Short sales are looking more attractive.

Foreclosure changes in the state of Nevada are making short sales more attractive.  Recently a number of lenders have commenced foreclosure through the judicial foreclosure process.  A judicial foreclosure is governed by NRS 40.  These are different from what the public is used to, the non-judicial process, governed by NRS 107.  The judicial foreclosure is a lawsuit filed in court, just like any breach of contract case.

Deficiency Judgments.  The potential issue with a judicial foreclosure is a deficiency judgment.  In a normal foreclosure, there is potential liability to be pursued for the difference between what the property sells for at the trustee sale and the outstanding debt.  Nevada is a recourse state.  If you do not pay back your loan, you can be sued.  (There have been some recent rules enacted to alleviate this issue (see the legislative memo —->here, but the Nevada Supreme Court is poised to limit these applications,  Volkes v. BAC Home Loans Servicing, No. 57304, 2012 WL 642673 (Nev. Feb. 24, 2012)).  Typically, in the last few years, foreclosure did not usually lead to the filing of a lawsuit by the lender for a “deficiency judgment.”  In Nevada this lawsuit to seek this debt has to be filed within 6 months of the trustee sale date.  See my post on this here.  These lawsuits were simply not being filed, for the most part, by the large institutional lenders, only typically by the local, regional lenders.  That has changed.  Lenders are beginning to seek foreclosure via the judicial foreclosure process. (WHY? See the short history below.)  Now, remember, the judicial foreclosure is a lawsuit.  So, instead of the previous scenario where the lender had to decide after foreclosure, if they wanted to hire a Nevada attorney and pursue the homeowner; the lender is already in court.  The judicial foreclosures showing up on line (search the filings here at the —->Eighth Judicial District Court) are demanding two causes of action: 1.) Judicial Foreclosure and 2.) Request For A Deficiency Judgment.  The lender is already engaged with a Nevada attorney, so the lender does not have to make the decision to pursue the homeowner, they simply go to the next step and ask for a judgment immediately after the sheriff’s sale.  Hundreds of these lawsuits have been filed in the Eighth Judicial District Court in Clark County in only the past 90 days.

Short Sales.  Thus, a successful short sale, coupled with the lender releasing the seller of future deficiency liability (see my post on release language –> HERE) is an attractive option for a seller in Nevada.

Short History.  Back in the summer of 2011 the Nevada Legislature passed Assembly Bill 284.  AB 284 changed Nevada Foreclosure Law by adding stricter requirements for the foreclosure process.  It’s complicated.  You can read the Nevada Attorney General’s comments about it here.  You can read the whole bill here.  The NRS statute is 107.080.  In summary – it required lenders/trustee to sign documents prior to foreclosing, which, if done improperly triggers potential civil and criminal penalties.  This effectively slowed the number of trustee sales, notice of defaults, etc. There has been much discussion on this.  Such as the Nevada Attorney General issuing a statement.  Even the legislators that sponsored the bill wrote a memo about this subject recently.  This is rare.  And here we are, judicial foreclosures have commenced.

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This is part of my short sale series listed below in alphabetical order:

7 Tips for Short Sale

Addendum to Short Sale Listing

Advance Fees Continued and the FTC

Advance Fees – Short Sales – FTC II

Charging for negotiating short sales/Negotiators

Deficiency Judgments Nevada

Foreclosure and the One Action Rule in Nevada

HAMP the Federal Shortsale Program coming April 2010

Income Taxes & Foreclosures/Shortsales

Lender Short Sale Approval Addendum

Nevada Supreme Court Mandatory Mediation Program and How it Affects Shortsale

Nevada Short Sale Documents

Seller Being Released From Liability Language in Shortsale

Seller Liability After Short Sale

Short Sale Advanced Fees

Short Sale Addendum to Purchase Agreement October 2010

Short Sale Junior Lien/Senior Liens Rights To Sue & Other Changes

Short Sale Wallet Size Answer Sheet

IRS PUBLICATIONS shortsales/foreclosures:

IRS publication on how 1099 taxes are calculated, exempt, etc.

IRS explanation as to taxes resulting from Foreclosure and Debt Cancellation.

Ten Facts about Mortgage Debt Forgiveness

Questions? Call me. Darren Welsh, Esq. 702 245 1787 email me darren@dwelshlaw.com or drop me a TPS by filling out this form

 

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