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In a short sale the property owner will get a mortgage satisfaction, mortgage paid in full, at closing.   In a foreclosure sale, the court gives the mortgage note owner title to the property.  The mortgage note owner can sell the property without giving the old property owner a mortgage satisfaction.  The property is sold and the old property owner will owe the unpaid balance on the mortgage note. 

In Florida, a mortgage foreclosure sale does not automatically result in a deficiency judgment. Just because the borrower loses property at foreclosure does not mean the borrower will remain personally liable for money owed to the Lender. To obtain a deficiency judgment against the property owner:

1. The Lender must wait until after the foreclosure sale.
2. The Lender has to file a motion for a deficiency after the foreclosure sale.
3. The court must hold separate evidentiary hearing on the lender’s request for deficiency liability.

At the evidentiary hearing the mortgage Lender has to show the court evidence that the property value on the sale date was less than the note balance. The borrowers can get his own appraisal or can use the government's tax assessed value as evidence of value. If the property was worth more than note balance on sale date the court will not give the mortgage lender a deficiency judgment against the borrower. The borrower may present evidence of value in the form of a formal appraisal or other less formal opinions of value such as the local government's tax assessed value.

Recent Florida Experience
During the past real estate booms deficiency judgments were uncommon because increasing real estate values brought home values above note balances of defaulting mortgages. Additionally, lenders could take back "upside down" properties and hold them until the rising market made them whole. In the current real estate recession, more lenders may pursue deficiency judgments. Up to this point in the real estate crash few Lenders have been pursuing deficiency judgments. Second mortgage lenders and private lenders are more likely than first mortgage holders to go after deficiency judgments. Even in a weak market, if there is still equity in your property when you relinquish the property through foreclosure you can defend a motion for deficiency judgment. As a practical matter, most real estate attorneys report that few lenders have been pursuing deficiency judgments during the current real estate recession.

Cost of Deficiency Judgment
The lender will only pursue a deficiency judgment if the benefits outweigh the costs. Some considerations are:

• What is the deficiency amount?
• What will be the out-of-pocket costs of collection and court costs to obtain the deficiency judgment?
• What is the likelihood that the judgment will actually be paid?
  • To the extent that the borrower has non-exempt assets to pay the deficiency, the more likely the lender is to try and collect all or a part of the deficiency. In Florida, and probably a lot of other states, exempt assets would include a person's homestead, automobiles, 401 K Plan's, IRA's and other similar retirement accounts.
  • If the first mortgage was 80% or less of the purchase price then there should not be Private Mortgage Insurance on the first mortgage. The cost of obtaining a judgment is greater for the Lender is there is no insurance carrier to support the legal of cost. A second mortgage, generally does not have private mortgage insurance.

A judgment is a piece of paper that says someone owes money to someone else. A lien is created when the judgment is recorded in the county records. However, a judgment lien can only be created on real property. If the borrower does not own real property, the judgment lien cannot attach to anything.

We are not lawyers and we are not giving you legal advice.  The information here is intended to be only illustrative and not intended for your specific individual needs. We recommend you consult a lawyer if you want professional assurance that our information, and your interpretation of it, is appropriate to your particular situation.