As the economy has fallen into a recession, homeowners in Palm Desert, La Quinta, Rancho Mirage and throughout the Coachella Valley have had to ponder whether to continue paying their mortgage or attempt to walk away from their loan obligation. As a real estate attorney with an office conveniently located on the Palm Desert / La Quinta border, I have helped many homeowners with this difficult decision. While many homeowners think the decision should be based on the amount your home is “upside down”, in reality, the decision will most likely depend on whether or not you are protected by California’s anti-deficiency laws.
California’s anti-deficiency law is codified in California Code of Civil Procedure section 580(b). Said section applies to homeowners in Palm Desert, La Quinta, Rancho Mirage, throughout the entire Coachella Valley, and the remainder of California and reads as follows: “No deficiency judgment shall lie in any event after a sale of real property or an estate for years therein for failure of the purchaser to complete his or her contract of sale, or under a deed of trust or mortgage given to the vendor to secure payment of the balance of the purchase price of that real property or estate for years therein, or under a deed of trust or mortgage on a dwelling for not more than four families given to a lender to secure repayment of a loan which was in fact used to pay all or part of the purchase. Price of that dwelling occupied, entirely or in part, by the purchaser. Where both a chattel mortgage and a deed of trust or mortgage have been given to secure payment of the balance of the combined purchase price of both real and personal property, no deficiency judgment shall lie at any time under any one thereof if no deficiency judgment would lie under the deed of trust or mortgage on the real property or estate for years therein”.
In other words, the bank cannot recover from you the difference between what the home sells for by short sale and the loan amount which stems from the property’s prior purchase price. Remember, in order to qualify, the borrower had to live in the home — an investment property or a vacation home will not qualify for protection. A refinance or home equity line of credit will also waive the protections provided by California’s anti-deficiency laws.
The decision to walk away from your home should be made only after careful consideration of all of your options. A major factor may be who ends up responsible for the deficiency amount. Contact Afsar Law Group today to have your loan documents reviewed to determine if walking away from your Palm Desert, Rancho Mirage, La Quinta or other Coachella Valley home is the right decision.
Amir H. Afsar, Esq. is an attorney and founder of Afsar Law Group, A.P.C. which represents clients in business, real estate, construction, and estate planning matters throughout the Coachella Valley including Indio, La Quinta, Bermuda Dunes, Indian Wells, Palm Desert, Rancho Mirage, Cathedral City, Palm Springs, Banning, Joshua Tree, and other cities located within Riverside and San Bernardino County. Mr. Afsar can be reached at Afsar Law Group, A.P.C. at 760.345.3110.