Texas Commercial Law Firm

III. Deficiencies

A. Recovering a Deficiency Judgment

After a non-judicial foreclosure sale, suit must be filed recover a deficiency against the borrower. Unlike other causes of action based upon a written contract in Texas, the statute of limitations for filing a deficiency suit is specifically limited to two years from the date of the foreclosure sale. Tex. Prop. Code §51.003, see Appendix. (The “Deficiency Statute”). The Deficiency Statute expressly applies only to deficiencies in mortgage debt remaining after real property foreclosures. The Deficiency Statute's two-year limitations period does not apply to deficiencies remaining after repossession and sale of personal property unless the personal property was sold incidentally to a real estate foreclosure sale.

The Deficiency Statute provides that anyone against whom a deficiency judgment is sought after a non-judicial foreclosure sale may request the court where the action is pending for a judicial determination of the fair market value of the property foreclosed as of the date of the foreclosure sale. Both parties are allowed to introduce evidence of the property's value at foreclosure. The finder of fact will weigh the evidence presented by both parties in making its decision as to the property's value as of the date of foreclosure. Competent evidence of value may include (but is not limited to):

(i) expert opinion testimony;

(ii) comparable sales;

(iii) anticipated marketing time and holding costs;

(iv) cost of sale; and

(v) necessity and amount of any discount to be applied to the future sales price or the cash flow generated by the property to arrive at a current fair market value.

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