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Mortgage tax relief act extended to 2013, is shortsale the best foreclosure option for primary residence I own in CA?

San Francisco, CA |

My house is currently in foreclosure, NOD dated 10/09/12, no Trustee Sale Date yet. Real estate agent offered to short sale my house and indicated that shortsale does not have the same impact on my fico score versus foreclosure. I have BK7 discharged in 2010. What is my best foreclosure option? Deed in Lieu? Short Sale? Or let foreclosure process go through, walk away after Trustee Sale? Fico score already got hit after BK7 in 2010, will my fico score get hit again after shortsale or foreclosure? If I do a short sale or Deed In Lieu, should I have a Real Estate Lawyer review the contract to make sure that I don't incur hidden liabilities in the contract?

I am confused which way to go (shortsale vs deed in lieu vs foreclosure) and would highly appreciate your advice on this. Thanks.

Attorney Answers 4

Posted

David gave an excellent answer. In CA, short sales can actually afford you more deficiency protection than a foreclosure. I have yet to see a bank take a deed in lieu so unless that's actually been offered, don't bother exploring that alternative.

As far as taxes, the results are the same regardless of the path you take.

With respect to your credit, FICO actually records short sales and foreclosures exactly the same ("not paid as agreed"). The big difference in credit scores is actually in the amount of missed payments along the way.

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David Aaron Wiesen

David Aaron Wiesen

Posted

Thank you.

Posted

Based upon the information you have provided: Your credit is already bad. With Mortgage Tax Relief Act being extended you already know that there are not going to be tax consequences. With CA being Nonrecourse you are not going to be sought for any deficiency. It really does not matter which of your three options you choose.

You should consult with a Real Estate attorney or Tax attorney to review the entirety of your situation to make sure that there is not something you are missing.

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Posted

Mr. Weisen stated that your loan is a no-recourse loan, that is assuming the lender completes a trustee's sale, better known as the anti-deficiency law. You need to check the following with a California attorney, but in Arizona the anti-deficiency law is limited to only trustee sales or judicial foreclosures. That means if someone does a short sale or other workout the anti-deficiency laws do not apply. At that point you are left with the contract language in the short sale or workout agreement. Hire a good foreclosure attorney to determine your exposure.

This firm is in the business of helping people and companies file for bankruptcy protection. Therefore, the bankruptcy code requires that we call our firm a "debt relief agency." This information is provided for general information purposes only and is not intended to be a legal opinion, legal advice or a complete discussion of the related issues. Nor is this advice intended to create a client - attorney relationship. Every individual's factual situation is different and you should seek independent legal advice from an attorney familiar with the laws of your state or locality regarding specific information.

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2 comments

Christopher N Schneider

Christopher N Schneider

Posted

Arizona law differs significantly from California. California Code of Civil Procedure 580e provides that a short sale on a primary residence will not be subject to a deficiency judgment. Simply put, if the banks sign off, they can't collect from the lender personally.

Diane L Drain

Diane L Drain

Posted

Once again California is one big step ahead of Arizona. Hopefully we will follow soon. Thanks for the information.

Posted

You definitely will want to consult with an attorney before agreeing to a short sale or deed in lieu. An attorney will not only be able to discuss with you the best option, but can also negotiate the terms of any agreement.

By posting on this site or answering/responding to questions does not create an attorney-client relationship and is intended to be an opinion only. My opinion is not intended to be a guarantee or promise of any outcome or result in your matter.

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