If you go through a foreclosure in Florida, the foreclosure auction could result in a deficiency. When the foreclosure sale price doesn't cover the borrower's mortgage debt balance, the difference between the total debt and the sale price is called a "deficiency."
In most states, including Florida, if a foreclosure sale results in a deficiency, the lender can get a deficiency judgment (a personal judgment) against the borrower for the deficiency amount.
Again, when the foreclosure sale price doesn't cover the borrower's mortgage debt balance, the difference between the total debt and the sale price is called a "deficiency." For example, if your total mortgage debt is $700,000, but your home sells to a bidder at a foreclosure sale for $650,000, the deficiency is $50,000.
If state law allows it, the lender can seek a personal judgment against the borrower to recover the deficiency. This type of money judgment is called a "deficiency judgment."
The lender must go through court to get a deficiency judgment.
Foreclosures in Florida are judicial, which means the lender must foreclose through the state court system. A judicial foreclosure begins when the lender files a lawsuit asking a court for an order allowing a foreclosure sale.
In Florida, the lender may obtain a deficiency judgment as part of the foreclosure action if the borrower was personally served with the foreclosure complaint. The lender may also file a separate lawsuit against the borrower for a deficiency judgment unless the court denied one in the foreclosure action. (Fla. Stat. Ann. § 702.06).
The court has flexibility regarding the amount of the deficiency. (Fla. Stat. Ann. § 45.031(8), Fla. Stat. Ann. § 702.06).
But the judgment can't exceed the difference between the judgment amount and the home's fair market value as of the sale date if the property is owner-occupied and residential. (Fla. Stat. Ann. § 702.06).
Again, say the total amount you owe on your home loan, including outstanding principal, interest, fees, and costs, is $700,000. Your home sells for $650,000 at a foreclosure sale. The deficiency is $50,000. However, the court determines that the property's fair market value is $675,000. So, in this scenario, the court will most likely limit a deficiency judgment to $25,000.
The foreclosure sale happens after the judgment. Under Florida law, the court clerk must promptly file a certificate of sale after the foreclosure sale, which usually happens within a day of the sale. You then have ten days after the filing of the certificate of sale to file an objection to the sale. (The bid amount at the sale is presumed to be sufficient consideration for the sale.)
After ten days, assuming no one objects, the clerk confirms the sale and issues a certificate of title to the purchaser. (Fla. Stat. Ann. § 45.031).
The statute of limitations for getting a deficiency judgment for residential properties with no more than four dwelling units in Florida is one year. The limitations period starts on the day after the clerk of court issues the certificate of title to the person or entity that bought the home at the foreclosure sale. (Fla. Stat. Ann. § 95.11).
You might be able to eliminate your liability for a deficiency judgment, like many other dischargeable debts, in a Chapter 7 or Chapter 13 bankruptcy. Or you might be able to raise a defense, such as the deadline for getting a deficiency judgment has passed.
To learn more about Florida's foreclosure process or find out about potential defenses to a foreclosure, such as a statute of limitations defense, and possibly fight the foreclosure in court, consider talking to a foreclosure attorney.