!

Grace Borzini
Your Local Lake Nacimiento Real Estate Expert
Oak Shores Realty

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Oak Shores Realty specializes in Oak Shores at Lake Nacimiento properties. Please contact us today to get more information on Lake Nacimiento lake homes. Oak Shores Realty can also provide you an insiders “Lake Nacimiento Buying Guide” with great information including maps and market information.

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