Will my Georgia short sale result in a deficiency judgement against me?

Real Estate Agent with Solid Source Realty GA 320764

Georgia Short Sale FAQ


Q: Will my Georgia short sale result in a deficiency judgment against me?


A: Not likely.


A deficiency judgment is a legal order to pay off a remaining balance when a property does not sell for enough to satisfy the full mortgage debt. The amount still owed to the lender is called the deficiency.


But, in order to even get a short sale approved by the lender in the first place, the borrower must have a documentable financial hardship. This is why short sales usually do not result in a deficiency judgment, but rather, the lender agrees in writing to accept a “short payoff” and forgoes any pursuit of the remaining balance.


Track record of short sale success with NO deficiency judgments


I have been helping underwater  homeowners sell their properties with bank-approved short sales for the past ten years. In all of that time I have never seen a lender actually impose a deficiency judgment, and have only once seen  a lender even “reserve the right to pursue” a deficiency judgment. This lone incident happened in a short sale where the seller had to sell short because of a job relocation, and even though she could not afford to bring money to the table at the time, the lender perhaps thought her prospects were likely to improve in the near future.


In theory, it could happen that a lender seeks and wins a deficiency judgment against a short seller. The availability of a deficiency judgment largely depends on state law.


Some jurisdictions hold that the loans obtained at the acquisition of a property ("purchase-money") are non-recourse, but Georgia is not one of them.


There is also no statutory procedure that the lender must follow in Georgia to obtain a deficiency judgment after the borrower's property is sold in a short sale or deed in lieu of foreclosure transaction.


That said, I can only repeat that I have not seen it happen in all my years as a Georgia short sale specialist. In my experience, based on my own transactions and those of other short sale specialists in my network of agents and attorneys, Georgia short sellers rarely if ever have deficiency judgments lodged against them by their lenders.


Deficiency judgments in Georgia foreclosures


In case of a foreclosure, however, there may be a greater likelihood. Most foreclosures in Georgia are nonjudicial, which means the lender does not have to go through state court to get one. In a Georgia foreclosure, OCGA § 44-14-161 permits a creditor to obtain a deficiency judgment if the foreclosure sale is reported to a judge within 30 days of sale.


In this case, a deficiency judgment from the courts makes the foreclosed borrower personally liable for the deficiency balance  and allows lenders and debt collectors to pursue that payment.


Need help selling an underwater house in Georgia? Give us a call to confidentially discuss your options. We are the Best Atlanta Short Sales Team, and helping underwater Georgia homeowners is our specialty.



Comments (1)

Dave Halpern
Dave Halpern Real Estate Agent, Inc., Louisville, KY (502) 664-7827 - Louisville, KY
Louisville Short Sale Expert

Over time the banks have learned that it's better for them to forgive the deficiency rather than force the seller into bankruptcy, causing the lender even greater losses.

Sep 19, 2017 03:45 AM