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In Florida, the legal standard for a mortgagee to obtain a deficiency judgment following foreclosure is to establish the difference between the amount of the indebtedness and the fair market value of the foreclosure property as of the date of the foreclosure sale. The amount of the indebtedness is typically established by means of the foreclosure judgment. The fair market value is established by presenting evidence of the appraised value.

Banks typically obtain appraisals in connection with the foreclosure process and frequently these are obtained prior to the foreclosure sale date in anticipation of the fact that the bank will likely be the high bidder and take title to the property. The cost of the appraisal, which is often significant, generally falls on the bank and, as a result, many lenders are hesitant to order another appraisal as of the foreclosure sale date for deficiency purposes, preferring instead to rely on the appraisal that they have already obtained. Would it make a difference in a bank’s attempt to obtain a deficiency if the appraisal they used measured value at a date only five months after the foreclosure sale date?

A recent appellate decision from the Second District said “yes” and, as a result, the bank’s deficiency judgment was reversed and remanded to the trial court for further proceedings. In the case, the bank presented evidence from its appraiser as to the fair market value of the property on June 13, 2010. The foreclosure sale occurred January 6, 2010, some five months earlier, and the testimony was challenged by the borrower’s counsel. Without further evidence, the bank was left to simply argue that the value could not have changed much in those few months. While the trial court accepted this, the appellate court did not. Maybe the bank could have presented additional evidence to tie the value down to the foreclosure sale date. However, we think the best evidence of that would be an appraisal with a date of valuation matching the foreclosure sale date.