An Arkansas real estate agent, Jennifer, is advising a seller whose property is being foreclosed upon through a trustee's sale under a deed of trust. The seller asks Jennifer whether the lender can pursue him personally for any remaining balance if the foreclosure sale proceeds are less than the loan amount. Which response is most accurate under Arkansas law?
Correct Answer
A) Yes, the lender may pursue a separate court action for a deficiency judgment if the sale proceeds are insufficient to cover the outstanding debt
Under Arkansas law, after a non-judicial trustee's sale, the lender (beneficiary) may pursue a separate court action to obtain a deficiency judgment if the sale proceeds are insufficient to cover the full outstanding loan balance, interest, and costs. A deficiency judgment allows the lender to seek the remaining balance from the borrower personally. This is a distinct legal action separate from the foreclosure itself and is not automatically prohibited by the use of a deed of trust.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Closing costs are the fees and expenses paid by the buyer and seller at the closing of a real estate transaction, beyond the purchase price. They typically range from 2-5% of the purchase price.
A conventional loan is a mortgage that is not insured or guaranteed by a government agency such as the FHA, VA, or USDA. It is originated and funded by private lenders and may be conforming or non-conforming.
The debt-to-income ratio (DTI) compares a borrower's monthly debt obligations to their gross monthly income. It is used by lenders to determine how much mortgage a borrower can afford.
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