Deficiency Judgment Laws in Washington

Can your lender get a deficiency judgment against you after a foreclosure in Washington?

By , Attorney University of Denver Sturm College of Law
Updated 9/29/2023

If you go through a foreclosure in Washington, the foreclosure sale could result in a deficiency. When the foreclosure sale price doesn't cover the balance of the borrower's mortgage debt, the difference between the total debt and the sale price is called a "deficiency."

In some states, if a foreclosure sale results in a deficiency, the lender may get a "deficiency judgment" against the borrower for the deficiency amount. However, Washington law usually prevents the lender from pursuing a deficiency judgment against a foreclosed homeowner, so most people in the state won't face one.

Still, in rare circumstances, the lender could potentially get a deficiency judgment against a foreclosed homeowner in Washington.

What Is a Deficiency in a Washington Foreclosure?

If you go through a foreclosure, but the foreclosure sale doesn't bring in enough money to pay off your mortgage debt balance, the difference between the total mortgage debt and the sale price is a "deficiency."

Example of a Deficiency in a Washington Foreclosure

Say that Remi and her family live in Seattle, Washington. Remi loses her job and can't make her mortgage payments. Her total mortgage debt is $800,000. At the foreclosure sale, the property sells to the highest bidder for $750,000. The deficiency in this situation is $50,000.

What Is a "Deficiency Judgment" After a Foreclosure Sale?

When permitted by state law, the lender can seek a personal judgment against the borrower to recover the deficiency after a foreclosure sale. This money judgment is called a "deficiency judgment."

How Can the Lender Get a Deficiency Judgment, Generally?

In some states, the lender requests the deficiency judgment during a judicial foreclosure. In other states, the lender files a lawsuit against the borrower after the foreclosure to get a deficiency judgment.

Are Deficiency Judgments Allowed in All Foreclosures?

Some states, including Washington, have anti-deficiency laws that prohibit deficiency judgments in some circumstances.

What Happens to Extra Money After a Foreclosure?

Also, if the foreclosure sale price is equal to, or more than, the mortgage debt amount, there's no deficiency. So, in that situation, the lender isn't entitled to a deficiency judgment.

And if the sale results in excess proceeds, you might be entitled to that extra money. But, if any junior liens were on the property, like a second mortgage or HELOC, or if a creditor recorded a judgment lien against the property, those creditors get first crack at the money to repay what they're owed.

Then, any funds that are left over after paying these lienholders belong to (you) the foreclosed homeowner.

How Can the Lender Collect a Deficiency Judgment?

Generally, if your lender gets a deficiency judgment against you, it may collect this amount (in the example above, $50,000) using regular collection methods, like garnishing your wages or levying your bank account.

How Washington Foreclosures Work

Most foreclosures in Washington are nonjudicial, which means the lender doesn't have to go through state court to foreclose. However, The lender could instead choose to foreclose through the state court system with a judicial foreclosure.

Does Washington Allow Deficiency Judgments?

Washington doesn't allow deficiency judgments after nonjudicial foreclosures. But deficiency judgments are allowed in judicial foreclosures.

Deficiency Judgments Aren't Allowed After Nonjudicial Foreclosures in Washington

Again, in Washington, the lender can't get a deficiency judgment if it forecloses nonjudicially. (Wash. Rev. Code § 61.24.100). But judicial foreclosures are another story.

Deficiency Judgments Are Allowed In Judicial Foreclosures

If the lender pursues a judicial foreclosure, a deficiency judgment is permitted. (Wash. Rev. Code § 61.12.070).

But the court may set a minimum bid price or conduct a hearing to establish the fair market value of the foreclosed property. The deficiency judgment is then limited to the lesser of the difference between:

  • the outstanding debt and the foreclosure sale price, or
  • the outstanding debt and the home's fair market value. (Wash. Rev. Code § 61.12.060).

And, even if a deficiency judgment is allowed, the lender might decide to waive the deficiency to reduce the redemption period. (Wash. Rev. Code § 6.23.020).

Can You Avoid a Deficiency Judgment in Washington?

Even if your lender gets a deficiency judgment, you can probably eliminate your liability for a deficiency judgment, like many other dischargeable debts, in a Chapter 7 or Chapter 13 bankruptcy. or you might have a defense to the deficiency, like the minimum bid price wasn't met or the lender waived its right to the deficiency.

Deficiency Judgments After Short Sales in Washington

A "short sale" is when you sell your home for less than the total debt balance remaining on your mortgage, and the proceeds of the sale pay off a portion of the loan balance. In Washington, a lender can get a deficiency judgment following a short sale.

To avoid a deficiency judgment, the short sale agreement must expressly state that the lender waives its right to the deficiency. If the short sale agreement doesn't have this waiver, the lender may file a lawsuit to get a deficiency judgment.

Deficiency Judgments After Deeds in Lieu of Foreclosure in Washington

A "deed in lieu of foreclosure" occurs when a lender agrees to accept a deed (title) to the property instead of foreclosing. With a deed in lieu of foreclosure, the deficiency amount is the difference between the total mortgage debt and the property's fair market value.

At least one Washington court case says that a lender may not obtain a deficiency judgment after a deed in lieu of foreclosure. In Thompson v. Smith, 58 Wash. App. 361 (1990), the court ruled that because the deed in lieu of foreclosure was essentially a nonjudicial foreclosure, the borrower was entitled to protection under Washington's anti-deficiency laws.

Getting Foreclosure Help in Washington

If you have questions about Washington's foreclosure process or want to learn about potential defenses to a foreclosure and possibly fight the foreclosure in court, consider talking to a foreclosure attorney. It's also a good idea to talk to a HUD-approved housing counselor if you want to learn about different loss mitigation options.

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