You Can Fight Against a Foreclosure Deficiency Judgment
If you are in foreclosure, and you lose the case (or you decide not to challenge the case at all), you may be hit with a double insult: The foreclosure and loss of the home itself, but also, the entry of a deficiency judgment against you.
What is a Deficiency Judgment?
A deficiency judgment is a money judgment against you, for the balance of the home loan in the event that the property is worth less than what you owe. For example, if you owe $300,000, but the home is only worth $250,000, the deficiency judgment could be entered against you for the balance of $50,000.
As you can imagine, because home loans can be large, deficiency judgments can be large. Many consumers find that a deficiency judgment is the largest debt they have ever been found to be liable for.
Even consumers who feel like they are “doing the right thing” by agreeing to give up the home, and allow the foreclosure to happen, are surprised to see the bank give a big “thank you” to them in the form of a deficiency judgment.
Limitations on Collections
There are some limitations on the lender’s ability to collect a deficiency judgment. The lender has one year from the foreclosure to ask the court to enter the deficiency judgment. Many miss this deadline, and if it has been a year from your foreclosure, you may be safe.
Additionally, the amount of the deficiency is based on the fair market value of the home at the time of the foreclosure, not the sale price at auction. In many cases, a property will sell for less than what it is worth at auction. This means that the amount of the deficiency can be challenged, and in some cases, the motion for the deficiency judgment can be defeated.
Let’s say that you owe $300,000. At the time of foreclosure, your home’s value is $300,000, but at auction, it sells for $250,000. You have the right to have the court use the $300,000 value, in which case there would be no deficiency judgment at all. Because many properties sell for much less than what they’re worth at foreclosure sale, it is important to make sure that the true market value is being used. Doing so can minimize or eliminate your deficiency judgment completely.
In some cases, there may be improvements to the property that increase its fair market value. If the consumer had made upgrades to the property, or there are other benefits that could increase its value (such as location), these are factors the court has to consider when assessing the true fair market value.
Banks have to advertise the foreclosure sale. Many do not, or do not do so for the legally required time. A failure to comply with the advertising rules can lead to the loss of the bank’s ability to obtain the deficiency.
Contact the Miami foreclosure defense attorneys at Velasquez & Associates P.A. today for help if you are in foreclosure.