My New Blog

By Sue Saunders, NVAR General Counsel

There seems to be a lot of confusion among agents about the difference in consequences between a short sale and a foreclosure. The words “deficiency judgment” seem to strike terror in the hearts of most homeowners who are in default on their loans. The question most often asked is, “What is the difference if I let my home go into foreclosure or if I sell it in a short sale?”
Foreclosure. The only place that the words “deficiency judgment” appear in the law is in connection with a foreclosure. If a borrower is in default on his/her loan, the beneficiary of the deed of trust may choose to foreclose. If the beneficiary on a deed of trust chooses to foreclose on a residence, he can ask the trustee to sell the property at a trustee’s sale. If, at the trustee’s sale, the trustee is not able to sell the house for the amount of the outstanding debt/loan on the house, then the beneficiary has the option of seeking a deficiency judgment against the borrower. Notice, I said “seeking” a deficiency judgment.

A deficiency judgment is not automatic. The beneficiary must file a complaint in a Nevada district court within 6 months of the trustee’s sale asking the court for a deficiency judgment for the balance remaining due. In this lawsuit, the trustee must serve a summons on the borrower (now defendant) just like any other lawsuit. The defendant must file an answer disputing the fair market value of the property sold. (NRS 40.455).

Before awarding a deficiency judgment, the court shall hold a hearing and shall take evidence presented by either party concerning the fair market value of the property sold as of the date of the foreclosure sale or trustee’s sale. If the court finds the debt is more than the fair market value of the property, it may enter a judgment of deficiency against the borrower/defendant. This is called a “deficiency judgment”.
A new law regarding deficiency judgments will take effect for deeds of trust on owner-occupied houses financed after October 1, 2009. This law will help eliminate deficiency judgments under specific circumstances. I’ll write more about that in a future article.

Short sale. A short sale is an alternative to a foreclosure. When the borrower can no longer make the mortgage payments as agreed, he/she may choose the option of working with the lender to agree to accept a payoff of less than the balance owing on the loan. If the lender agrees to allow the borrower to sell the house for less than the original debt, it might not agree to release the borrower from the loan debt. Sometimes, lenders only release the lien so that the buyer at the short sale can take the house without any clouds on the title. However, releasing the lien does NOT relieve the borrower from owing the remainder of the loan. The lender can now sue the borrower on the promissory note (which the borrower signed at the time he/she signed the deed of trust).Since the promissory note is a contract, the statute of limitations for the lender to sue on a contract is 6 years. The lender now has 6 years to file a law suit against the borrower on the promissory note.

It has come to my attention that lenders are now refusing to forgive the balance due on the promissory note and are requiring the borrower to sign a new promissory note before they will approve a short sale. The lender who still holds the promissory note can sell these promissory notes to collection companies. Collection companies have 6 years to sue on the contract/ promissory note. These collection companies can sue the borrower on the promissory note 2, 3, 4, 5 years down the road when the borrower has likely recovered and is in a position to pay.
Foreclosure intervention counseling. The very best thing a borrower can do at the decision making stage is to seek foreclosure intervention counseling. Free foreclosure intervention counseling is available through Consumer Credit Counseling Services (CCCS). These housing counselors will complete a thorough review of the homeowner’s current and projected financial situation. These counselors will explain the various options, time-frames, rights and remedies to the homeowner. Once the homeowner and counselor have determined a possible option that works best for the homeowner, the counselor can assist the homeowner in contacting the lender to discuss a workout plan.

REALTORS® and homeowners can find out more about Consumer Credit Counseling Services by calling them toll free at 1 800 451 4505 or at www.cccsnevada.org .

Statements made by the NVAR Information Line attorneys on the telephone, in e-mails, or in legal e-news articles are for informational purposes only. NVAR’s staff attorneys provide general legal information, not legal representation or advice regarding your real estate related questions. No attorney-client relationship is created by your use of the Legal Information Line and any information you receive. You should not act upon this information without seeking independent legal counsel. Information given over the Legal Information Line or in these articles is for your benefit only. Do not practice law! Inform your clients they must seek their own legal advice.

By Holden Lewis • Bankrate.com

Buying a foreclosed home is a little different from buying a typical resale.

In many cases, only one real estate agent is involved. The seller wants a preapproval letter from a lender before accepting an offer. There often is little, if any, room for negotiation. The home comes as is, and it's up to the buyer to pay for repairs.
On the upside, most bank-owned homes are vacant, which can speed up the process of moving in.

"Buying a foreclosure is definitely a bit of a grind. It's not easy," says Robert Jenson, owner and founder of the Jenson Group at RE/MAX Central in Las Vegas. "You're getting fantastic pricing, but sometimes it takes going through a lot of houses and writing a lot of offers to get the home you want."

In Jenson's stomping grounds of Las Vegas and surrounding Clark County, the housing bust hit hard, and upward of 80 percent of homes sold are "distressed properties" -- foreclosures and short sales. (A short sale happens when the lender agrees to let the owner sell the house for less than the amount owed because the owner can't afford the monthly payments.)

Nationwide, about one-third of sales in May were of distressed properties. A big chunk of those sales went to first-time buyers, according to Lawrence Yun, chief economist for the National Association of Realtors. "First-time buyers are concentrated in the lower price ranges, which include most of the distressed sales," Yun says.

Before you begin the house hunt:

The first two steps in buying a foreclosure should happen almost simultaneously: Find a real estate broker who works directly with banks that own foreclosed homes and get a preapproval from a lender.

5 steps to buying a distressed property
Get preapproved for a mortgage.
Find an agent specializing in foreclosures.
Know how long it takes to sell a home in your price bracket.
Study the sale prices of comparable homes in your area.
Remember the sale is for the home as is.

Elaine Zimmerman, a Memphis real estate investor and author, recommends that shoppers first visit the Web site she owns, ForeclosuresUS.com, or any site with a database of foreclosed homes. You also could look at a local real estate Web site that lets you filter the results to see only foreclosures. You might find the acronym REO, which means "real estate owned" (owned by a bank, that is). This signifies that a home has been through foreclosure and the lender is selling it.

The goal of combing through foreclosure listings is not to find a house; it's to find an agent. Banks usually hire one or a few real estate brokers to handle their REO properties in a market. In a lot of cases, the buyer works directly with the bank's broker instead of using a buyer's agent. That way, the commission doesn't have to be split between two brokers.

A lot of these Realtors have a long-term relationship with these banks, and they know of listings that haven't even come on the list yet," Zimmerman says. "Call them about the listings that you're interested in, but also ask them about listings that may be coming up because sometimes it may take a day or two or even a week before a listing actually comes onto the database."

Such a request might not always pan out. In places such as Las Vegas, where thousands of foreclosed properties are for sale, you might not get much one-on-one attention from overloaded agents. To prove that you're serious about buying, says Jenson, "right before or after you meet with the agent, meet with the lender."

Unless you plan to pay cash, you'll need a recent preapproval letter from a lender. The letter will describe how much money you can borrow, based upon the lender's assessment of your credit score and income.

"The problem is buyers want to find the house first, and then they think they'll work out the financing," Jenson says. "But the problem is the really good deals on these bank-owned, they go quick -- and the buyer doesn't necessarily have time to try to work out the financing afterward. They need to work that out first."

Zimmerman says some first-time buyers make the mistake of assuming that the bank selling the home will also finance the mortgage as part of the deal. "Don't expect to get financing from the bank that foreclosed on it," she says. "That's a totally separate transaction, and they view it that way. The people in the (bank's) REO department are not loan officers. They are getting rid of bad assets." Find the best mortgage rates in your area.

Pricing is not a slam-dunk

There's no rule of thumb on what the bank's bottom line is on price. Just as with any other real-estate purchase, you have to look at the recent sales prices of comparable properties, or "comps."

Jenson says: "You really have to look at the comps in today's current market conditions and write a competitive offer based on that. Sometimes the bank prices the homes really low, and the home will have multiple offers over list price within hours. Sometimes it's priced too high, and you can come in lower. A lot of times, buyers will come to me and say, 'We want to write offers for half price.' It just doesn't work that way."

Keep in mind that foreclosed houses generally are sold as is. That means that you shouldn't expect to get a discount to compensate for repairs. Jenson says: "Let's say the house is listed for $200,000, all the comps are $200,000, and so the client comes in and says, 'Hey, look, I want to buy this house but I've got to do paint, carpet and fix some mold damage, so I want to take $15,000 off the price.' You know what? All the other ones were in the same condition, and they sold for $200,000."

Jenson further counsels to look at the "absorption rate for your product class." After apologizing for getting "too fancy," he explains that he means you should find out how quickly comparable houses are selling. In foreclosure, a 3,500-square-foot house with a pool in a gated community might sell within days or hours, whereas more modest homes might sit on the market for weeks. Or vice versa, depending on market conditions.

If homes in your product class are selling swiftly, "the best advice on a bank-owned property is to come in at your highest and best, unless the property has been sitting on the market forever with no activity," Jenson says. "If you're going to be upset because you would have gone $5,000 more, but you lost the property, just bid the higher price in the first place."

Because repairs are almost inevitable with foreclosed houses, Jenson and Zimmerman recommend getting to know tradespeople who can assess and repair damage from pests, mold and leaks. Zimmerman says you should assume that the air conditioning needs to be fixed, and possibly the heating system, too.

It all sounds daunting. But at least you don't have to wait for the owner to move out of the house.

By AMY HOAK
House hunting usually slows down this time of year, as people put their searches on hold during the holidays.

This winter could be different, however, thanks to the extension -- and expansion -- of the first-time home-buyer tax credit.

"We're going to see far more interest in the fourth quarter than we generally do because of the tax credit," says Heather Fernandez, vice president of Trulia.com, a real-estate search engine. Traffic surged on the site on Nov. 5, the day Congress approved the credit extension, she says.

View Full Image

Tom Bloom
 .The new law extends the tax credit for first-time home buyers and opens it up to some existing homeowners as well: The credit is now up to $8,000 for first-time buyers and up to $6,500 for repeat buyers.

All buyers must have a binding contract on a house in place on or before April 30. The purchase must be for a principal residence and must close on or before June 30.

To be considered a first-time home buyer, an individual must not have owned a home in the past three years. And to be eligible, existing homeowners need to have lived in the same principal residence for five consecutive years during the eight-year period that ends when the new home is purchased.

Income limits have risen as well. According to the Internal Revenue Service's Web site, www.irs.gov, the home-buyer tax credit phases out for individuals with modified adjusted gross incomes between $125,000 and $145,000, and between $225,000 and $245,000 for people filing joint returns.

The inclusion of move-up buyers might inspire homeowners to take action and list their house if they've been putting it off, says Carolyn Warren, a Seattle mortgage broker.

"If people love their home, it's not going to entice them to sell," Ms. Warren says. "If they've had it in the back of their minds and really would like to move up, it might push them into doing it sooner than later."

If you're thinking of purchasing a home, here are five tips:

Don't procrastinate
Start your house search now. Getting an early start will give you a better chance of finding the right house before the credit deadline.

When first-time buyers thought that the credit would expire Nov. 30, people scrambled to find properties in September and October, says Pat Lashinsky, chief executive of ZipRealty, a residential real-estate brokerage firm. In some cases, "there wasn't inventory that fit people's needs," he says. In some markets, including Phoenix, Chicago and parts of California, for example, properties had multiple bidders, Mr. Lashinsky adds.

Before you start house hunting, get preapproved for a mortgage, says Eddie Fadel, a Miami-based mortgage banker. And do a realistic assessment of what you can afford.

Buyers who have to sell an existing home should price it aggressively from the beginning to drum up interest and get a buyer as soon as possible, Ms. Fernandez says.

Don't count on another extension
The credit won't be available forever, Mr. Fadel says.

"This is a medication for the housing crisis," he says, "Once the patient -- which is the housing market -- is cured, there will be no medication needed."

Be mindful of interest rates
Interest rates are low right now, but will likely rise next year, Ms. Warren says. Higher rates will affect your monthly mortgage payments, thus the affordability of the house you are buying.

"It's pretty universally accepted that rates will be higher next year," she says. "What is unknown is how fast and by how much."

Average rates on 30-year fixed-rate mortgages have been hovering around 5%. But when the Federal Reserve stops buying large amounts of mortgage-backed securities next year, interest rates could rise, Ms. Warren points out. The Fed plans to end its purchase program in March.

Communicate with your lender
Make sure you're speaking with your lender regularly to avoid any delays. If the lender asks for any additional documentation, turn it in as soon as possible, says Doug Heddings, a New York-based real-estate agent with Charles Rutenberg Realty.

And think twice before pursuing a short sale. That's where someone sells a home for less than what he or she owes on a mortgage, with permission of the lender. The process can be lengthy and unpredictable because the homeowner's lender has to approve any deal, Ms. Warren says, and it can get complicated when there is a second mortgage associated with the property.

Don't take shortcuts
Don't forgo any of the steps you would normally take just to make the tax-credit deadline. That means making sure the house is a good fit and is in the right location and getting a home inspection, Mr. Lashinsky says. Skipping steps could cost you in the long run.

"Don't let the tax credit get you to make a decision to buy a house that you wouldn't otherwise want to buy," he says. "Don't shortcut the process to get the tax credit."

Study suggests asking prices for local homes still sliding, not rising

By HUBBLE SMITH
LAS VEGAS REVIEW-JOURNAL 
Housing in Southern Nevada
Hold off on those reports that the Las Vegas housing market has turned the corner.

The Altos Research 10-City Price Composite Index was down 0.4 percent in October and 0.9 percent for the last three months. The San Francisco-based research firm showed Las Vegas asking prices at $169,958 in October, a 2.4 percent drop from $174,183 in August.

 
That contrasts against recent data released by the Greater Las Vegas Association of Realtors that showed the median price of a single-family home climbing to $139,100 in October, compared with $135,500 in August.

The largest monthly drop in asking prices, according to the Altos Research study, occurred in Salt Lake City, where prices fell 3.3 percent to $382,970 in October. Phoenix was second with a 2.1 percent decline to $311,050. Las Vegas prices were down 1.2 percent.

"The rate of decline has slowed in Las Vegas, but that market continues to show the largest decline during the downturn," Altos Research Chief Executive Offer Michael Simonsen said in his housing-market update.

In October 2007, the median asking price in Las Vegas was $354,347, plunging 52 percent to $169,958 this October.

Frank Nason of Residential Resources in Las Vegas said statistics are "kind of funny the way they're released." For example, Realtors statistics only include homes sold from the Multiple Listing Service, not all closings recorded by the county assessor's office.

He's showing a median price of $140,000 in October, up from $138,000 in September.

"I think they're bouncing along the bottom," Nason said. "Foreclosures have moved from lower-priced homes to all the higher-priced homes. The reason is people in higher-priced properties had more resources. They're running out. A lot of people are doing strategic defaults. Why become a debt slave?"

Las Vegas-based SalesTraq reported the median existing-home price at $123,500 in September, down from $124,900 in July. Home Builders Research reported the September median price at $125,500, compared with $125,000 in July.

"Have we seen the bottom in prices as some of the pundits have recently predicted? No one knows since none of us who follow the market have crystal balls," Nason said. "Is the so-called 'shadow inventory' of foreclosed properties going to flood the market or will the financial institutions be able to manage a measured release of properties to prop up prices?"

Simonsen said the decline in the Altos Research price index would have been worse if not for historically low mortgage rates and the government's $8,000 first-time homebuyer tax credit, which was recently extended.

Contact reporter Hubble Smith at hsmith@reviewjournal.com or 702-383-0491.

10-City Price Composite
Metro area Sept. Oct. % change
Salt Lake City $396,139 $382,970 -3.3
Phoenix $317,796 $311,050 -2.1
Los Angeles $734,941 $719,884 -2.0
Portland, Ore. $341,382 $336,025 -1.6
Houston $241,075 $237,333 -1.6
Tampa, Fla. $227,176 $223,872 -1.5
Detroit $159,339 $157,229 -1.3
Charlotte, N.C. $263,205 $259,884 -1.3
Las Vegas $172,068 $169,958 -1.2
Denver $401,214 $396,686 -1.1

Source: Altos Research

Renters and tenants whose landlords have lost their properties through foreclosure now have important rights.

by: Janet Portman , Attorney

Renters and tenants are now being affected by foreclosures almost as often as homeowners. The mortgage industry crisis that started in 2006 has resulted in thousands -- no, make that millions -- of foreclosed homes. Most of the occupants are the homeowners themselves, who must scramble to find alternate housing with very little notice. They're being joined by scores of renters who discover, often with no warning, that their rented house or apartment is now owned by a bank, which wants them out.

Who Are the Renters?

Renters who lose their homes to foreclosures don't fit a single profile. Many of them live in smaller buildings, condos, and single-family homes. They're located in cities and surrounding suburbs, in low-income and upscale neighborhoods. In short, foreclosed homes are everywhere, and they're rented by people with widely varying incomes, including some with "Section 8" (federal housing assistance) vouchers.

Who Are the Defaulting Owners?

The typical foreclosed home may have originally been owner-occupied, but more often it's owned by investors and speculators who were hoping to profit from the rents. Caught between the slump in housing values and the rise of mortgage interest rates, these owners could not feasibly sell or extract enough rent to cover their monthly costs. In droves, they lost their investments. For example, in Minneapolis and its surrounding suburbs, 38% of the 2006 foreclosures involved rental properties; in Minneapolis alone, 65% were rentals.

Who Are the New Landlords?

When an owner defaults on a mortgage, the mortgage holder, often a bank, either becomes the new owner or sells the property at a public sale. If the bank becomes the owner, it may pay a servicing company to handle the property. But don't expect close attention -- these companies are focused on financial matters, not mundane things like maintenance.

Some renters find themselves with a new owner even before the foreclosure. Lawyers in Massachusetts, for example, contend that many new rental property owners are investment trusts that specialize in purchasing troubled loans directly from banks, then foreclosing, evicting, and selling.

New Owners Means No Maintenance

Many tenants have no idea that their building has been taken at foreclosure. They continue to pay rent to the former owner, who often pockets the money but is hardly inclined to maintain the building it no longer owns. In the meantime, the new owners simply refuse to be landlords, never making repairs or even paying utility bills. Because the banks are stuck with increasing numbers of foreclosed properties that they can't sell, they remain non-landlords for some time, making life impossible for their tenants until those tenants are evicted.

Renters in Foreclosed Properties No Longer Lose Their Leases

Before May 20, 2009, most renters lost their leases upon foreclosure. The rule in most states was that if the mortgage was recorded before the lease was signed, a foreclosure wiped out the lease (this rule is known as "first in time, first in right"). Because most leases last no longer than a year, it was all too common for the mortgage to predate the lease and destroy it upon foreclosure.

These rules changed dramatically on May 20, 2009, when President Obama signed the "Protecting Tenants at Foreclosure Act of 2009." This legislation provided that leases would survive a foreclosure -- meaning the tenant could stay at least until the end of the lease, and that month-to-month tenants would be entitled to 90 days' notice before having to move out (this notice period is longer than any state's non-foreclosure notice period, a real boon to tenants).

An exception was carved out for the buyer who intends to live on the property -- this buyer may terminate a lease with 90 days' notice. Importantly, the law provides that any state legislation that is more generous to tenants will not be preempted by the federal law. These protections apply to Section 8 tenants, too.

Importantly, tenants who live in cities with rent control "just cause" eviction protection are also protected from terminations at the hands of an acquiring bank or new owner. These tenants can rely on their ordinance's list of allowable, or "just causes," for termination. Because a change of ownership, without more, does not justify a termination, the fact that the change occurred through foreclosure will not justify a termination.

Does It Make Sense to Evict Tenants?

New owners may want to terminate existing tenants because they believe that vacant properties are easier to sell. Common sense suggests otherwise. In many situations a building full of stable, rent-paying tenants will be more valuable (and command a higher price) than an empty building. Emptied buildings are also prone to vandalism and other deterioration -- after all, no one is on site to monitor their condition. When entire neighborhoods become a wasteland of empty foreclosed multifamily buildings, their value drops even further. It's hard to understand why new owners choose to pay lawyers to start eviction procedures instead of paying a modest fee to a management company to collect rent and manage the property while they wait to sell.

"Cash for Keys"

To encourage tenants to leave quickly and save on the court costs associated with an eviction, banks offer tenants a cash payout in exchange for their rapid departure. Thinking that they have little choice, many tenants -- even Section 8, protected tenants -- take the deal. It doesn't help them much as they join the swelling ranks of newly displaced tenants (and former homeowners) who are competing to find an affordable new rental.

What Can a Foreclosed-Upon Tenant Do?

Thanks to the 2009 federal legislation, most tenants with leases will keep their leases, and month-to-month tenants will have at least 90 days to relocate. Tenants with leases have no legal recourse against their former landlords, because they are in the same position vis a vis the new owner as they were with the old: The lease survives and ends as it would had there been no foreclosure. Similarly, month-to-month tenants always know that they can be terminated with proper notice, and 90 days is longer than any state's termination period.

However, a lease-holding tenant whose rental has been bought by a buyer who want to move in to the property ends up less fortunate than before the new law -- he may lose his lease with 90 days' notice, a result that probably would not have happened had the owner simply sold the property to a buyer who intended to occupy the property. (Normally, the new owner has to wait until the lease ends, absent a lease clause providing for termination upon sale, though such clauses may not be legal in all situations.)

Suing in Small Claims Court

A lease-holding tenant who has to move out so that new owners may move in might consider suing their former landlord in small claims court. Here's how it works.

After signing a lease, the landlord is legally bound to deliver the rental for the entire lease term. In legalese, this duty is known as the "covenant of quiet enjoyment." A landlord who defaults on a mortgage, which sets in motion the loss of the lease, violates this covenant, and the tenant can sue for the damages it causes.

Small claims court is a perfect place to bring such a lawsuit. The tenant can sue the original landlord for moving and apartment-searching costs, application fees, and the difference, if any, between the new rent for a comparable rental and the rent under the old lease. Though the former owner is probably not flush with money, the awards in these cases won't be very much, and the court judgment and award will stay on the books for many years. A persistent tenant can probably collect what's owed eventually.

For more information on suing a landlord in small claims court, see Everybody's Guide to Small Claims Court, by attorney Ralph Warner (Nolo).

by: Janet Portman , Attorney

TOWER 1, 6TH FLOOR, CORNER UNIT, 2 BED/2BA, APPROX 1443 SQ FT, STRIP/SOUTH AND WEST VIEWS, 2 BALCONIES, 2 PARKING SPACES, LISTED AT $315,000...AN INCREDIBLE $218 PSF.

MOTORIZED BLINDS INCLUDED throughout the entire unit, a value of $10,000 and an ADDITIONAL PARKING SPACE, a value of $30,000...****A TOTAL OF $40,000****
H.O.A dues are approx $845 per month.

UNBELIEVABLE VIEWS FROM EVERY ROOM. GREAT FLOOR PLAN.

NOT A SHORT SALE OR A FORECLOSURE!!!!!!

A MUST SEE!!!!

WILL NOT LAST LONG!!!!

PRICED TO SELL FAST!!!

CALL STEVE HARLESS - RE/MAX EXTREME - 702-217-1680