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Most of you may know that, in Florida, the standard by which a deficiency is determined in a foreclosure case is the difference between the amount owed to the lender and the fair market value of the mortgage property as of the date of the foreclosure sale. This has been well established by case law over the years. In practice, the fair market value is typically established by presenting testimony from a real estate appraiser who is recognized by the court as an expert in property appraisal. Often, the lender has ordered the appraisal in connection with its evaluation of the property and before it takes the asset into ORE. In these instances, there are times when the appraisal report is dated as of a date other than that of the foreclosure sale date. What impact can this have on a subsequent motion for deficiency? A recent appellate decision by the Second District Court of Appeals addressed this question.

In this case, decided in April of this year, the Court reviewed a $2.6 million dollar deficiency judgment entered by the trial court based in part on an appraisal dated some six months after the foreclosure sale date. It appears that the borrower’s trial counsel must have raised the issue that the value was not determined as of the foreclosure sale date. In response, the lender’s attorney offered only the argument that the values could not have changed much in the five month time from the foreclosure sale date to the appraisal date. The appellate court reversed the decision, finding that this was merely a conclusory statement that was not supported by the evidence. The case was remanded for further proceedings which means more cost and delay for that lender.

The lesson here is a basic one. You need to present evidence of fair value as of the date of the foreclosure sale or risk an unfavorable ruling, either at trial or on appeal. The best way is to make sure that the appraiser you are using as an expert has valued the property at the foreclosure sale date and that the resulting report reflects that.