Texas Commercial Law Firm
Foreclosure
C. Calculating the Deficiency
In the event no party requests a determination of fair market value or if such request is made and no competent evidence of fair market value is introduced, the sales price at the foreclosure sale will be used to compute the deficiency. If the court finds that the fair market value of the mortgaged property when foreclosed exceeds the winning foreclosure bid, the defendants will be 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 secured by a superior lien on the foreclosed property.
| EXAMPLE | AMOUNT |
| Total Indebtedness | $1,000,000 |
| Foreclosure Sales Price | - $600,000 |
| Difference | $400,000 |
| Fair Market Value of Property at Foreclosure | $700,000 |
| Off-Set Amount (difference between fair market value and foreclosure sales price) | $100,000 |
| Final Deficiency Amount | $300,000 |
It is important to note that the fair market value figure will be reduced by deducting any claims, indebtedness, or obligations of any kind secured by liens or encumbrance on the real property not extinguished by foreclosure. Such items may include state tax liens, prior contractual liens, prior mechanic's liens, mechanic's liens against removable items and prior easements.
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