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15250 Ventura Blvd, Suite 601
Sherman Oaks, CA 91403 
Call (213) 596 0265

Short Sales and Foreclosure

As foreclosure rates hit record levels, more sellers are turning to short sales as a way to avoid foreclosure. So, how does it work? In a short sale, the seller arranges with their mortgage lender to accept a price that’s less than the amount they owe on the property. As part of this arrangement, the lender typically agrees to forgive the rest of the loan. As a result, the seller doesn’t have to go though a foreclosure, the buyer picks up a property at a discount, and the lender avoids taking on the burden of unloading the property. The sellers need to know that a short sale may damage their credit, though probably not as much as a foreclosure and it might have tax consequences. Our firm can refer you to a competent real estate agent to complete the short sale process and we can consult you on the tax consequences of such transaction.


Foreclosure is the most commonly used legal process by which a lender or other real property lien holder may dispossess you of your home and sell the home in order to obtain repayment of a debt. A foreclosure most often results from a failure to make timely mortgage payments or other default on your home loan. Lenders are in the business of lending money. A lender will usually not commence a foreclosure action unless you have missed multiple consecutive payments and have not made prior arrangements with them to do so.

It is also worth noting that, if a lender completes a foreclosure and the proceeds obtained from the foreclosure sale are less than the amount owed on the loan, then the lender may also be entitled to seek a deficiency judgment from a court against you for the difference between the amount of the sale proceeds and the amount owed on the loan. Conversely, if there are leftover proceeds from the sale of the property at a foreclosure sale, after payment of all amounts owed to the lender and to additional junior lenders or secured creditors, then the foreclosing lender is typically required by statute to return such additional proceeds to the homeowner.

How can a foreclosure affect you?

Foreclosures and deficiency judgments affect homeowners in several ways. The most obvious affect of a foreclosure is that it will dispossess you of your home. Upon the successful completion of a foreclosure sale by the lender, you will no longer own the home, and if you do not vacate the home, you will be subject to eviction proceedings. Furthermore, as previously stated, you may also be subject to a deficiency judgment if the proceeds from the foreclosure sale were less than the amount owed on the loan. If a lender obtains a deficiency judgment, it may then garnish your paycheck and/or bank accounts, attach and sell automobiles or other personal property owned by you or seek other judgment enforcement remedies available under applicable laws. A foreclosure or deficiency judgment will also damage your credit worthiness and limit your ability to obtain credit in the future.