A short sale is the term used to describe a sale of real estate in which the seller receives less than the amount owed on the mortgage. The bank or other lender then negotiates to forgive the difference between what is owed and what is realized from the sale. In markets with declining home values, short sales may be the best way for lenders to realize the value in a home. Short sales in Las Vegas are also appealing to homeowners seeking to avoid foreclosure after receiving a notice of default. At Schwartz Flansburg, our attorneys help homeowners protect their interests during the short sale process. We explain the tax implications and talk about potential consequences on future credit scores. Our attorneys can help you decide whether a short sale is right option for you an your family.
On October 1, 2013, Nevada’s Homeowner Bill of Rights came into effect, making it legal for homeowners to short sell their properties and rent the home back from the buyer. Normally, lenders require sellers to sign an “arm’s length” affidavit, which often states the homeowner will not rent back the property from the buyer. Under Nevada law, as changed by the Homeowner’s Bill of Rights, arm’s length affidavits are no longer enforceable in the State. As your attorney it is our job to help sellers understand all of their options, including why a sale/leaseback of your home may be best for you.
Lenders are not always eager to accept short sales in lieu of full payment. Short sales require more paperwork and take more time than conventional home sales. There may be additional loans on the home — frequently the case in difficult economic times — that require permission from multiples lenders, not just the primary mortgage holder. The bank may be facing a big loss on the property because there is little home equity and a steeply declining market. Nevertheless, short sales are generally a better financial result for lenders than foreclosure sales.
Homeowners who sell property for less than its outstanding mortgage must obtain approval from the lender or make up the difference themselves. There are numerous reasons why a bank might approve a short sale. If the homeowner is several payments behind, the lender may see a short sale as a way to get something out of the house. If the home is in an area of steeply declining values, the lender may decide that it is better to get some money now than even less later after foreclosing on the property. Importantly, short sales allow lenders to avoid the costs of the foreclosure process.