What Happens if the Sale Price of a Home is Less Than the Tax Owed in a Tax Foreclosure Sale?

When a property is seized under Texas’s foreclosure laws, the goal is for the sale to cover the owner’s unpaid debt. In some foreclosure sales, however, the sale amount will be less than the debt owed. When this occurs in Texas, it’s known as a deficiency.

Non-judicial Foreclosures

For non-judicial foreclosures, if there’s a deficiency, Texas allows creditors to pursue the owner in court. This is done via a deficiency judgment to obtain the remainder of the unpaid debt. Creditors have two years from the date of the foreclosure sale to take action on the unpaid debt.

In Texas, the majority of foreclosures are non-judicial.

Judicial Foreclosures

For foreclosures that occur under a court judgment, creditors may also pursue a deficiency judgment. A creditor may bring an action in the district court of the county where the property is located. A difference from non-judicial foreclosures, however, is that a creditor must file within 90 days of either the foreclosure sale or receiving actual notice of the sale.



Fair Market Value

In a deficiency judgment, parties may introduce evidence about a property’s fair market value. Examples of evidence include:

• Opinion testimony from experts
• Comparable sales
• Anticipated marketing time and holding costs
• Sale cost
• For determining the fair market value at the time of the foreclosure sale, the necessity and amount of applying any discount to the property’s future sales price or any cash flow generated by the property

If the foreclosure sale price is less than the fair market value, the debtor may be required to pay the difference.

To provide a simplified example, a property owner owes $150,000 in back taxes. Their property sells at foreclosure for $100,000, leaving $50,000 outstanding. The court determines the property’s fair market value is $125,000, meaning the creditors can pursue the debtor for an additional $25,000 beyond what was obtained through the foreclosure sale.

Hire a Skilled Property Lawyer Who Knows Texas

If you reside in Harris County and are unable to pay your property taxes or are involved in a deficiency judgment, a skilled Texas property law attorney can help. The attorneys at Manfred Law help Texas property owners claim what’s theirs. Call us at 713-547-5460 or contact us online to schedule your consultation.