What is a deficiency judgment?

A deficiency judgment is indeed a judgment for the difference between the amount owed on a mortgage and the amount recovered through the sale of the property at foreclosure. When a homeowner defaults on their mortgage and the property is foreclosed, it is sold at auction. If the sale price does not cover the total debt owed to the lender — including any unpaid principal, interest, and costs — the lender may pursue a deficiency judgment against the borrower for the remaining balance.

This process allows lenders to recover the shortfall that remains after the foreclosure sale. It is important for homeowners to be aware that if a deficiency judgment is granted, they may still be responsible for paying the difference, in addition to any potential impact on their credit score.

Understanding the nature of deficiency judgments is crucial for anyone involved in real estate, as it affects the risk and financial responsibilities that come with borrowing and homeownership.