Facing a Short Sale in San Diego?
That’s right. In 2011, the California legislature passed SB 458 that the Governor signed, which removes almost ALL liability for the unpaid principal mortgage amount that results from a short sale, called a “deficiency judgment”.
Before the law was passed, short sale sellers in California who sold their home for less than was owed on the mortgage(s), were open to liability for the unpaid amount of the mortgage. For example, if a person owed $350,000 on their first mortgage, but could only pay $300,000 of that amount when they sold their home on the open market, they could be liable for that $50,000 if the bank decided to sue the homeowner for the deficiency. Sometimes, the lender would ask the homeowner for a cash contribution or a promissory note whereby the owner would pay back all or part of the deficiency over time.
Now, the lenders are prohibited from even asking for a cash contribution, let alone demanding one. If the lender agrees to the short sale request, most homeowners will now escape liability for the deficiency. Of course, you need to check with a real estate attorney and tax professional to be sure you are covered by the new law.
The other major issue facing short sale seller is income tax liability for the forgiven debt. Under the IRS tax code and many state tax statutes, forgiven debt is considered income, and thus, taxable. If you are considering a short sale, you should know that the laws have made it easier to escape liability in many cases and banks have streamlined their processes and have sped up the timelines. Talk first with a REALTOR and then speak with a qualified attorney and tax professional to see if completing a short sale is the best solution for you.
Call us today if you have any questions about your situation.
Search our website for the latest real estate information about Carmel Valley, search all properties in San Diego, up-to-date real estate news, and lots more!
–
Kevin P. Cummins, J.D., SFR
Broker Sales Associate | REALTOR®
3810 Valley Centre Drive #906
San Diego, CA 92130
C: 858-750-9577 | F: 858-793-9944
