After a home is sold at a foreclosure auction how long does a lender have the right to seek a deficiency judgement against you for whatever the shortage is? Is there a statue of limitations on this?
Generally, a non-judicial forclosure in most states extinguishes the rights to seek a deficiency judgement. This is because lien forclosures constitute an election to forclose on the property rather than proceeding on the promissory note. However, it would depend on the documents that you signed and the law of your jurisdiction. You need to see a lawyer regarding the legal consequences and laws in Nevada. I will tell you that it is EXTREMELY rare for banks to proceed on deficiency judgments and that it is only done in Oregon when Judicial forclosures are filed--which is also rare based on the costs and the debtors extra rights of redemption.
NRS 40.455 Deficiency judgment: says that the lender has 6 months after the sale to file the claim. (Check the statute to see if you fall under an exception).
However, this limit only applies to the foreclosing mortgage or deed of trust. If you have a second loan or other liens, the limit is six years on them. (See NRS 11.190 for Periods of limitation: subsection 1(b)).
But that is not all: The statute of limitations only applies on debts that are due. If you have a second mortgage left over after your first mortgage foreclosed, better prey that they accelerated the debt (called the whole thing due). But unless they filed their own Notice of Default and Election to Sell, they probably did not accelerate the debt. In this situation the six year statute only applies to the individual monthly installments after their due date reaches the six year mark.
In other words: on a 30-year second mortgage, if you defaulted 5 years into your payment plan and the first mortgage foreclosed leaving the second unsecured---that unsecured note could technically bite you 20 years from now. The note would only have 5 years worth of installments left---but remember that none of them are due yet, that's why the statute of limitations has no effect on them. Also included in the judgment will be 6 years in the other direction (the immediately preceding installments that were due) plus late fees and interest on those installments. The only years excluded by the statute are the installments due from year 5 (the year you quit paying) through year 19. You would still owe for the last 11 years of the note even though only 5 years are left on it.
Do yourself a favor and short-sale the property. But have an attorney negotiate with the banks---not a Realtor! I help ReMax in short-sale negotiations and our firm has been very successful in getting banks (both first and seconds) to waive the deficiency. But you must have a competent attorney that knows this stuff backwards and forwards.
