What is a Deficiency Judgment
Homeowners who have lost their home to foreclosure or sold through a short sale, may not be off the hook. Lenders have the right to seek a Deficiency Judgment against the homeowner for the difference between the amount of the mortgage and what the property sold for.
Lenders in essence are seeking to recoup what they lost. For example, if you buy a home for $100,000 and obtain a mortgage for $80,000 but the property drops in value to $50,000 and you convince the bank to take a deed in lieu of foreclosure, the bank then sells the property for $50,000 taking a loss of $30,000 – the difference between the loan amount and the sales price. The bank has a set period of time, in Florida it is 5 years, where they can file a Deficiency Judgment against the homeowner for the $30,000 loss.
Deficiency Judgments can be filed against homeowners in foreclosure cases, short sales and deed in lieu. If you are facing defaulting on your mortgage, it is important to make sure the lender agrees not to file a deficiency judgment and get it in writing.
It is worth hiring a lawyer if you have any doubts at all.
