In the context of a foreclosure, a "deficiency" is the difference between what the borrower owes on the mortgage loan and the foreclosure sale price. In Ohio, a foreclosing bank can seek a deficiency judgment (a personal money judgment against the borrower) if the foreclosure sale results in a deficiency.
However, state law limits the amount of a deficiency judgment.
What Is a Deficiency in an Ohio Foreclosure?
All Ohio foreclosures go through court, a process known as a "judicial foreclosure." At the end of the process, the home is sold to a new owner at a foreclosure sale.
When the foreclosure sale price doesn't cover the borrower's mortgage debt balance, the difference between the total debt and the sale price is called a "deficiency."
Example of a Deficiency in an Ohio Foreclosure
For example, if your total mortgage debt is $500,000, but the home sells to the bank at a foreclosure sale for a credit bid of $450,000, the deficiency is $50,000.
Do Foreclosures Always Result in a Deficiency?
If the sale price equals or exceeds the mortgage debt amount, there's no deficiency. In fact, if the sale results in surplus funds (more than what's needed to pay off any other liens, like a second mortgage or HELOC), you might be entitled to that extra money following the foreclosure sale.
What Is a “Deficiency Judgment” After a Foreclosure Sale?
If state law allows it, the bank can seek a personal judgment against the borrower to recover the deficiency if one exists. This kind of money judgment is called a “deficiency judgment.”
Does Ohio Allow Deficiency Judgments?
Yes. Ohio allows deficiency judgments.
What Are Ohio's Deficiency Judgment Laws?
The statutes governing deficiency judgments in Ohio can be found in the Ohio Revised Code, Title 23, Chapter 2329. In this article, you'll find details on foreclosure laws in Ohio, with citations to statutes so you can learn more. Statutes change, so checking them is always a good idea.
How courts and agencies interpret and apply laws can change. And some rules can even vary within a state. These are just some of the reasons to consider consulting a lawyer if you're facing a foreclosure.
What Are the Legal Requirements for a Deficiency Judgment in Ohio?
Again, foreclosures in Ohio are judicial, which means the bank must foreclose through the state court system. A judicial foreclosure begins when the bank files a lawsuit asking a court for an order allowing a foreclosure sale. In Ohio, the bank can get a deficiency judgment against the borrower as part of this process.
Attorneys’ Fees Generally Aren't Allowed In Ohio Foreclosures
Some states allow a foreclosing bank to include its attorneys’ fees in the total amount the borrower owes, increasing the deficiency. However, under Ohio law, a bank can't collect attorneys’ fees incurred in the foreclosure from the borrower.
Ohio follows the “American Rule,” which says that the winning party in a civil lawsuit generally can’t recover attorney's fees as a part of the litigation costs. Ohio courts have said that a bank can't get attorney's fees in a foreclosure, and it can't collect fees in a mortgage payoff (even though mortgage contracts typically include a provision allowing such fees to be collected) because it violates public policy.
However, the bank can charge attorney's fees if the borrower reinstates the loan.
How Deficiency Judgments Work in Ohio
While deficiency judgments are allowed, Ohio law limits the deficiency amount because the property can’t be sold at a foreclosure sale for less than two-thirds of the appraised fair market value. (Ohio Rev. Code §§ 2329.17, 2329.20 (2025).)
How a Bank Collects a Deficiency Judgment
Once a bank gets a deficiency judgment, it may generally collect the deficiency from the borrower through typical collection techniques, like garnishing wages or levying a bank account.
What Is the Statute of Limitations for a Deficiency Judgment After Foreclosure in Ohio?
A judgment is unenforceable as to any deficiency remaining after two years after the court confirms the sale. (Ohio Rev. Code § 2329.08 (2025).)
Can I Avoid a Deficiency Judgment in Ohio?
If your bank gets a deficiency judgment against you, you might be able to eliminate your liability for the judgment (and other dischargeable debts) in a Chapter 7 or Chapter 13 bankruptcy.
Or you might be able to work out a settlement with the bank to accept less than the full deficiency amount and forgive the rest. Generally, however, the IRS considers forgiven debt as taxable income, subject to some exceptions.
Can Lenders of Second Mortgages, HELOCs, and Other Junior Liens Collect From You?
Generally, when a senior lienholder forecloses, any junior liens (these would include second mortgages and HELOCs, among others) are also foreclosed, and those junior lienholders lose their security interest in the real estate. If a junior lienholder has been sold out in this manner, that junior lienholder can sue you personally on the promissory note.
So, if the equity in your home doesn’t cover second and third mortgages, you might face lawsuits from those bank to collect the loan balances.
Deficiency Judgment After a Short Sale in Ohio
A "short sale" is when you sell your home for less than the total debt you owe, and the sale proceeds pay off a portion of the balance. In Ohio, a bank may get a deficiency judgment after a short sale.
To avoid a deficiency judgment, a short sale agreement must expressly state that the bank waives its right to the deficiency. If the short sale agreement doesn’t contain this waiver, the bank may file a lawsuit to get a deficiency judgment.
Deficiency Judgment After a Deed in Lieu of Foreclosure in Ohio
A deed in lieu of foreclosure (deed in lieu) is when a bank agrees to accept a deed to the property instead of foreclosing to get the property’s title. With a deed in lieu, the deficiency amount is the difference between the total debt and the property's fair market value.
Often, a deed in lieu will satisfy the debt fully. But Ohio doesn’t have a law that says the bank can't get a deficiency judgment following this kind of transaction. So, a bank might try to hold the borrower liable for a deficiency following a deed in lieu.
To avoid a deficiency judgment, the agreement must expressly state that the transaction satisfies the debt fully. If the deed in lieu contract doesn’t contain this provision, the bank may file a lawsuit to obtain a deficiency judgment.
Getting Help With an Ohio Foreclosure
If you have questions about Ohio’s foreclosure process or want to learn about potential defenses to a foreclosure and possibly fight the foreclosure in court, consider talking to a foreclosure attorney.
It's also a good idea to talk to a HUD-approved housing counselor about different loss mitigation options, such as a loan modification, short sale, or deed in lieu of foreclosure.