Ohio allows deficiency judgments after foreclosure:
Audio Lesson
Duration: 2:46
Question & Answer
Review the question and all answer choices
Never
CORRECT_ANSWER
Always automatically
Deficiency judgments are not automatic in Ohio. Lenders must follow proper procedures and file within the statutory timeframe, protecting borrowers from immediate collection actions after foreclosure.
Yes, within 2 years if the sale price is less than debt
Only for commercial properties
Ohio's deficiency judgment laws apply to both residential and commercial properties, not exclusively to commercial ones. The timeframe and conditions apply regardless of property type.
Why is this correct?
Ohio law specifically permits deficiency judgments within 2 years of foreclosure sale if the sale price is less than the outstanding debt. This timeframe and condition-based approach distinguishes it from states with either absolute bans or automatic deficiency judgments.
Deep Analysis
AI-powered in-depth explanation of this concept
Deficiency judgments are crucial in real estate practice because they represent the financial consequences when foreclosure fails to cover the outstanding mortgage debt. Understanding Ohio's specific rules helps real estate professionals advise clients on potential liability risks. The question tests knowledge of state-specific foreclosure laws, which vary significantly across jurisdictions. The correct answer recognizes Ohio's approach: deficiency judgments are permitted but not automatic, requiring a two-year window and only when the foreclosure sale proceeds are insufficient. This balances lender protection with borrower fairness. The challenge lies in distinguishing between states that prohibit deficiency judgments entirely, those that allow them automatically, and those with specific conditions like Ohio's commercial property limitation and time restriction. This connects to broader real estate principles of risk assessment, contract law, and state regulatory frameworks governing secured transactions.
Knowledge Background
Essential context and foundational knowledge
Deficiency judgments represent the difference between the outstanding loan balance and the foreclosure sale price. In Ohio, after a foreclosure sale, the lender has up to 2 years to pursue a deficiency judgment against the borrower. This right exists because foreclosure primarily aims to recover the property, not necessarily to satisfy the debt obligation. Most states have deficiency judgment laws, but the specifics vary widely regarding time limits, property types covered, and required procedures. Some states, known as 'anti-deficiency' states, prohibit deficiency judgments entirely, particularly for certain types of residential loans.
TWO-YEAR GAP (Two Years, Outstanding debt, Within timeframe, Years to file, Excludes commercial only, Amount Price difference)
Remember Ohio's deficiency judgment rules by thinking of the TWO-YEAR GAP: up to Two Years, only for the gap between Outstanding debt and sale price, Within that timeframe, Years to file the judgment, Applies to all properties (not just commercial), and calculates the Price difference.
For deficiency judgment questions, first identify if the state allows them, then check the timeframe and conditions. Ohio specifically allows within 2 years when sale price is less than debt.
Real World Application
How this concept applies in actual real estate practice
A real estate agent lists a $200,000 home for a client who purchased it for $180,000 with a $160,000 mortgage. After market downturns, the property sells at foreclosure for only $140,000. The agent must inform the former homeowner that Ohio law allows the lender to pursue a deficiency judgment for the $20,000 difference plus costs within 2 years. This knowledge helps the agent prepare the client for potential financial consequences and explore options like short sales that might avoid deficiency judgments altogether.
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