§ 580e.No Deficiency Owed Or Collected Upon Note Secured By Deed of Trust Or Mortgage For Dwelling of Not More Than Four Units
Title 8. Of the Trial and Judgment In Civil Actions · Chapter 1. Judgment in General · Last amended 2023 · Last verified July 28, 2026
In one sentenceSection 580e bars a deficiency judgment when the owner of a dwelling of four units or fewer sells it in a lender-approved short sale for less than the outstanding debt, so long as title is transferred and the sale proceeds are tendered as agreed, while preserving the lender's remedies for fraud or waste.
(1)No deficiency shall be owed or collected, and no deficiency judgment shall be requested or rendered for any deficiency upon a note secured solely by a deed of trust or mortgage for a dwelling of not more than four units, in any case in which the trustor or mortgagor sells the dwelling for a sale price less than the remaining amount of the indebtedness outstanding at the time of sale, in accordance with the written consent of the holder of the deed of trust or mortgage, provided that both of the following have occurred:
(A)Title has been voluntarily transferred to a buyer by grant deed or by other document of conveyance that has been recorded in the county where all or part of the real property is located.
(B)The proceeds of the sale have been tendered to the mortgagee, beneficiary, or the agent of the mortgagee or beneficiary, in accordance with the parties' agreement.
(2)In circumstances not described in paragraph (1), when a note is not secured solely by a deed of trust or mortgage for a dwelling of not more than four units, no judgment shall be rendered for any deficiency upon a note secured by a deed of trust or mortgage for a dwelling of not more than four units, if the trustor or mortgagor sells the dwelling for a sale price less than the remaining amount of the indebtedness outstanding at the time of sale, in accordance with the written consent of the holder of the deed of trust or mortgage. Following the sale, in accordance with the holder's written consent, the voluntary transfer of title to a buyer by grant deed or by other document of conveyance recorded in the county where all or part of the real property is located, and the tender to the mortgagee, beneficiary, or the agent of the mortgagee or beneficiary of the sale proceeds, as agreed, the rights, remedies, and obligations of any holder, beneficiary, mortgagee, trustor, mortgagor, obligor, obligee, or guarantor of the note, deed of trust, or mortgage, and with respect to any other property that secures the note, shall be treated and determined as if the dwelling had been sold through foreclosure under a power of sale contained in the deed of trust or mortgage for a price equal to the sale proceeds received by the holder, in the manner contemplated by Section 580d.
(b)A holder of a note shall not require the trustor, mortgagor, or maker of the note to pay any additional compensation, aside from the proceeds of the sale, in exchange for the written consent to the sale.
(c)If the trustor or mortgagor commits either fraud with respect to the sale of, or waste with respect to, the real property that secures the deed of trust or mortgage, this section shall not limit the ability of the holder of the deed of trust or mortgage to seek damages and use existing rights and remedies against the trustor or mortgagor or any third party for fraud or waste.
(1)This section shall not apply if the trustor or mortgagor is a corporation, limited liability company, limited partnership, or political subdivision of the state.
(2)This section shall not apply to any deed of trust, mortgage, or other lien given to secure the payment of bonds or other evidence of indebtedness authorized, or permitted to be issued, by the Commissioner of Financial Protection and Innovation, or that is made by a public utility subject to the Public Utilities Act (Part 1 (commencing with Section 201) of Division 1 of the Public Utilities Code).
(e)Any purported waiver of subdivision (a) or (b) shall be void and against public policy.
Plain-English Summary
Short sales close a gap the older anti-deficiency statutes didn't fully cover: a sale approved by the lender, for less than what's owed, that never goes through foreclosure at all. Where a note is secured solely by a deed of trust or mortgage on a dwelling of four units or fewer, no deficiency can be owed, collected, or even sought if the owner sells for less than the outstanding balance with the lender's written consent, and both the title transfer and the tender of sale proceeds happen as the parties agreed.
Where the note isn't secured solely by that dwelling — other property also secures the debt — the protection narrows but doesn't disappear. No deficiency judgment can be entered on that note itself, and the rights of everyone involved with respect to any other property securing the loan are treated as if the dwelling had been foreclosed through a trustee's sale for a price equal to the short-sale proceeds, following the approach § 580d already takes for trustee's sales.
A lender can't demand extra compensation beyond the sale proceeds in exchange for consenting to the sale, and the protection doesn't shield a trustor or mortgagor who commits fraud or waste with respect to the property — the lender keeps its ordinary remedies for that. The section doesn't apply where the trustor or mortgagor is a corporation, LLC, limited partnership, or political subdivision, and it carries the same carve-out for certain regulated bonds and public utility debt found in § 580d. Any waiver of these protections is void as against public policy.
Frequently Asked Questions
Does § 580e protect a homeowner who completes a short sale?
Yes, if the dwelling has four units or fewer, the sale has the lender's written consent, and the resulting proceeds are tendered as agreed — no deficiency can be owed or collected on that note.
What if other property besides the dwelling also secures the loan?
The protection against a deficiency judgment on that note still applies, and the borrower's rights as to the other collateral are treated as if the dwelling had been sold through a trustee's sale under § 580d.
Can a lender ask for anything extra in exchange for approving a short sale?
No. Section 580e bars a lender from requiring any compensation beyond the sale proceeds for its written consent to the sale.
Does § 580e protect a seller who committed fraud or damaged the property?
No. Subdivision (c) preserves the lender's existing remedies for fraud or waste regardless of the short sale.
Does this section apply to a corporate or LLC borrower?
No, § 580e(d) excludes borrowers that are corporations, limited liability companies, limited partnerships, or political subdivisions of the state.
Source & verification. Section text is reproduced verbatim from
the Deering's California Codes Annotated / vLex. Enacted by the California Legislature.
Last verified July 28, 2026.
· Official source
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