70% of all homeowners with a mortgage in Nevada are “upside down” in their mortgage, which means they owe more on their home than it is actually worth, and homeowners in Henderson are no exception. For many, especially during financial hardship, this meant going into foreclosure, which would impact a person’s credit score for 7-10 years in the future. Lately, though, there is a new real estate transaction that many homeowners are taking advantage of. It’s called a short sale.

In a short sale, the lender agrees to accept less than what is owed on the mortgage. Under President Obama’s Making Home Affordable program, the lender receives a $1,000 subsidy for agreeing to a short sale, while the seller would receive $1,500 in relocation assistance. If the short sale fails, the seller would then give the bank a “deed in lieu of foreclosure”. This helps the homeowner because many banks do not report a short sale or deed in lieu of foreclosure to the credit bureaus.

It is important to note that not everyone qualifies to do a short sale with the bank. There has to be extenuating circumstances, for example, loss of income, debilitating illness, or death of a spouse. Banks are more amenable to discussing short sales with homeowners now than in the past, especially due to the Nevada law that requires mediation between a bank and a distressed homeowner before the bank can foreclose.

Short sales are not a complete fix to the real estate crisis in Henderson, or for that matter, the country, but it is a great alternative to foreclosure.