SHORT SALES are an alternative to a foreclosure. When the borrower can no longer make the mortgage payments as agreed, he is faced with many decisions. One is to allow the lender to foreclose. Another is to get the lender to agree to accept a payoff of less than the balance owing on the loan. To understand short sales, one must first understand foreclosures.
Nevada permits two types of foreclosure proceedings. They are the non-judicial foreclosure and the judicial foreclosure. Non-judicial means that the process is administered without court supervision. Judicial foreclosures are a more complicated, expensive and time-consuming route toward the same end. non-judicial foreclosure through the Deed of Trust, which contains a power of sale clause. The Deed of Trust is signed by the borrower at the time the loan is given. The power of sale clause provides the terms of any foreclosure action, identifies the trustee, specifies the timeline of the foreclosure process, and enumerates the powers of the trustee. To go forward with a non-judicial foreclosure, the lender must proceed according to the strict procedures and timeline of notifications and waiting periods. If all are carried out properly, the lender may take back the home and sell it to recoup the debt. By electing the non-judicial procedure, the lender agrees that the sale of the home will completely fulfill all obligations of the debt.
To proceed with a judicial foreclosure, the lender must file for foreclosure in court, then record a notice of the pending lawsuit (lis pendens). After the defendants in the lawsuit have been served, they have an opportunity to answer the foreclosure complaint. A trial ensues and at the conclusion of the trial, a judgment for foreclosure is issued. After the judgment, the judicial sale (auction) process begins. The proceeds of the auction are used to reduce the debt and pay off penalties, costs and attorney fees. In some situations, the lender may also ask the court for a deficiency judgment against the borrower, which means that if the auction did not cover the amount owed plus all the associated costs, the lender can pursue the borrower for the additional amount.
Whether the lender chooses to foreclose under non-judicial or judicial proceedings is an "either-or" situation. The lender can either use the non-judicial foreclosure or the judicial foreclosure, but not both. This is also referred to as the "one action rule" (NRS 40.430). Only one action may be taken for the recovery of any debt or enforcement of any right secured by a mortgage or other lien upon real property.
WHAT IS A DEED-IN-LIEU OF FORECLOSURE? This is when the borrower transfers the real property title (deed) to the lender instead of the lender foreclosing and the lender accepts the deed in full satisfaction of the mortgage debt
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