A deficiency balance on foreclosure—also known as a mortgage deficiency or deficiency balance—occurs when a home or property is foreclosed on and the sale proceeds are not sufficient to pay off the mortgage. The remaining balance owed on the mortgage is a deficiency balance or mortgage deficiency.

Laws vary from state to state and a state’s laws and the terms of the mortgage may determine whether the mortgage lender (bank or mortgagee) will pursue a mortgagor who defaulted on a mortgage for any deficiency balance.

In Nevada, if a property is foreclosed upon and the sale does not generate enough funds to cover the outstanding mortgage balance, the lender may seek a deficiency judgment against the borrower for the remaining amount, known as the deficiency balance. However, Nevada law provides certain protections for borrowers. Under Nevada Revised Statutes (NRS) 40.455 and 40.459, there are limitations on the amount and the time frame within which a lender can pursue a deficiency judgment. For residential properties under four units, the deficiency is limited to the lesser of the amount by which the amount of the indebtedness exceeds the fair market value of the property at the time of sale or the amount by which the amount of the indebtedness exceeds the actual sale price. Additionally, the lender must file for a deficiency judgment within six months after the foreclosure sale. It's important to note that these protections may not apply to all types of loans or under all circumstances, and borrowers facing a potential deficiency judgment should consult with an attorney to understand their rights and obligations under Nevada law.