One of the most common questions I receive from sellers who are upside down on their mortgage(s) is what a deficiency judgment is and whether or not it may apply to them if they sell at a short sale, offer a deed in lieu of foreclosure or are foreclosed upon. The answer is it can occur in any of these situations.
Unfortunately, borrowers have no control when it comes to deficiency judgments. The ball is solely in the lender’s court since lenders have the legal right to pursue the full amount of any deficiency. When the promissory note was originally signed at the time of purchase or refinance, the borrowers legally obligated themselves to pay the full amount. Whether or not the lender elects to pursue is at the lenders discretion and usually not determined until the last minute.