FORECLOSURE/SHORT SALE BROCHURE

TRUSTEE'S FORECLOSURE SALE is the easy method of foreclosure in the State of Nevada and most other States. It's fast and inexpensive.

In a Deed of Trust the borrower (Trustor) gives the Trustee (typically a title company) the right to sell the property if the Buyer defaults.

The first step is a Notice of Default. It states the amount in default. 90 days is given to cure the default by catching up on all late payments, penalties, and costs.

After the 90 days expires, the lender files a 21 day Notice of Trustee's Sale, at which time an auction is held, usually at Court, with limited publicity resulting in a greatly depressed price. After it is over, the former owner must be evicted if he refuses to leave.

The Borrower can still catch up on all late payments until 5 business days prior to the sale. Within the last 5 days, the only way to stop a sale is by payment in full of the entire balance. EXCEPTION Personal Residence = There is a state law exemption for a purchase mortgage for a personal residence. The owner can "walk away" from the property with immunity from personal liability regardless of the method of foreclosure. However if it is not a purchase money first mortgage, such as a refinanced first mortgage or a second or third mortgage which is foreclosed out by the first mortgage, those lenders may have up to six years to sue you on a deficiency on the mortgage.

DEED IN LIEU OF FORECLOSURE

This is a short-cut, when the owner accepts the inevitable and gives the property back to the Bank. However, many lenders now refuse to take a Deed in Lieu of Foreclosure. They get "cleaner" title if they foreclose, effectively wiping out all other claims to the property.

BANKRUPTCY

Many borrowers stall until the last minute and then file bankruptcy to stop the sale. If there is no equity in the property the lender eventually will make a "Motion for Relief from the Automatic Stay" to allow the foreclosure to proceed. This takes time and costs the lender more money.

Foreclosure after Sale

"I sold the property. The loan is still in my name. The buyer was supposed to make all the payments. Now the Bank is foreclosing and sending me notices." As discussed above, if the lender uses the Trustee's Sale on a purchase money deed of trust on a personal residence, it waives any right to seek a deficiency judgment against anyone. Therefore, a seller who is still on the mortgage for his former property has little (if any) real risk of liability for a deficiency. The next concern is, "But will it affect my credit?"

If the former owner can prove that the loan was current when he sold the property, although it may show on a credit report, a letter to the credit agency explaining that the foreclosure was after a sale, usually works.

"SHORT SALE"

Most lenders are in the money business and would rather not own real estate. If the value of the property has decreased, some lenders cooperate and allow a sale of the property, instead of forcing a foreclosure.

If the debt is greater than the property's value, in order to sell it and turn the lender's interest into cash, the lender must agree to accept less than full payment as satisfaction of the debt.

Many lenders realize that some money soon is better than less money (since foreclosure auctions usually bring low prices) later, especially if the debt continues to increase during the pendency of the foreclosure.

However, some lenders refuse to agree to sign a waiver of the deficiency against you, and if you proceed with the short sale and related documents, you may have signed a document which extends the statute of limitations for the lender to collect against you for a period of six years instead of the normal six month limitation period from the date of the sale to the date you are served with a lawsuit.