Legal Question in Real Estate Law in Nevada
Home to be sold at auction
What happens to the difference between home that has gone to auction, that the loan is more than what the home is worth? What happens to the difference. I am in Nevada. The home is about 150k upside down. The loan servicer states it gets reported to the IRS but the house is a loss. We gained no income from the house.
1 Answer from Attorneys
Re: Home to be sold at auction
Nevada law permits, but does not require, a first deed of trust purchase money lender to file a Court action within strict time limits to obtain a money judgment against borrowers following a foreclosure which generates insufficient sale proceeds to pay off the loan debt.
After the sale, if you agree to repay the difference in writing, the lender does not have to prove anything in Court and may have a much longer time to pursue a Court action. Likewise, a wholly "sold-out" home equity or second deed of trust lender can bring a Court action to collect the entire balance due that was not paid in the foreclosure.
Sometimes the difference is deemed "forgiven" debt, which can be treated by the IRS as ordinary income. There are exceptions, set forth at the IRS website:
http://www.irs.ustreas.gov/newsroom/article/0,,id=174034,00.html
Your attorney and tax professional can explain further.
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