Real Estate Terminology
Don't be confused about all of the different terms when buying a home in Las Vegas or Henderson.
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REO (real-estate owned), REPO (repossessed), Bank Owned and Foreclosed are all acronyms and terms, pretty much used interchangeably nowadays, to indicate a FORECLOSURED SALE. They’re all foreclosured properties - a legal proceeding by which a borrower’s rights to a mortgaged property may be extinguished if the borrower fails to live up to the obligations agreed to in the loan contract. The terms REO, REPO, BANK OWNED are properties that have already been foreclosed on, and the respective bank (lien holder) who held the mortgage now own the home (hence the term bank owned home) and is trying to sell these properties and get them off their books. Regardless the term given, these properties are being marketed and dispensed of by the entity who owns them.
A HUD home is a foreclosed home as well. The only difference with this designation is that it was formerly purchased with an FHA loan, so the government guaranteed that loan and therefore, the government is responsible for selling the home.
A Short Sale is a home that is currently owned by the homeowner. Short Sales can be done while the homeowner is still current on their mortgage payments, however this is not done often. Short Sales are always done when the homeowner owes more than the home is worth. The goal of the homeowner is to get there bank to accept less as payment in full and to be released of any and all liability.
The foreclosure process differs from state to state. Some states require the courts to foreclosure on a property. This is called a Judicial Foreclosure. In Nevada, we currently have both a judicial foreclosure process and a non-judicial foreclosure process.
The Nevada Judicial Foreclosure Process
Judicial foreclosures are rarely done in Nevada but do happen when there is NO power of sale clause in the deed of trust. If the court grants the bank or lien holder the right to foreclosure your home/property will sold at a public foreclosure auction to the highest bidder. At This point the home/property is a foreclosed home/Bank Owned/Repo/Reo. However, in a judicial foreclosure the homeowner/borrower has one year after the bank/lien holder foreclosed on them to redeem the property. This is called a Right of Redemption which is only allowed on a judicial foreclosure.
The Nevada Non-Judicial Foreclosure
In Nevada when there is a Power of Sale clause in the deed of trust a Non-Judicial foreclosure is done. Once a homeowner or borrower in Nevada is 90 days or more late, the lender/Bank/lien holder can file a Notice of Default (NOD) in the county that the home or property is located. This Notice of Default (NOD) is the first step in the Nevada foreclosure home process. This is the pre-foreclosure process. The Notice of Default (NOD) is public information and the Bank/Lien Holder must notify the homeowner or borrower by certified mail on the date of recording.
You can check if you have a notice of default (NOD) by clicking here.
Once a Notice of Default (NOD) is filed the homeowner or borrower has 35 days to cure and reinstate the loan. Some deeds of trust have what’s called an acceleration clause. If the deed of trust, does in fact, have an acceleration clause upon a homeowner or borrower the default of the entire balance of the note may be called due. Again, this can only be done if the homeowner or borrower does not bring the note due with 35 days of the notice of default (NOD). Should the homeowner or borrower not cure and reinstate the homeowner or borrower has one more chance on saving their home or property. Fifteen days before the home or property gets foreclosed on the homeowner or borrower must file a Notice of Intent to Cure and then pay the amount owed by noon the day before the sale.
In order for a sale date to occur two things must happen. First, the property sale date must be 3 months after the notice of default. Second, a notice of sale must be posted 20 days before the notice of default and election of sale must be recorded. The trustee must post notice in 3 public places for 3 consecutive weeks. One of the most common places public notice is given is here. In the Notice of Default and Election of sale it will state the time and place of the sale. A trustee’s deed on the completion of sale will go the highest bidder. Bids usually start at the amount owed plus additional costs. Should there be no bids on the property it will go back to the lender/bank making the property a BANK OWNED HOME/REO/REPO which is now a FORECLOSED home. There is NO right of redemption on a non-judicial foreclosure in Nevada. The lender or lien holder can pursue a deficiency judgment within 3 months of foreclosing on the home or property.
HOUSING AND URBAN DEVELOPMENT (HUD) SALES
Housing and Urban Development (HUD) homes follow the same home foreclosure process as above, the only difference is that a HUD home was a loan insured by the Federal Housing Authority (FHA).
Once the home has been foreclosed upon the lender submits a claim to the Housing and Urban Development to be reimbursed for the loss. Prior to listing HUD does an appraisal to obtain list price. When purchasing a HUD home the first 30 days the home is on the market, it is opened to owner occupied purchaser only. The property becomes available for purchase by investors on day 31 if not sold within the first 30 days. Bids are placed on HUD’s website by your HUD registered realtor here. HUD homes are sold AS IS and HUD will not make repairs. Upon close of bidding the highest net bid is accepted. Once the home is in escrow if the buyer wants to cancel their sale the earnest money is forfeited.
LAS VEGAS SHORT SALES
A Short Sale is a type of pre-foreclosure. A Short Sale is when the homeowner owes more on the property than the property is worth. This is also known as being “upside down” on the mortgage. The homeowner is looking for a home buyer to purchase the property so they can be relieved of their debt. The object is to get the bank to accept less money than what is owed to them as payment in full. This type of purchase can be a win-win for all involved.
The homeowner can be relieved of their debt and saved from a foreclosure; the bank can remove the liability from their books; and the buyer gets a deal on a home.Here is how a short sale works:
In a Short Sale, the home buyer is making an offer on the property for less than what the homeowner owes to the lender. In most cases the homeowner has already submitted a short sale package to their lender. If not, the short sale package should be sent to the lender at the time the offer is submitted.
The short sale package usually consists of the homeowner’s last two months of bank statements, current paystubs, last two years of tax returns and a hardship letter.
When the lender or bank receives the short sale package the file is assigned to a negotiator or Asset Manager who will review the offer and the short sale package. If the lender is willing to pursue the short sale offer they will obtain a Broker’s Price Opinion (BPO). A BPO is the price a Real Estate Broker believes the home would sell for in today’s market.
Once the short sale is approved we suggest a home inspection and the file is moved to the buyer’s lender for financing approval and an appraisal is done. Financing approval typically takes 20-45 days depending on the lender. Upon financing approval documents are sent to the home buyer(s) to sign and the loan is funded. Cash home buyers do not need a lender and can sign their closing documents within a week from the short sale approval.