What is a Deficiency Judgment?

A deficiency judgment is a legal process that can occur either after a foreclosure, or after a short sale. Basically, a lender can use a deficiency judgment to attempt to get the rest of the money they are owed that they didn’t get from a foreclosure or short sale. For example, if a property is worth $150,000, and it was sold at a short sale for $100,000, the lender can file a deficiency judgment to try to get the remaining $50,000 of the property’s value. The lender has to go through the court system and file a lawsuit to do this, and if it is successful, your wages can be garnished or bank account levied as a means of paying back the remainder of the loan.

Many states prohibit lenders from filing deficiency judgments after a foreclosure, and three states prohibit them after a short sale. However, Maryland does not prevent deficiency judgments after foreclosures nor short sales. A lender can seek a deficiency judgment up to three years after a foreclosure.

So how do you prevent the lender from seeking a deficiency judgment? One option is to negotiate with the lender during the short sale process. You can attempt to get them to waive their right to seek judgment or, if they refuse, you can try to make a settlement offer of a smaller amount. The lender may be willing to do this because collecting a deficiency judgment is both time consuming and costly. A more risky option is to take the chance that, because of the difficulty of the process for the lender, they may decide not to sue you for deficiency. They may send you letters demanding payment, but they can’t actually freeze your bank account or garnish your wages unless they file a suit.




Negotiating with a lender during the short sale or foreclosure process can help prevent the threat of a deficiency judgment. If you’re considering a short sale and are concerned about a deficiency judgment, Gray’s Home Solutions can help you through the process and save you time by buying your home quickly. We’re looking for properties of all types across the state of Maryland. Whether your house is in pristine condition or if it has seen better days, we’ll make an offer fast. Best of all, in addition to our speed, you pay no fees or commissions when we buy your home.

Even if you’re not looking for a buyer, you can participate in our sellers referral program. Here’s how it works. Send us the phone number and property address for a For Sale By Owner or vacant property. We’ll take a look, and if we buy the property we’ll pay you $250 as a thank you for providing the lead.

Are you interested in learning more about selling your home fast? Our ebook has a ton of great information for you. We also have an ebook with information on how to avoid foreclosure, available for download here. They’re both free, so give them a look. You can also connect with Grays Home Solutions on FacebookTwitterGoogle+, and LinkedIn for more real estate made simple.


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