Deficiency Judgment
in New York State —
What Buffalo Homeowners
Must Know
Deficiency Judgment New York Buffalo — What You Owe After Foreclosure Short Sale WNYWhen your home sells for less than you owe — in a foreclosure, short sale, or deed in lieu — the remaining balance is called the deficiency. New York State allows lenders to sue you personally for that balance, even after the property is gone. This page explains exactly what a deficiency judgment is, how New York law applies, how to negotiate a waiver, and why a cash sale often eliminates the risk entirely.
New York is one of the states that allows deficiency judgments. This means that after your home is sold — through foreclosure, short sale, or deed in lieu — your lender may file a separate lawsuit to collect the difference between what you owed and what the property sold for. You can lose the home AND still owe the bank money.
Nickel City Buyers, LLC is not a law firm and we are not attorneys. This page is educational information based on our experience purchasing 300+ homes in Buffalo and WNY since 2013 — it is not legal advice. For guidance on deficiency judgments, consult a licensed NYS attorney. Free help: nls.org · housinghelpny.org.
Two concepts every Buffalo and WNY homeowner facing foreclosure or short sale needs to understand — deficiency and deficiency judgment.
A deficiency is the gap between what you owe on your mortgage and what the property actually sells for. If you owe $180,000 on your Buffalo home and it sells at a Sheriff Sale for $140,000, the deficiency is $40,000. That $40,000 does not automatically disappear.
Deficiencies occur most commonly in foreclosure (Sheriff Sale), short sales (lender-negotiated below-payoff sale), and deeds in lieu (signing the property to the bank). In all three cases, you may still owe money after the transaction is complete.
In New York State, the statute of limitations for a lender to seek a deficiency judgment is 90 days after the foreclosure sale — but this is a serious and active enforcement tool, particularly for larger deficiencies.
A deficiency judgment is a court order requiring you to pay the remaining balance. Your lender files a separate lawsuit after the foreclosure sale seeking a judgment for the deficiency amount. If the court grants it, the lender can pursue collection through wage garnishment, bank account levies, and liens on any other property you own in New York.
Not all lenders pursue deficiency judgments — the cost of litigation sometimes exceeds what they’d collect. But if you have other assets, income, or property, the risk is real and the consequences are serious.
The single most effective way to eliminate deficiency judgment risk is to sell the property for at or above the total payoff amount — which is exactly what a cash sale to Nickel City Buyers accomplishes.
in New York
New York has specific rules around deficiency judgments that every WNY homeowner needs to know before a foreclosure, short sale, or deed in lieu proceeds.
Unlike some states with anti-deficiency laws, New York State permits lenders to pursue deficiency judgments after foreclosure, short sale, and deed in lieu transactions. There is no automatic forgiveness of the remaining balance. The lender must file a separate action within 90 days of the foreclosure sale to pursue the deficiency.
In New York, when calculating the deficiency, courts typically credit you with the fair market value of the property rather than the actual sale price — whichever is higher. This means if your home sells at Sheriff Sale for $120,000 but has a fair market value of $150,000, the deficiency is calculated using $150,000. This protects homeowners from lenders who accept distressed sale prices and then pursue large deficiencies.
After a foreclosure sale in New York, the lender has 90 days to file a motion for a deficiency judgment. If they do not file within this window, the right to pursue the deficiency is lost. This deadline is why immediate action after a sale is critical — and why negotiating a deficiency waiver before the sale is far more effective than contesting it afterward.
For short sales and deeds in lieu, the deficiency rules are negotiated as part of the transaction. Always get a written deficiency waiver from your lender before agreeing to either option. Some lenders include deficiency language automatically; others do not. Never sign a short sale agreement or deed in lieu without confirming the deficiency status in writing. Free legal aid: Neighborhood Legal Services (nls.org).
When a lender forgives a deficiency — either voluntarily or as part of a short sale agreement — the IRS may treat the forgiven amount as taxable income. You may receive a 1099-C (Cancellation of Debt) form. The Mortgage Forgiveness Debt Relief Act has provided exceptions historically, but tax rules change. Always consult a CPA or tax advisor before agreeing to any deficiency waiver to understand the potential tax consequences for your specific situation.
When Nickel City Buyers purchases your property for cash, the sale proceeds pay your lender’s full payoff amount at closing — including all outstanding principal, interest, and fees. There is no deficiency because the lender receives full payment. The deficiency judgment risk is eliminated entirely. This is one of the most overlooked advantages of a cash sale for Buffalo and WNY homeowners facing foreclosure.
If a short sale or deed in lieu is your path forward, a deficiency waiver is non-negotiable. Here’s what it is and how to get one.
A deficiency waiver is a written agreement from your lender releasing you from personal liability for the remaining balance after the property sells for less than you owe. Without one, you remain legally responsible for the deficiency even after the transaction closes.
Never sign a short sale agreement or deed in lieu without a written deficiency waiver. Some lenders include deficiency language automatically as part of their approval letter. Others do not — and verbal assurances are worthless. Get it in writing, reviewed by an attorney, before you sign anything.
“A verbal promise from a loss mitigation representative that ‘we won’t pursue the deficiency’ is not a waiver. It is not enforceable. Get it in the approval letter.”
For short sales in New York, the deficiency waiver is typically negotiated as part of the lender’s approval of the sale. Your attorney or HUD-approved housing counselor can negotiate this language on your behalf — free counselors are available through Neighborhood Legal Services and Housing Help NY.
For deeds in lieu, the deficiency waiver must be explicitly included in the deed in lieu agreement before you sign. See our full deed in lieu guide for the complete picture.
- Written form — verbal agreements are unenforceable
- Lender’s letterhead — on official approval documentation
- Specific waiver language — “lender waives any right to pursue deficiency judgment”
- Property address — must reference your specific property
- Borrower name(s) — all borrowers on the loan must be named
- Date and signatures — executed by authorized lender representative
- Attorney review — have a NYS attorney confirm the language before signing
Why a Cash Sale Is the Cleanest Path
Every path that involves selling your home for less than you owe — short sale, deed in lieu, foreclosure — carries deficiency judgment risk in New York State. You can negotiate a waiver, but it requires your lender’s cooperation, proper legal documentation, and takes time you may not have.
A cash sale to Nickel City Buyers eliminates the deficiency risk entirely — because the sale pays your lender’s full payoff at closing. There is no remaining balance. There is no deficiency to waive. The risk doesn’t need to be negotiated away because it never exists.
Many Buffalo and WNY homeowners who believe they are underwater — that they owe more than their home is worth — are surprised by a current market valuation. Property values in WNY have increased significantly since 2013. A home purchased for $110,000 that has appreciated and had $40,000 in principal paid down may have more equity than the owner realizes.
Call (716) 557-7005 before you assume a cash sale is off the table. A 10-minute conversation gives you an honest picture of what a cash offer looks like, what your payoff amount is, and whether you’d walk away with equity. If you genuinely are underwater, we’ll tell you that honestly and point you toward a free housing counselor who can help negotiate a deficiency waiver on your behalf.
Deficiency Judgment NY —
Buffalo WNY FAQ
Can a lender sue me for the remaining balance after foreclosure in New York?
Yes. New York State allows lenders to pursue deficiency judgments after foreclosure. After a Sheriff Sale in Erie County (92 Franklin St, Buffalo) or Niagara County (175 Hawley St, Lockport), the lender has 90 days to file a motion for a deficiency judgment. If granted, the lender can pursue collection through wage garnishment, bank account levies, and liens on other property you own. Not all lenders pursue deficiencies — the cost of litigation versus collectability is a factor — but the risk is real, particularly if you have other assets or income.
How is the deficiency amount calculated in New York?
In New York, the deficiency is typically calculated as the difference between what you owed (principal, interest, fees, foreclosure costs) and the fair market value of the property at the time of sale — not necessarily the actual sale price. New York courts apply the fair market value standard to protect homeowners from situations where the property sells at a deeply distressed price at Sheriff Sale. If the fair market value is higher than the sale price, the higher number is used for deficiency calculation.
What is a deficiency waiver and how do I get one?
A deficiency waiver is a written agreement from your lender releasing you from personal liability for the remaining balance. It must be in writing, on the lender’s official documentation, with specific language waiving the right to pursue a deficiency judgment. For short sales, it is negotiated as part of the lender’s short sale approval. For deeds in lieu, it must be explicitly included in the agreement before you sign. Never accept verbal assurances. A free Neighborhood Legal Services attorney or HUD-approved housing counselor can negotiate deficiency waiver language on your behalf at no cost.
Does a cash sale eliminate deficiency judgment risk?
Yes — completely. When Nickel City Buyers purchases your property, the sale proceeds pay your lender’s full payoff at closing — including all outstanding principal, interest, fees, and foreclosure costs. Because the lender receives full payment, there is no deficiency. The risk is eliminated, not negotiated away. This is one of the most significant advantages of a cash sale for Buffalo and WNY homeowners who are behind on their mortgage but have any equity above the total payoff amount. Call (716) 557-7005 to find out if a cash sale is possible for your situation.
Will forgiven deficiency debt be taxed in New York?
Potentially — yes. When a lender forgives a deficiency (as part of a short sale agreement, for example), the IRS may treat the forgiven amount as taxable income and issue a 1099-C (Cancellation of Debt) form. The Mortgage Forgiveness Debt Relief Act has historically provided exceptions for primary residences, but tax rules change and the application depends on your specific circumstances. Always consult a CPA or tax advisor before agreeing to any deficiency forgiveness arrangement. Free tax assistance may be available through VITA (Volunteer Income Tax Assistance) programs in the Buffalo area.
What areas of Erie and Niagara County does Nickel City Buyers serve?
We serve all of Erie and Niagara County — Buffalo, Cheektowaga, Amherst, Tonawanda, Lackawanna, West Seneca, Hamburg, Orchard Park, Lancaster, Depew, Kenmore, Williamsville, East Aurora, Clarence, Akron, Grand Island, Niagara Falls, Lockport, North Tonawanda, Lewiston, Youngstown, Wheatfield, Pendleton, and Newfane. Call (716) 557-7005 for a free assessment of your situation.
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Nickel City Buyers, LLC is a cash home buying company serving homeowners facing deficiency judgment risk throughout Buffalo and Western New York. We are not a law firm. Located at 3842 Harlem Rd STE 400-339, Cheektowaga, NY 14215. Phone: (716) 557-7005. Website: nickelcitybuyers.com. Erie County Sheriff Sales: 92 Franklin St, Buffalo NY. Niagara County Sheriff Sales: 175 Hawley St, Lockport NY. We serve Buffalo, Cheektowaga, Amherst, Tonawanda, Lackawanna, West Seneca, Hamburg, Orchard Park, Lancaster, Depew, Kenmore, Williamsville, East Aurora, Clarence, Akron, Grand Island, Niagara Falls, Lockport, North Tonawanda, Lewiston, Youngstown, Wheatfield, Pendleton, Newfane, and all of Erie and Niagara County. A+ BBB rating. 300+ homes since 2013. Free legal resources: nls.org · housinghelpny.org. Foreclosure Resource Center →
A Cash Sale Pays
the Bank in Full.
No Deficiency. Ever.
When we close, your lender gets full payoff from the proceeds. No remaining balance. No judgment risk. Cash offer in 24 hours. Close in 7–21 days.