No deficiency on seller-financed purchase loans; value defense for others
N.C. Gen. Stat. § 45-21.38
In plain words
If the seller of your home financed the purchase and the note shows it is for the purchase price, the seller cannot get a deficiency judgment after foreclosure. For other loans, if the lender bought the home at the sale and then sues for a deficiency, you can show the home was worth the debt (or more) to reduce or wipe out the deficiency.
Who is protected
North Carolina borrowers facing a deficiency claim after foreclosure.
When it applies
- Only in North Carolina.
- Only after the foreclosure sale.
What you can do
Build a value defense
Collect appraisals and comparable sales from the sale date.
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Honest limits
- The purchase-money bar covers seller-financed purchase loans; most bank loans are not covered by § 45-21.38.
- This is general education, not legal advice. Laws change and details matter — check the current official text or talk to a legal aid lawyer or HUD-approved housing counselor.
The law
- State lawNo deficiency on purchase-money mortgages
N.C. Gen. Stat. § 45-21.38
What it says: A seller-financed purchase-money lender is not entitled to a deficiency judgment.
Read the official texthttps://www.ncleg.gov/EnactedLegislation/Statutes/HTML/BySection/Chapter_45/GS_45-21.38.html - State lawValue defense in deficiency suits
N.C. Gen. Stat. § 45-21.36
What it says: When the lender buys at the sale, the borrower may show the property was fairly worth the debt.
Read the official texthttps://www.ncleg.gov/EnactedLegislation/Statutes/HTML/BySection/Chapter_45/GS_45-21.36.html
Court cases
- Homeowner lostSame topicMartins v. BAC Home Loans Servicing, L.P.
Martins v. BAC Home Loans Servicing, L.P., 722 F.3d 249 (5th Cir. 2013)
a mortgage servicer acting for a properly assigned mortgagee may foreclose in Texas without possessing the original note, and an oral promise to modify a large loan is not enforceable
- Homeowner lostSame topicMilton v. U.S. Bank National Ass'n
Milton v. U.S. Bank Nat'l Ass'n, 508 F. App'x 326 (5th Cir. 2013) (per curiam) (unpublished)
an agreement to delay a Texas foreclosure falls within the statute of frauds and must be in writing to be enforced
- Homeowner lostSame topicBFP v. Resolution Trust Corp.
BFP v. Resol. Tr. Corp., 511 U.S. 531 (1994)
the price received at a non-collusive foreclosure sale that complied with state law is reasonably equivalent value under the Bankruptcy Code
Related rights
Right to surplus money after a foreclosure sale
N.C. Gen. Stat. § 45-21.31(b)
After the sale pays the costs, taxes and the debt (and other liens in order), any money left over must be paid to the people entitled to it — usually the former owner. If the trustee does not know who is entitled, the surplus goes to the clerk of superior court.
Read this rightThe government cannot keep your home equity beyond the tax debt
U.S. Const. amend. VTakings Clause
If your home is taken or sold to pay property taxes, the government may collect what you owe, but it may not keep the extra value. Keeping the surplus is a "taking" of your property without just compensation, which the Fifth Amendment forbids (Tyler v. Hennepin County, 2023). You may be able to claim the surplus, but you usually must follow your state's claim process and deadlines.
Read this rightAfter a discharge, creditors cannot collect the wiped-out debt from you
11 U.S.C. § 524(a)(2)
A bankruptcy discharge wipes out your personal liability for most debts in the case. After that, the law forbids creditors from suing, calling or otherwise trying to collect a discharged debt from you personally. A court can hold a creditor in contempt if there was no fair doubt that its conduct was barred.
Read this rightRenters get at least 90 days' notice after a foreclosure
12 U.S.C. § 5220 note(Pub. L. 111-22, div. A, § 702(a)–(b))
If you rent a home that goes through foreclosure, the new owner must give you a notice to move at least 90 days before you have to leave. If you have a real (bona fide) lease signed before the foreclosure notice, you can usually stay until the lease ends. The exception is when the new owner will live in the home; even then you still get the 90 days' notice.
Read this rightRight to pay off and end the foreclosure until the upset-bid period ends
N.C. Gen. Stat. § 45-21.20
North Carolina has no statutory right to reinstate by paying only the missed payments. But the power of sale ends if you pay (or tender) the whole debt plus the sale expenses before the sale — or even after the sale, until the 10-day upset-bid period runs out.
Read this rightSurplus from a tax foreclosure sale goes to those entitled
N.C. Gen. Stat. § 105-374(q)
After a tax foreclosure sale pays the costs, taxes and other listed claims, the commissioner pays any surplus to the clerk for the people entitled to it — usually the former owner. If there is a dispute, the clerk holds the money until a special proceeding decides who gets it.
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