Legal Question in Real Estate Law in California

I'm not going to second-guess another attorney who may have more information and who may have done legal research for you. Remember that a non-primary residence loan can be "crammed down" by a bankruptcy court, possibly resulting in reduced principal and/or interest, in a Chapter 13 proceeding.

I absolutely agree with Mr. Stone: Asking a detailed questions with several possible twists with no ability to see the documents or even ask you questions would be negligent on the part of every attorney here. You have an opinion from a live breathing attorney right now - so the best options are to make an appointment with another live breathing attorney or ask a detailed paid questions so that the responding attorney on Lawguru can have a back and forth conversation with you. Otherwise it is like me asking you what color is my house with no other info than that - ie a GUESS!

Best wishes,

A short sale is a brand new agreement between the lender and the borrower, and can be structured, through negotiation between the parties, with or without recourse provisions. The bank likes to slide one in. The borrower should look for it and negotiate it away, even to the point of walking away from the deal if the bank insists. So, either the agent or the lawyer may be right, depending upon your negotiating skills. Ask them both how many short sales they have personally handled, and of those, how many left the borrower in the clear and how many had some possibility, at least, that the lender could decide to squeeze a deficiency out of the borrower after the sale.

Sorry for all the BS from the other attorneys on this site. What you are really asking it seems is whether the purchase money anti-deficiency law applies to your loan. That is a purely legal question and you are entitled to an answer. The answer is it does not apply to your loan. The agent is right and the attorney is wrong. The reason is that the antideficiency statute expressly limits its application to the borrower's residence. You state you have never lived there. Therefore the protection of the statute is unavailable to you.

Mr. Stone is correct, however, that if a short sale is sufficiently more favorable to the lender than foreclosing and trying to sell the house as REO, they may agree to waive their deficiency rights in the short sale agreement. If they refuse, their downside is you let them foreclose, which 99.99% of the time results in less net money to the bank than an orderly short sale. Your credit is going to take a hit either way. So play hardball with the bank if you like. Point out to them that they get more money if they take the short sale and waive the deficiency than if they foreclose, because foreclosing (unless they actually file a lawsuit and obtain a judicial foreclosure, which is very very rare) also cuts off deficiency rights regardless of the nature of the loan.

To add to Mr. McCormick's answer, the reason that they cannot pursue a deficiency judgment against you if they foreclose through a trustee sale (non-judicial foreclosure) is a statute that is referred to as the one action rule. If they use non-judicial foreclosure, they must accept what they get. If they use a judicial foreclosure (where they actually file a lawsuit) they receive the judgment in a specific $$ amount, sell the property and apply it to the judgment, and then can proceed against you for the balance. It takes them longer and provides you with a right of redemption in many cases. Play hardball with them. If more people did, they would get the idea and be a little more reasonable.