With regard to Ca Civil Code 1695: Is there someone ...

With regard to Ca Civil Code 1695: Is there someone I can talk with regarding some of the details in this legislation?

Look for a good real estate attorney. If you are a Realtor, the California Association of Realtors has a legal team that has written quite a bit on it, and I believe they are also take member questions. If you have a specific question regarding the law we’d also be happy to share our thoughts.

I am not a Realtor and, therefore, do not have access to CAR’s legal team.?I am an investor interested in negotiating the SS with the lender and then selling the property to an end buyer in a double closing.?I have talked with 4 local?RE attorneys who have advised me against doing these transactions because of the roadblcoks imposed by CCC 1695.
?Can you recommend an experienced RE Attorney who can? help me with the paperwork for the SS transaction in a way that satisfies the requriements of CCC 1695? I am in the SF Bay Area.

Hi Sean,
There are specific forms that need to be used when purchasing homes in default and CCC’s are clear when it comes to investors. “Double closings” are a whole other thing and most title companies won’t do them. Sellers have recourse up to 2 years + all legal fees so you got some good advise from the attorneys.
I’m aware of one attorney in Sacramento that invests in these properties and he may be able to help you

Hey Sean, I’m in the L.A. area and I was wondering if you might know of any good foreclosure attorneys out this way… Thanks.

I have read and heard of Ron Ballard, a California attorney, who has extensive experience and perhaps is an authority on Short Sale legislation. As a matter of fact I have attended several Webinars that Ron has participated in. Readers may want to check the State Bar Association of the location of this attorney.

My attorney advised the same re:1695. And with just a couple of exceptions, I’ve listened to him. That said there are a lot of folks out there who buy preforeclosures and who do (or have done) quite well. I’ve met a number and some are fabulous people, and others are down right crooks. I don’t think at the end of the day they simply found a better attorney. Instead I think the reality is that most folks who are losing their home will never have sufficient funds to mount a legal fight against you. District Attorneys sometimes get involved, but usually only if it involves the elderly as they are too underfunded to take on the investigative work necessary to pursue these cases. And in the case of a short sale the likelihood of the homeowner coming after you is perhaps fairly low in which case you might not really need to worry about 1695. Instead I’d be worried about the lender. I certainly would not make any statements the lender could find to be fraudulent. A lot of these loans are federally insured, and if you submit a false appraisal or make other false claims you could find yourself facing federal fraud charges. Good luck.

It is my understading that The Seller or home owner cannot receive any money

Nothing in the ca civil code says that. What you heard is probably a lender requirement when the lender agrees to a short sale.

I am a newbie investor and just bought a short sale. I have never purchsed a short sale before and actually did not expect to close this property. Here is the situation.

The realtor had a short sale listing that he listed in September 2009 and sold in 1 day at 270K ($270K is a good price at that time. Market has been increasing since that time). Being a short sale escrow went on forever and that original buyer eventually gave up in late January 2010. The agent contaced me and asked if I would be interested in this property in early February 2010 at the $270K price and I said yes (thinking being a short sale it would still take a while and the chances of getting this property at $270K may be slim anyways). Well lo and behold the short sale was approved in about a weeks time and we were able to close in 2 weeks (I got the property for $270K and the appraisal came in at $310K). Apparently the entire time the property was in escrow with the first buyer the short sale wheels were turning and I got the approval at the end of the process. After close of escrow my agent learns of ccc 1695 and informs me of future liability.

What I want to know is what am I to do now? We have the property for sale at $359K and it should sell for $350K. We have clean the carpet, paint touch up, new sod, drained and cleaned the pool, cleaned up the landscape (house was a mess, lots of kids and wild dogs). I am now worried that the prior owner will come back for damages. What is my liability, my agents liability and what should I do now. I am upset with this agent for pulling me into this (even though he did not know about ccc 1695 he should have known). I did not do anything to pressure the seller into selling and the price was actually set the the original purchaser in September 2009 when the market was lower.
Any insight greatly appreciated!!

I believe you would be an “equity purchaser” under CC 1695. I’m guessing your agent failed to use the correct form, or provide the 5 day cancellation period as required by that law. You can read the possible consequences of those actions here: http://www.foreclosureradar.com/ca-foreclosure-law/ca-foreclosure-law-civil-code-1695. Specifically read 1695.7, 1695.8. Using a representative may have created additional liability for you. See section 1695.17. I’ve heard many preforeclosure investors say they don’t worry about CC1695 because homeowners aren’t aware of it, and they’ve bought hundreds of properties without problem. For now the first thing I’d do is a get a preliminary title report and see if the title company will insure the sale (note that CC1695 allows the sale to be rescinded for up to 2 years if you didn’t take the required actions, so there is real risk for a title co). If they won’t insure it, you might try making a deal with the seller to clear up the title issue. Maybe some of the preforeclosure investors that deal with this all the time have more to add…

I am an active SS investor. There are ways to work with 1695. I would not recommend Ron Ballard. He has only been work with SS’s for two years and was new to them then. Most of his material was taken from another attorney and did not work in California.

Freeflyer, Can you please elaborate on the ways to work around CCC 1695? What liability would an investor face or a licensed realtor for that matter? How have you been successful in the past and what issues should be avoided? Thank you.

If we are buying a property as a SS from an owner who has received a NOD, but the subject property is NOT their residence (it’s a SFR rental) does CCC1695 apply and do we need to use the Equity purchase agreement and give them 5 days to cancel?

I know we need to do this with owner occupied properties but not sure about rental properties.


You can find the text of the code here:


Note the following section:

“b) “Residence in foreclosure” and “residential real property in foreclosure” means residential real property consisting of one- to four-family dwelling units, one of which the owner occupies as his or her principal place of residence, and against which there is an outstanding notice of default, recorded pursuant to Article 1 (commencing with Section 2920) of Chapter 2 of Title 14 of Part 4 of Division 3.”

That said, you might still either want to follow 1695, or make sure you carefully document the fact that it was a rental. You don’t want to put yourself in a position where the homeowner comes back after the fact and says they actually were the homeowner and just signed something under duress.

Sean, have you ever done one of these deals where the property was not the owners primary place of residence? If so, what was your experience? Observations? Thanks.

The key thing to remember in a non-owner occupied deal, cash or not, is that they may claim they were actually living there after the fact in order to take advantage of the law… and you. If you do a deal like that, I’d suggest having some documentation to prove they lived elsewhere and have a 3rd party witness that. The other thing I’d suggest on these is to use your head, and only do win-win deals. If you are dealing with a combative, angry, seller, it might be better to pass. Be especially careful if they are elderly. While they may be perfectly happy with your offer, don’t be surprised if you find one of their children or friends accusing you of taking advantage of them, aka elder abuse, which is not something you want to be involved with. Hope that helps.