How can I avoid paying a deficiency judgment in Texas?

Texas Property Code - Section 51.003. Deficiency Judgment stipulates that in the event that a home is sold at a foreclosure sale and the amount paid is less than the amount owed to the lender is less than the sale price then the lender is allowed (within twenty four months) to file for a deficiency judgment.  There are specific rules that state however that the lender may not file a deficiency judgment until the following:

Fair market value assessment

When a property is sold at a foreclosure auction for less than the amount owed, the borrower may request a fair market value appraisal or assessment on the property. In the event that the value of the home exceeds the amount that the property was auctioned for, the borrower's indebtedness must be reduced by the  difference between the auction price and the amount owed.

Example: A Texas homeowner loses their home to foreclosure. The home is worth $200,000 and at the auction the home was sold for $170,000.  The homeowner owes $180,000 in outstanding mortgages. Homeowner may argue that since the home was sold for less than $200,000 the lender is not allowed to file a deficiency judgment.  A qualified real estate attorney could fight for the homeowner's rights in this case and a deficiency judgment would not be allowed.

Personal Mortgage Insurance (PMI)

In the event that the property had PMI, the lender must deduct any amount that they have recuperated from this insurance from the amount of the judgment requested.  In many cases, especially when homes have been purchased with low down-payment amounts, this insurance would protect the homeowner from a deficiency judgment.

Foreclosure laws require competent assistance

Texas homeowners who are facing foreclosure need to have competent legal advice regarding what their rights are.  Foreclosure laws are updated on a regular basis; a foreclosure attorney who understands the complexities involved in foreclosure law can help protect a homeowner.