CA Foreclosures on Investment Properties


If a person owns a primary residence and has also purchased an investment property (rental), and the note on the investment property is in default, does California’s “no defficiency judgements” rule still apply, thus protecting the person’s other assets (including the equity in their primary residence) from the lender’s reach?

Also, will banks be willing to negotiate short sales or deeds in lieu with such borrowers?



normally Investment properties are consided Recourse loans unlike owner occupied (non recourse when you bought it with purchase $)

to answer your question; normally California takes the property as payment for the 1st… but you do risk the 2nd mtg coming after you personally…

ck with a RE atty… and tax professional

Hi Chuck, the first response you got was incorrect. They can’t get a deficiency judgment against you and come after your primary. The only exception is if you have a non-purchase money loan on the rental. What they will do is 1099 you the loss.

You could do a deed in lieu of foreclosure, but my experience is that the banks want you to short sale it first.

I am not a lawyer, so seek legal advice. My knowledge comes from being a licensed real estate broker in California and specializing in foreclosures and short sales.

Good luck.


The way that I have been explained it having to do with deficiency states, although a deed in lieu of foreclosure may work, it will be taxing on your credit. However, a short sale is much more detrimental to your credit. I’m sure the bank would prefer the short sale, but it would be worse for your credit. Loss Mitigation would work…