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Deficiency Judgments in Nevada...Foreclosures vs. Short Sales

The Great Seal of the State of NevadaImage via Wikipedia

In Las Vegas, Nevada short sales, the biggest concern and issue for the short sale seller (not to mention the real estate professional and other parties to the transaction) is whether or not the lender/bank will agree to not pursue a deficiency judgment as a part of the short sale approval.

There is still alot of confusion concerning the timeframes that lenders can pursue a borrower after a foreclosure or a short sale.

Nevada had been a recourse state for foreclosures prior to the new law that took effect last year.  What does this mean?

For a homeowner who obtained a purchase money loan for their property prior to October 1, 2009 and subsequently was foreclosed upon, the 1st lien holder has 6 months to pursue a deficiency judgment for the balance owed to the bank.  Junior lien holders (2nd, 3rd mortages) have a total of 6 years to pursue a deficiency judgement.

Effective October 1, 2009, Nevada became a limited recourse state similar to California.  Loans made after October 1, 2009; by a financial institution to a borrower who continuously occupies the property as a primary residence are nonrecourse.  This means that the lender may not pursue a foreclosed borrower to recover a deficiency.   This law does not change the statutes that effects short sales... it only applies to foreclosed homes and borrowers.

The following requirements must be met in order for the new law to apply:

  1. The real property is a single-family residence
  2. The loan was used to buy the property
  3. The borrower continuously occupied the property as a principal residence after the loan was made
  4. The original loan was not refinanced
  5. The loan was made by a financial institution

What about Las Vegas Short Sales and Deficiency Judgments?

Bottom line for short sales -  the lenders (1st or 2nd) have 6 years to pursue a deficiency judgment UNLESS whoever is negotiating on behalf of the seller (listing agent, attorney, 3rd party licensed short sale negotiator) is able to have the proper language included in the short sale approval from the bank/lender. 

More blog articles of interest on this subject from local Las Vegas area attorneys...

Attorney Robert Noggle
Does a 1099-C Waive the Lienholder’s Right to Sue on a Deficiency?

Attorney Darren Welsh
Deficiency Judgments Nevada
Foreclosure and the One Action Rule in Nevada
Seller Being Released From Liability Language in Shortsale

Seller Liability After Short Sale


Are you a Las Vegas area homeowner facing a possible foreclosure and wanting to learn more about your options?  Contact Us Today for a no obligation Las Vegas short sale consultation.

Jan O’Brien is an expert with the Las Vegas short sale process.   She is the co-author of the Certified Foreclosure Alternatives Consultant designation course.   Call Jan direct at 702-858-9191 to schedule a Foreclosure Alternatives Consultation today.

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