What is a deficiency judgment?
Connecticut is a recourse state. This means the lender that suffers a shortage in a foreclosure has the right to pursue a deficiency judgment from the borrower. They can and sometimes do sue the homeowner for the losses they have suffered and will move to collect these funds. You will have no control over this in a foreclosure.
What happens to the deficiency in a short sale?
Most investors - Fannie Mae, Freddie Mac, FHA, USDA have specific policies about what happens to the forgiven debt in a short sale which is usually that the remaining debt be fully forgiven and that the lender agree to not pursue any deficiency judgement. Some lenders have no set policy - specifically on portfolio notes.
How will I know if the lender is waiving their right to pursue a deficiency judgment?
Towards the end of the short sale approval process, the lender will issue a short sale approval letter specifying the terms under which they are approving the short sale.
How the deficiency will be handled will be spelled out in your approval letter which . When the approval is reached, if the terms of the short sale approval letter are not acceptable, you will have the ability to renegotiate these terms. As your CT short sale agent I always seek to have the short sale approved at terms most beneficial to you - which would be to settle the account in full.
HERE AT REID REAL ESTATE GROUP WE ACHIEVE FULL DEBT FORGIVENESS WITH A DEFICIENCY WAIVER IN 99% OF OUR SHORT SALES.
Is full debt forgiveness always guaranteed with a short sale?
No - not always. There are some very rare situations in which the lender(s) will not waive their right to pursue a deficiency and then it will be your decision whether to go through with the short sale or not. This is most common with portfolio notes. VA also has some different policies for how the debt in short sale is handled.
A short sale is not a perfect solution 100% of the time, but it is almost always the most beneficial one. A short sale negotiated by an experienced agent is your best chance of settling the debt at your terms, preventing foreclosure and minimizing your damages.
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We are grateful to Minna for her knowledge, professionalism and expertise in short sales. She truly cares about her clients and it is evident in the manner she represents them. She has a strong work ethic and keen negotiation skills when dealing with financial institutions and buyers. We strongly recommend Minna and her company if u want immediate results.
T.G.
Last Updated on January 13, 2026 by Minna Reid