If no party requests a determination of fair market value, or if the request is made but no competent evidence of fair market value is introduced, the sales price at the foreclosure sale is used to compute the deficiency.” If the court determines that the fair market value of the real property on the date of the foreclosure sale was greater than the sales price of the real property paid at the foreclosure sale, the persons against whom recovery of the deficiency is sought are entitled to an offset against the deficiency in the amount by which the fair market value exceeds the sales price, less the amount of any claim, indebtedness, or obligation of any kind that is secured by a lien or encumbrance on the real property that was not extinguished by foreclosure.
EXAMPLE: The following is an example of a calculation of a deficiency, where the court determines that the fair market value at the time of foreclosure was greater than the sale price of the real property at the foreclosure sale:
Outstanding
Indebtedness
(including expenses of
sale) $
1,000,000.00
Price paid at foreclosure sale − 700,000.00
Bank’s deficiency claim $ 300,000.00
Fair market value on date of
foreclosure
sale as found by finder of
fact
$ 800,000.00
Less unpaid ad valorem taxes − 60,000.00
Adjusted fair market value $ 740,000.00
Credit (difference between $ 740,000.00
adjusted fair market value and − 700,000.00
price paid at sale) $ 40,000.00
Bank’s deficiency claim $ 300,000.00
Less credit − 40,000.00
Total amount of Bank’s deficiency $ 260,000.00
An adjusted fair market value figure will be generated after deducting claims, indebtedness or obligations of any kind that are secured by a lien or encumbrance on the real property that was not extinguished by the foreclosure. The following is a partial list of items presumed to fall within that category: state tax liens, any prior contractual liens, any mechanic’s lien filed prior to the deed of trust, and easements and other title matters which were not extinguished by the foreclosure, including encumbrances to which the Bank consented which were not extinguished by the foreclosure. Recall that easements and other encumbrances which the debtor grants without the Bank’s consent, after the Bank has filed its deed of trust, may be extinguished by the foreclosure sale.