Quick Guide To California Short Sales

California short sales enable homeowners to avoid being foreclosed on by selling their house for less than the amount they owe. A successful short-sale transaction will transfer the property owned by a distressed seller over to a qualified buyer. When it comes to short sale transactions in California, there are certain safeguards that are put into place to help protect sellers from potential legal problems. Neither the buyer or the seller is required to use a real estate attorney as part of the transaction. However, it is a good idea to have legal assistance if the sale is a complicated one. One of the primary areas in California were short sales still occur on a regular basis is the Murrieta short sale market. This market is the center of many of the sub prime loans of the mid 2000s. Some were extended and are now coming due with untenable balloon payments, etc.

Murrieta Short Sale Agents


Before a lender will consider a California short sale, there are certain requirements that the homeowner must meet. The homeowner must be able to demonstrate long-term and ongoing financial hardship. They also must not be able to refinance their mortgage to make it more affordable. There are certain lenders that will ask a seller to place the property up for sale as a regular sale first. This will confirm that the higher asking price is not supported by the market. When all other options have been exhausted, the primary lender may agree to a short sale. Instead of going through the hassles of a foreclosure and having to dispose of the property, they might be willing to take a loss instead and move on.


A short sale’s major function is saving the homeowner from being foreclosed on. Short sales provide a lender with an out, especially if they are burdened with many foreclosed properties already. To encourage an increased number of short sales, the state of California has declared itself to be a nonrecourse state. That means after a primary lender has signed off on the short sale transaction, the seller cannot be sued to collect the money they still owe on their loan.

Time Frame

Sometime there are multiple lenders approving loans on a specific short sale property. Therefore, getting all of the approvals needed from all of the various lenders must take place prior to the sale closing. It can take time to get multiple sign-offs, therefore a short sale can be a contradiction in terms. Frequently it takes two or three times longer to complete compared to a regular real estate transaction.

Potential Liability

Since California happens to be a nonrecourse state, lawsuits from primary lenders can be avoided by sellers. Second mortgages or other loans that have been take out in addition to the original principle may still be able to sue. In complex cases it is very important to consult with an experienced real estate lawyer. If the short sale property was the seller’s primary residence, they will receive tax liability protection through the Conformity Act of 2010 (SB 401).


In order for a short sale purchase to be successful, the buyer will need to have patience and financial flexibility. Some loans will all through if the short sale negotiations end up stalling for many months. A short sale transaction might be refused by a secondary lender, in hopes that foreclosure gets them a better deal. This can kill a short sale. With lender stalling and rising debts facing them, sometimes sellers end up walking away from their house. However, if a buyer is patient, they will often succeed in purchasing a California short sale home.