Deficiency Judgments following foreclosure in Tennessee

Due the the rash of foreclosures in recent years, particularly with commercial and  investment real estate loans, a rash of deficiency judgment actions are taking place in the courts. A little known amendment to Tennessee Code Annotated 35-5-118 effective in 2010 has caused lenders and borrowers to scratch their heads about how to calculate if a property sold for materially less than the fair market value at foreclosure sales.The basic law states that the sale price paid by the creditor is presumed to be equal to the fair market value of the property at the time of sale.If facing a deficiency judgment suit, the borrower must prove by a preponderance of the evidence that the property sold for an amount materially less  than the fair market value at the time of the sale. Unfortunately , the legislature has kept us guessing on what materially less means.Two appellate court cases have attempted to define this and the courts appear to be heading in the direction that a sales price equal to 80-86 % of the proven fair market value is not materially less than the fair market value. Watch for legislation as to this issue in an attempt to define what materially less is or is not.