A California beneficiary accepts a short sale during a non-judicial foreclosure, with the property selling for less than the outstanding loan balance. Which statement best describes the beneficiary's ability to pursue the remaining deficiency?
Correct Answer
A) It depends on whether the loan is purchase money or non-purchase money, the lien position, and the terms of the short sale agreement
The beneficiary's deficiency rights depend on several intersecting rules. CCP §580b bars deficiency judgments on purchase money loans secured by 1-4 unit owner-occupied residential property. SB 458 (codified at CCP §580e) prohibits deficiency judgments after a short sale on first deeds of trust secured by 1-4 unit residential property, and extends that bar to junior lienholders who consent to the short sale. However, non-purchase money loans and commercial properties may not receive the same protection, and the written short sale agreement can independently waive or preserve deficiency rights. Because the outcome turns on loan type, lien position, property type, and agreement terms, no single blanket rule applies.
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