There’s great news to announce this month for California homeowners considering a short sale.  New legislation, SB 458, was just signed into law by Governor Jerry Brown, which prohibits banks and other lending institutions from pursuing borrowers for any losses incurred as a result of doing a short sale.  So, as of July 15th, if the bank provides approval in writing for your short sale they are effectively forgiving that portion of the debt that is lost in the transaction.  No more deficiency judgments, no hassles, just a clean slate.

This is very big news for a number of reasons.  Many potential sellers have been sitting on the sideline because of their concern over whether the deficiency would follow them long after the sale and lead to additional financial hardship and credit issues.  With a relatively slow moving market, this could open the door for more buying and selling to take place, giving the Sacramento real estate market the shot in the arm we’ve been waiting for.

For those who have been considering a short sale, one of your major potential setbacks has been taken off the table.  I know some people still have other concerns, but when facing a potential foreclosure, we believe the short sale option is the lifeline that many homeowners are looking for.

Just look at the benefits:

1. Minimal credit damage vs. a foreclosure
2. The ability to be back in the home buying market usually within one or two years
3. The dignity that goes with selling your home as opposed to “losing” your home
4. No out of pocket costs associated with selling or closing
5. Getting out from underneath a huge burden of debt

If you’ve recently been turned down for a loan modification, are suffering a financial hardship and are underwater on your mortgage, you may want to explore the short sale option.   Now with the law on your side it pretty much eliminates any downside risk, and we think that’s a very good thing.