Deficiency judgments in Nevada are governed by NRS 40.451 to 40.459. The beneficiary or trustee under the deed of trust is required to file the deficiency action with the court within 6 months after the foreclosure sale. A hearing will be set by the court. If the court determines that the property sold for less than the loan amount, the court will award a deficiency against the borrower. Nevada has strict limitations on the amount the beneficiary or trustee can collect in a deficiency judgment. Under NRS 40.455(1), the judgment cannot exceed the following amounts:
- More than the fair market value of the property at the time of the sale including interest; or
- The lesser of either the amount the property sold for or the difference between the sale proceeds and the loan balance.
In determining the value of the property, the court may hear expert appraisal testimony regarding the fair value of the property. If junior lien holder’s rights have not been extinguished during the foreclosure, they may also sue for deficiency judgments in Nevada. NRS 40.459 provides that guarantors are protected against a deficiency judgment.
How to Avoid a Deficiency Judgment
The majority of the time Nevada borrowers end up negotiating a short sale with their lender to avoid a deficiency judgment. The benefits of using an attorney is that the attorney will negotiate short sale terms providing that the short sale proceeds satisfy your debt. Borrowers should make sure that they get something in writing from their lender confirming that the lender will not pursue a deficiency judgment against them whether they have an attorney representing them or they are negotiating the short sale directly with their lender.
If you file for bankruptcy, your lender cannot pursue a deficiency judgment against you. However, bankruptcy is much more serious and complicated than a short sale, so you need to speak to a Nevada bankruptcy or foreclosure defense attorney first before making any decisions to file for bankruptcy.
Reasons Why Your Lender Won’t Pursue a Judgment Against You
It is rare for Nevada lenders to not pursue deficiency judgments against their former customers. It cost them time and money, and they would rather be making loans than chasing after you for a judgment. Lenders know that most borrowers after a foreclosure don’t have enough assets to go after to make filing for a deficiency judgment worthwhile. They may want to do business with you later, and it’s not good business to sue your customers. So unless you have substantial assets or you strategically defaulted on your mortgage, changes are slim that your lender will pursue a deficiency judgment against you in Nevada.
Talk to a Foreclosure Defense Attorney
Nevada foreclosure laws are complex. If you are facing foreclosure or your lender has filed a deficiency judgment against you, it is recommended that you hire a Nevada foreclosure defense attorney to negotiate a resolution with your lender. The attorney is an expert at Nevada foreclosure laws, and will be able to get you better results than if you handle the negotiations on your own.
