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Texas · ForeclosureTexas deficiency after foreclosure: the two-year limit and the fair market value offset

If a Texas property sold at a nonjudicial foreclosure sale brings less than the unpaid debt, any action to recover the deficiency must be brought within two years of the sale. Anyone against whom recovery is sought can ask the court to determine the property's fair market value on the sale date, based on evidence such as expert testimony, comparable sales, marketing time and holding costs and costs of sale; if the value – less any liens the foreclosure didn't extinguish – exceeds the sale price, the excess offsets the deficiency, and if no one asks or no competent evidence is offered, the sale price is used. Money the lender received from a private mortgage insurer is credited to the borrower before the lender sues (Tex. Prop. Code §51.003). After a judicial foreclosure sale, anyone obligated on the debt, including a guarantor, can sue in the district court of the county for the same fair market value determination, no later than the 90th day after the sale (§51.004), and a guarantor already under judgment has a similar 90-day right (§51.005).

What the statutes set

  1. Deadline (§51.003(a))

    A deficiency suit after a nonjudicial sale within two years.

  2. Offset (§51.003(b)–(c))

    On request, fair market value minus surviving liens, over the sale price, reduces the deficiency.

  3. Mortgage insurance (§51.003(d))

    Insurer payments are credited to the borrower first.

  4. Judicial sale (§51.004)

    A fair market value suit within 90 days after the sale.

What the TC does on a Texas short sale or pre-foreclosure listing

  • Ask the seller's lender for a written payoff, or for the short sale approval and whether it waives any deficiency.
  • Calendar the first-Tuesday sale date as the outside closing deadline.
  • Keep the lender's approval letter in the file.

Questions about Texas deficiency judgments

How long does a Texas lender have to sue for a deficiency?

Two years after a nonjudicial foreclosure sale (Tex. Prop. Code §51.003(a)).

Can a Texas borrower reduce the deficiency?

Yes – by asking the court to determine fair market value at the sale date; any excess over the sale price, after surviving liens, offsets the deficiency (Tex. Prop. Code §51.003(b)–(c)).

Related guides

Put the sale date and the lender's approval on the deal as dated tasks in ClosingCode.

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Sources: Tex. Prop. Code §§51.003–51.005 (statutes.capitol.texas.gov), read October 30, 2026.

General information, not legal advice. ClosingCode is software; it is not a law firm or brokerage. This guide is not a substitute for the advice or services of an attorney.