Given that this is such a common occurrence and such a common word these days, I thought my readers might like some information on Foreclosure in Las Vegas and Nevada.

How Does a Foreclosure in Nevada Work?

Some Terms you'll need to know:

1. Judicial Foreclosure - A foreclosure that is accomplished when your lender files for a foreclosure in the Nevada Court System.

2. Non-Judicial Foreclosure - a covenant, provision or contract term in your mortgage loan agreement, promissory note or deed of trust which provides that the lender can foreclose upon you without going to court.  This is the most common method of foreclosure in Nevada.  

3. Power of Sale Provision, or Trustee's Power of Sale. See number 2 above, a contract term in your loan documents which allows your lender to foreclose upon your house without filing against you in court.

4. Deed of Trust. Without getting too technical, the Deed of Trust is, in essence, the same as a mortgage.  Essentially it is a trust that says, the homeowner owns the house, but owes the lender money, if the homeowner stops paying the lender, the lender can take the house back.

Nevada allows both judicial in court or non judicial out of court foreclosures.  If your loan documents contain a power of sale provision, or if the deed of trust or mortgage on the house contains a power of sale clause, the bank will most likely pursue foreclosure without petitioning the court to do so.  Most deeds of trust or mortgages in Nevada do contain a power of sale clause.  This is a big benefit to the banks.  By obtaining a foreclosure out of court, the bank saves both time and money. 

If your loan documents or deed of trust / mortgage does not have a power of sale clause written into the deed of trust, then judicial or in court foreclosure must be followed.  The Court process begins with the bank filing a lawsuit against the home owner who is having difficulty paying his mortgage.  The bank does this to obtain an Order from the Court not to foreclose.  Once this court order to foreclose is obtained, the process of moving toward the sale of the home is the same as in non judicial foreclosure. 

When a power of sale clause contains specific instructions as to when, where, and how the sale of the home is to take place, then those specifications must be followed.  Sometimes, power of sale clauses are not so detailed, and the usual, or what we call below, the Statutory Process of moving toward the sale date is followed. 

The  first step of the Statutory process is  a copy of the notice of default and election to sell the property is sent to the homeowner.  This letter must be sent by certified return requested mail, to the last known address of the homeowner.  This letter is to be mailed the same day it is recorded with the county in which the property is located.

The time line from the notice of sale to the actual auction of the house is usually one hundred and twenty days in Nevada.  The scheduled sale date cannot be sooner than three months after the date the notice of default and election to sell is recorded with the county and mailed to the homeowner.  The notice of default itself, specifies the time, date, and place the sale is to be held.

The process of curing the default, if the homeowner wants to cure his default, must be taken care of during the first thirty five days following the issuance of the notice of default and election to sell.  If the homeowner wants to do this, they must file a notice of intent to cure, not later than fifteen days prior to the scheduled sale date. 

In order to cure the default, and stop the foreclosure sale - the homeowner must pay the lender whatever amount of money is required to bring the loan current.  This money must be paid before noon the day before the scheduled auction of the home. 

If the homeowner does not cure in this way, the sale will proceed as scheduled.  The notice of default and election to sell will contain all the information about the sale; where and when it will occur.  Most often, the beginning bid or the amount required to participate as a bidder on the home will be the total amount of the first mortgage plus the fees and costs and interest the bank has incurred in pursuing the foreclosure.

But, since most homes in foreclosure these days have  little if any equity in them, this opening virtually always too high for investors.  This means that at most sales the property is taken back by the bank.  This means your lender, now owns the home they just spent money to foreclose.  This is a problem for these lenders.

If the home is sold at auction for less than is owed on the loan, the bank has the right to seek the difference between what the sale generated and what they were owed from the former home owner.  The bank must exercise this option within six months of the foreclosure Sale or Trustee's Sale.  After this amount of time, they can no longer seek that money.  This is called a deficiency judgment.  Most people who lose their home to a foreclosure sale do not have any other assets worth pursuing by the bank.  The banks realize that it is a waste of time to try and get blood from a stone in these cases.  So, unless the bank has reason to believe that the former homeowner has other properties worth equity or other assets they could take they will most likely not seek a deficiency judgment.  To do so would just be flushing money and time down the drain. 

It is however important not to rely on this. A bank has the right and may at its option pursue it for six months.  Also, a second mortgagee may pursue the deficiency judgment because it was subordinate or held under the rights of the first mortgagee.  It is possible that the second mortgage may seek a deficiency past the six months required in the case of a first mortgagee.

Go here for Nevada's Law on Trustee's Sales

Go here for Nevada's - so called -Anti-Deficiency Statute 

The foregoing foreclosure article is not legal advice. If you want more information and legal counsel, contact the offices of David Otto & Affiliates, PC by phone or email.