What is Deficiency / Deficiency Waiver?
A deficiency is the leftover balance still owed after a short sale or foreclosure brings in less than the loan amount. A deficiency waiver is the lender's written agreement to forgive that shortfall so it can't pursue the borrower for it later. Whether a waiver is granted — and whether state law allows the lender to collect — is one of the most important points to confirm before closing a short sale.
Example: On a short sale that pays the lender $50,000 less than owed, the seller's agent negotiates a deficiency waiver in the approval letter so the bank cannot bill the seller for the $50,000 afterward.