The Foreclosure Process in Nevada – Explained
Before I go into explaining the basic foreclosure process for Nevada let me first state that I am not an attorney and you should consult with an attorney when you are facing a foreclosure on your home.
With that being said, here is a brief explanation of the foreclosure process as well as some possible solutions you may have available to you. Every person’s situation is different and not just one solution will be best for all parties.
Judicial vs Non-Judicial
The type of foreclosure process you may see will depend if you are in a judicial state or a non-judicial state. The state of Nevada has both types so it will be more dependent upon the loan you received. The difference depends on the mortgage you obtained on the home. If there was a “power of sale” clause in the document then the non-judicial process will be utilized. A Power of Sale is a document in every Deed if Trust transaction.
If there was no “power of sale” clause then a judicial forclosure will be used. In this type of foreclosure, the mortgagor must go through the court system which after the verdict the home will be auctioned off. If there is a successful buyer then that person receives ownership of the home. If there is no successful bidder then it will be returned to the bank.
In only a Judicial foreclosure will you have a 1-year right of redemption. You can read more by reading this article, too.
The Non-Judicial Foreclosure
The most common type of foreclosure in the state of Nevada is the non-judicial foreclosure. This only means that there are no court proceedings used while going through the foreclosure process.
When people sign their loan documents they will usually be also signing a Power of Sale document. What this document does is preauthorizes the sale of the property (that was collateralized with for the loan) in order to pay off the balance in case a default occurs. This Power of Sale document will be in every situation when you have a Deed of Trust.
The process for a non-judicial forclosure has a minimum time schedule for a series of events to occur. These are minimal time frames. A bank can take a longer time than what is described below.
Step 1: Grace Period
All mortgages will have a date range for when a bank payment is due, called the grace period. Typically on home mortgages, this will be between 10 – 15 days. The most common is 15 days. On the next day, the bank can charge a late fee for the missing payment. You will need to check your own Promissory Note for the grace period and the late fee amount.
At this point in time, you are at the early phase of foreclosure but no legal action has started. This won’t occur for several months but this is the first stage where someone may be in trouble.
Step 2: 30 Day Late
When the last day of the month that the first payment was deemed late then this is when a 30-Day Late payment will be triggered. The bank may file this on your credit report and this now begins the process of when the bank will attempt to call and work something out with you to catch up on the missed payment.
Step 3: 60 Day Late
This is triggered when two full months have occurred and you still have not made the first or now a second payment. This will be placed on your credit at some point in time. Your scores will now begin to get seriously hurt by the delinquencies.
A 90 day late will occur after the third consecutive payment is late.
Step 4: 120 Day Late and Notice of Default
When four months have occurred and no payment has been made then you will have a 120-Day Late on your credit report. At this time the bank or trustee can send you a legal document called the Notice of Default and Election to Sell (a.k.a., a NOD or Notice of Default). You can read more into the details on what serves as a proper formatted NOD by reading this article.
This NOD is a public document which will be filed with the county recorder’s office. This is also a public notification that you are in default on your loan. When this is filed it is now Day 2 of the 120-day legal cycle for a foreclosure to occur. Again, this time frame is the quickest that a bank must take to reclaim the home. Many banks will take much longer to do this process.
The recording of the NOD begins the actual clock for the foreclosure process. Before you were just in default on a few payments now the legal action can be started to take a home back from a borrower.
Step 5: The Notice of Trustee Sale
After the NOD has been filed starts a clock that the bank must adhere to in order to take back your home. It will take a minimum of four months after the NOD is filed before a bank can record a Notice of Trustee Sale (NOTS). This is the minimum timeframe. Many banks may go through a much longer process depending on their own backlogs.
Often a bank will take a lot longer before they will record the sale/auction date. I have seen during the downturn of the market in 2008 – 2012 where the bank would wait several years before going to a sale.
The NOTS must give the borrower one final chance to make things right. The sale must be at least 20 days after the recording of the document. The notice must be posted in several public places. This includes county websites pertaining to just this sort of notification.
Step 6: After the Sale
After a sale has occurred either by being sold at the auction or the title reverting back to the bank then if you haven’t already vacated the home then the bank can begin an eviction process or if the home is owner-occupied they will begin a “formal eviction”. A “summary eviction” is used to remove a tenant.
The formal eviction process is a legal matter that needs to be adhered to by the letter. Read this article for that process.
The Actual Timeline for Non-Judicial Foreclosure in Nevada
Missed Payments Day 1 – 120.
Forclosure Day 1 – Late after being 120 days late on payments (four months).
Foreclosure Day 120 (approximately 240 days since the first payment was missed).
Stalling a Foreclosure
To help buy time there are a number of things a homeowner can do to help delay the bank from taking a home.
If you have equity in the home and the ability to sell with little to no money out of your pocket then a traditional sale would be possible.
The sale of a home through the use of a REALTOR® will be about 5 – 9% of the sales price to cover closing costs, title/attorney fees, and real estate commissions. If there is enough equity in the home to cover these costs or you have the small amount it will take to close the transaction then this is the ideal scenario.
The Short Sale
The most common thing a homeowner can do is to attempt to sell the home. If there is no equity in the home (i.e., you owe more than the market deems it is currently worth) then a short sale is a good option.
Essentially, a short sale is selling the home “short” to what is owed. This means selling it for less than the current loan balance.
Here is an article explaining in more detail the process of a short sale. I will cover this in a future article.
Deed In Lieu of Foreclosure
This is essentially a voluntary surrender of your home back to the bank. This is done when a homeowner just wants to be done with the home. The most saving grace on doing this technique is to save your credit from getting any worse, especially if there is a foreclosure looming.
Selling the Home Subject To…
A much-overlooked technique is to sell the home subject to the current financing that is in place.
This requires a real estate investor who is willing to take on the home based on the financing that is already in place. This is often for a property that is too expensive to sell via the traditional method, or not enough room to sell via a short sale, and you want to save your credit from future delinquencies.
An investor may give you a little moving money to find other accommodations.
Why Subject to?
The reasons why an investor would be willing to overpay for a home is not too complicated. One reason is that the home could be a possible good cash flow as a rental or lease option.
Another reason is that it is a lot easier for a buyer to buy via existing financing with you rather than try to qualify for an investment loan which may require 20% down payment. Thus, taking over your payments is a cheaper and easier process for them.
Going through a foreclosure is a very personal and trying time. Believe me, I know. I lost my personal residence to foreclosure back in 2007 at the start of the downturn of the market. It was not an easy time financially or emotionally.
By understanding the foreclosure process and some ways to get out can be very helpful.