A deficiency is the difference between the principal balance due and the amount received, providing the amount received is less than the amount owed.
Whether the bank can pursue a deficiency judgment after a foreclosure or short sale depends in part on whether the promissory note makes the seller personally liable for the debt. Some states allow for personal liability.

Deficiency Judgments in California

The good news for California borrowers is all purchase-money loans on a one- to four-unit residential dwelling are exempt from deficiency judgments.
Hard-money loans in California -- loans taken out after the home was purchased through arefinance or second mortgage -- can be subject to a deficiency judgment under the following conditions:

• The lender forecloses under judicial proceedings (California Code Civil. Proc. § 726).

• Most lenders foreclose through a trustee's sale; however, which does not give the lender the right to pursue a deficiency judgment, with one exception (see second hard-money secondmortgages below).

• A three-month time limit applies to actions for deficiency judgments under a judicial foreclosure.

• If the second mortgage is hard money and the lender has lost security for that loan through a foreclosure or short sale -- making the security for the promissory note worth nothing -- the beneficiary of that second mortgage can pursue a deficiency judgment (Roseleaf Corp. v. Chierighino, 59 Cal. 2d 35 (1963)

• SB 931, effective Jan. 1, 2011, offers deficiency protection to California short sale sellers if the loan is in first position. It does not apply to foreclosures.