What is a “Deficiency” Balance?
A deficiency occurs when the money garnered from the sale of a foreclosed property is insufficient to pay off the mortgage balance. The State of Nevada is a deficiency judgment state (Nevada Revised Statutes 40.451) which means Lenders/Banks can sue a borrower if there is a deficiency.
If the Lender/Bank decides to file a deficiency law suit against the borrower, it must be filed within (6) months after the foreclosure sale. The deficiency is calculated by obtaining an appraisal on the property to determine the market value or using the sales price, whichever is greater and then subtracting the amount owed. For example:
A borrower’s home is foreclosed and is sold at a foreclosure sale for $150,000. The borrower has a mortgage balance of $350,000. The fair market value of the property is $175,000 which was determined by an appraisal. The deficiency balance would be $175,000 ($350,000 – $175,000).
Disclosure: We are not Attorneys and if you are facing foreclosure, we suggest you speak with an Attorney.