By: Scott J. Kennelly & Janet C. Owens
Following a foreclosure sale, a secured creditor may seek a monetary judgment for the deficiency amount that remains owed to it by the borrower. If the creditor was the successful bidder at the foreclosure sale, it has the burden of proving that the fair market value of the property foreclosed upon, as of the date of the foreclosure sale, was less than the total debt owed. Fair market value is defined as the amount that would be paid for the property to a willing seller, not compelled to sell, by a willing buyer, not compelled to buy, considering all reasonable uses to which the property is adapted. The determination of a property’s value may be affected by the foreclosure sale bids , but creditors usually are required to independently prove the value.
A creditor typically engages an appraiser to value the property as of the date of the foreclosure sale. The trial court cannot consider appraisals that are older than the sale date, even by a few days. This is because the only date relevant to the amount of a deficiency judgment is the date of the foreclosure sale. Still, an appraiser may “update” an old appraisal with testimony as to the property’s value. For example, an appraiser can review his older appraisal, investigate the more-current value of the property in accordance with the professional appraiser standards (i.e., Uniform Standards of Professional Appraisal Practice), and testify regarding the value as of the date of the foreclosure sale.