Deficiency Judgment

What Is a Deficiency Judgment?

When a Florida bank forecloses on a house, the property is sold at a public auction. If the property sells for less than the outstanding mortgage balance, the difference is called the "deficiency."

For example: The homeowner owes $400,000 on their mortgage. The house sells at auction for $250,000. The deficiency is $150,000. Under Florida Statute 702.06, the bank can ask the court to enter a deficiency judgment against the former homeowner for the $150,000, turning the former homeowner into a judgment debtor who can be pursued for the remaining debt through wage garnishment, bank account levies, and liens on other property.

The One-Year Deadline

Florida law gives the lender exactly one year after the Clerk issues the Certificate of Title to the auction buyer to file a motion for deficiency judgment. If the lender misses this deadline, the right to pursue the deficiency is permanently waived.

Fair Market Value Defense

Florida Statute 702.06 provides a critical defense for the borrower. If the bank is the highest bidder at the auction (which happens in the vast majority of foreclosures), the court must determine the fair market value of the property on the date of the sale. The deficiency is calculated as the mortgage balance minus the fair market value, not minus the auction price. If the bank bid $200,000 at auction but the house was actually worth $350,000 on that day, the deficiency is reduced dramatically.

Related Terms

• Foreclosure — The judicial process that creates the deficiency
• Deed in Lieu — An alternative that may include a deficiency waiver
• Short Sale — Another alternative where deficiency rights must be negotiated

Barnes Walker Foreclosure Defense

Barnes Walker's foreclosure defense attorneys aggressively challenge deficiency judgment motions, utilizing Florida's fair market value defense to dramatically reduce or eliminate the lender's claim, and negotiating deficiency waivers in deed-in-lieu and short sale transactions. Request a legal inquiry for assistance.

Reviewed by the attorneys at Barnes Walker, Goethe, Shea & Robinson, PLLC