Chapter 19-3 Calculation of Deficiency Amounts

• Jurisdiction: Florida

19-3 Calculation of Deficiency Amounts

A mortgagee in a foreclosure action-or its assignee-is entitled to recover its full judgment debt, including post-judgment interest and costs, less the fair market value of the property.¹²

19-3:1 Burden of Proof

The granting of a deficiency judgment is the rule rather than the exception.¹³ The rein-troduction of a final judgment of foreclosure is not necessary to establish a lender's right to a deficiency judgment in the same case; therefore, the determination of the fair market value is typically the main issue of contest in a deficiency judgment pro-ceeding.¹⁴

The initial burden of proving fair market value is placed on the lender; however, it is a burden easily met. Initially, the lender simply has to introduce the sale price at the foreclosure auction (or short sale, if deficiency is not waived in the agreement) in evidence. As Florida courts issue a certificate of sale, providing evidence of the sale price is simple.¹⁵ Upon the introduction of the sale price, the burden then shifts to the note signor to prove the fair market value of the property is something different than the presented sale price. The "proper rule is that upon the introduction of the evidence of the sale price, the defendant has the burden of going forward and presenting such evidence as he shall find proper concerning the fair market value of the property."¹⁶ In the absence of evidence presented by the defendant, the trial court has the power to act upon the assumption that the sale price reflects the fair market value.¹⁷ In fact, a "legal presumption exists that the foreclosure sale price equals the fair market value of the property."¹⁸

The same burden-shifting framework also applies to deficiency judgments after short sales.¹⁹ In fact, the presumption that the short sale price was the fair market value may carry more weight as short sales are generally done at the request of the obligor.²⁰

When there is a dispute over the fair market value of the property at the time of the sale, an evidentiary hearing is required. Often both sides will have appraisals done to establish the fair market value, but appraisals cannot be considered by the court unless the appraisal is: (1) properly admitted into evidence; and (2) an evaluation of the value of the property is conducted at the time of the sale.²¹

19-3:2 Judge's Discretion

The court is given discretion to determine if there are any "equitable considerations" that warrant a reduction in the actual deficiency.²² However, this discretion is not unfettered. The court cannot exercise its discretion without first determining how much the property is worth at the time of the sale, either through the sale price or other evidence of fair market value.²³ If the court then decides to reduce the deficiency amount, the court must state any legal or equitable principles relied upon.²⁴When a court does not state any legal or equitable principles justifying an award for less than the full amount of the deficiency, it is an abuse of discretion.²⁵

In most cases, foreclosure sale bidding begins at $100.00 and frequently, the lender is the high bidder for that amount, or some other nominal amount. Upon introduction of the certificate of sale indicating a high bid at auction of $100, presumption would be placed that this is the fair market value and shift the burden to the note signor to present evidence to the contrary.²⁶ In such cases, the note signor should try to prove the fair market value of the property is higher than the sale price, thereby decreasing the amount of the deficiency judgment. However, even absent evidence from the defendant, in cases where the successful bid is clearly a nominal amount, the court may require an appraisal as close to the...