Legal Question in Real Estate Law in California
California's Anti-Deficiency Law
I am doing a short sale on my non-recourse property with 2 ''purchase money'' loans. The junior lender is asking me to sign a document stating that they have the ability to pursue deficiency after closing. They refuse to approve the short sale without the document. I thought that the California's Anti-Deficiency Law prohibited this. A couple questions:
1. Is the lender unaware of California law and that is why they are asking me to sign this?
2. If I do sign it, is it void due to California law? Or, am I giving up my anti-deficiency rights once I sign the papers?
3. Is the lender breaking any laws simply by requesting that I sign this paper?
1 Answer from Attorneys
Re: California's Anti-Deficiency Law
Without pulling out my books and re-reading Code of Civil Procedure section 580b for the third time in three weeks, I'd say it depends upon whether the property is a one-to-four unit residential structure and was purchased for owner-occupancy.
As I remember, insulation from attack by a "sold-out junior" is available if the loan was seller financing or, if done by a third-party lender, the property meets both those criteria - a 1-to-4 that was bought to be the buyer's primary residence and not as an investment.
Since the lender presumably knows the answers to all three questions (third party, 1-to-4 and owner occupied), it may be doing nothing more than asking you to confirm a right it already has.
Owner occupancy can be checked by looking at the tax rolls to see where you claim a homeowner exemption, or by where you have your bills addressed.
I'll be looking to see if any other LawGuru lawyer jumps in with another analysis.
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