Many Hillsborough County homeowners believe that once their home is sold at foreclosure auction, their obligation to the lender is finished. That is not always true. In Florida, the lender may have the right to sue you for the remaining balance — the difference between what you owed and what the home sold for at auction. This is called a deficiency judgment, and it can follow you for years.
Understanding how deficiency judgments work in Florida — and specifically what your rights are under Florida Statute §702.06 — is essential for making the right decisions during foreclosure.
What Is a Deficiency Judgment?
When your home is sold at a foreclosure auction, the proceeds go first to pay the foreclosing lender's judgment amount. If the sale price is less than the total amount owed — the mortgage principal, accrued interest, penalties, and the lender's attorneys' fees — the remaining balance is called the deficiency.
For example: You owe $350,000 on your mortgage. Your home sells at auction for $275,000. The deficiency is $75,000. Under Florida law, the lender may be able to sue you for that $75,000 in a separate legal action.
Florida Statute §702.06 — The Deficiency Judgment Law
Florida Statute §702.06 governs deficiency judgments in foreclosure cases. Key provisions:
- One-year window: The lender has exactly one year from the date of the foreclosure sale to file a separate lawsuit seeking a deficiency judgment. After that one-year deadline, the claim is time-barred permanently.
- Separate lawsuit: The deficiency claim must be filed as a separate action — it is not automatic. The lender must actively choose to pursue it.
- Not all lenders pursue deficiencies: Many institutional lenders write off the deficiency for accounting or regulatory reasons. However, some lenders — particularly private lenders, second mortgage holders, and debt buyers — aggressively pursue deficiency judgments.
The Fair Market Value Credit
One of the most important — and least understood — protections in F.S. §702.06 is the fair market value offset. Florida law does not simply subtract the auction sale price from the debt to calculate the deficiency. Instead, the deficiency is calculated using whichever is greater: the foreclosure sale price or the fair market value of the property at the time of the sale.
Here is why this matters with an example:
- You owe $350,000
- Home sells at auction for $220,000
- Fair market value (appraisal) is $290,000
Without the fair market value offset, the deficiency would be $130,000 ($350,000 − $220,000). With the offset, the deficiency is only $60,000 ($350,000 − $290,000). If you believe the auction price was below fair market value, an appraisal submitted to the court can significantly reduce any potential deficiency.
How to Negotiate a Deficiency Waiver
A deficiency waiver is an agreement from the lender — in writing — that they will not pursue the remaining balance after the foreclosure sale or short sale. Negotiating a waiver should be a primary objective whenever you are working through any foreclosure resolution.
Strategies for obtaining a deficiency waiver in Hillsborough County:
- During a short sale:Request a deficiency waiver as part of the short sale approval. Many lenders include this in the approval letter or as a condition of closing. If the lender's approval letter does not explicitly waive the deficiency, push back before closing.
- During a deed in lieu: A deed in lieu of foreclosure typically includes a deficiency waiver as part of the agreement. Confirm this is in the written agreement before signing.
- As part of foreclosure settlement: If the lender offers a forbearance or modification during the lawsuit, you may be able to negotiate a deficiency waiver for any remaining balance as part of the settlement.
- Through bankruptcy: A completed Chapter 7 bankruptcy discharges the deficiency entirely. A Chapter 13 plan may also address and eliminate the deficiency.
Why a Short Sale Is Better Than Foreclosure for Deficiency Risk
A short sale in Hillsborough County has a significant structural advantage over foreclosure when it comes to deficiency risk. In a short sale:
- You are in active negotiation with the lender, giving you leverage to request a written deficiency waiver as a condition of the sale.
- The lender approves the sale price, which is typically close to fair market value, reducing any gap between the sale price and the debt.
- Many servicers have standard approval letter language that includes a deficiency waiver — something that does not happen automatically in a courthouse auction.
In a foreclosure auction, the lender receives whatever the auction produces — which may be well below market value — and retains the full right to pursue the deficiency within the one-year window. In a short sale, you can eliminate that risk through negotiation.
What Happens After a Deficiency Judgment Is Entered
If the lender files within the one-year window and the court enters a deficiency judgment, it functions like any other court judgment in Florida:
- The lender can garnish your wages (subject to Florida garnishment exemptions)
- The lender can levy non-exempt bank accounts
- The judgment becomes a lien on any Florida real estate you own
- The judgment can be reported to credit bureaus
- In Florida, judgments can be renewed and last up to 20 years
Florida does have a generous homestead exemption — if you live in another home at the time of the deficiency, that home may be protected. Florida also has wage garnishment exemptions for heads of household earning less than certain thresholds. But these protections are not automatic — you must assert them.
Get Help With Your Hillsborough County Situation
Barrett Henry is a REALTOR® and Broker Associate at REMAX Collective with 23+ years of real estate experience. He works with Hillsborough County homeowners to evaluate their foreclosure options, negotiate short sales with deficiency waivers, and find the exit strategy that causes the least long-term financial damage.
- Free consultation: (813) 733-7907
- Bay Area Legal Services — Free legal help for qualifying homeowners: baylegal.org
- HUD Counseling: Find a HUD counselor or call (800) 569-4287
- Hillsborough Clerk case search: hillsclerk.com
Worried about a deficiency judgment? Contact us today for a free consultation on your Hillsborough County foreclosure situation — no cost, no obligation.
