Can the Bank Get a Deficiency Judgment After a Short Sale In Nevada?

If you go through a foreclosure in Nevada, but the foreclosure sale doesn't bring in enough money to cover the balance of your mortgage loan, the difference between the sale price and your total debt is called a "deficiency." Many states, including Nevada, subject to a few limitations, allow the bank to then get a deficiency judgment (a personal judgment) against the borrower for the amount of the deficiency.

But what happens to the deficiency if you complete a short sale or a deed in lieu of foreclosure? Fortunately, Nevada law prohibits deficiency judgments after a short sale or deed in lieu of foreclosure under certain circumstances.

Short Sales and Deeds in Lieu of Foreclosure: The Basics

You can avoid a foreclosure with a short sale or deed in lieu of foreclosure, but either option can result in a deficiency.

What Is a Short Sale?

A "short sale" is when you sell your home for less than the total mortgage balance. The proceeds from the short sale pay off a portion of the debt. The deficiency amount is the difference between the sale price and the total mortgage debt.

What Is a Deed in Lieu of Foreclosure?

A "deed in lieu of foreclosure" is when you hand the deed to the property over to the bank rather than going through a foreclosure. With a deed in lieu of foreclosure, the deficiency amount is the difference between the home's fair market value and the total mortgage debt.

When Nevada Law Prohibits a Deficiency Judgment

Under Nevada state law, the bank can't seek a deficiency judgment against you after a short sale or deed in lieu of foreclosure when all of the following apply:

• the foreclosing creditor is a banking or financial institution
• the property is a single-family residence that you own at the time of the short sale or deed in lieu of foreclosure
• you used the borrowed amount to buy the property
• you have continuously occupied the property as your principal residence since getting the loan
• the short sale or deed in lieu agreement doesn't expressly state the amount of money still owed to the bank or does not authorize the bank to recover that amount, and
• the agreement contains a conspicuous statement that the bank has waived the right to seek a deficiency and says how much is being waived. (Nev. Rev. Stat. § 40.458) (June 13, 2011).

Getting Help

If you want to fight a foreclosure in court or need help arranging a short sale or deed in lieu of foreclosure that won't leave you liable for a deficiency judgment, talk to a foreclosure attorney. It's also recommended that you speak to a HUD-approved housing counselor.