In real estate, a Deficiency Judgment is a court-ordered judgment against a borrower when the proceeds from the sale of a foreclosed property are not sufficient to fully satisfy the outstanding loan balance. After the property is sold (typically at a foreclosure sale) the lender may seek a deficiency judgment for the remaining unpaid portion of the debt, plus allowable costs, interest, and fees.
Whether a lender may obtain a deficiency judgment depends on state law, the type of foreclosure process used, and the loan terms. Some states restrict or prohibit deficiency judgments, especially for certain residential or purchase-money loans. When permitted, a deficiency judgment allows the lender to pursue the borrower’s other assets or income to recover the remaining debt beyond the value of the secured property.
