This page explains New York law. In a deficiency dispute the appraisal is usually the whole case: every dollar of market value the court finds comes straight off the judgment. KOR Law LLP's debtor and creditor practice represents borrowers, guarantors and lenders in these disputes. The rules for when a lender can seek a deficiency at all are on the companion page, whether a lender can get a deficiency judgment after a New York foreclosure sale.
Why does the appraisal matter so much?
Under section 1371(2) of the Real Property Actions and Proceedings Law, the deficiency equals the amount owed under the judgment with interest, plus prior liens with interest, plus the costs and referee's fees, minus the market value the court determines or the sale price, whichever is higher. When a lender bids the property in at auction for less than the court later finds it was worth, the sale price stops mattering and the court's finding of market value controls the result.
The court must make that finding "upon affidavit or otherwise as it shall direct," and it must do so "whether or not the respondent appears" (RPAPL 1371(2)). So if you say nothing, the court will usually have only the lender's appraisal in front of it. The court system's CourtHelp guide tells homeowners that to dispute the value they must submit proof from an appraiser.
What date does the value have to be measured on?
The statute fixes it: the fair and reasonable market value "as of the date such premises were bid in at auction or such nearest earlier date as there shall have been any market value thereof" (RPAPL 1371(2)). That has practical consequences:
- An appraisal valued at some other date, such as when the loan was made, when the borrower defaulted, or months after the sale, does not answer the question the statute asks.
- Because the auction has already happened by the time the motion is made, both sides' appraisers are doing a retrospective valuation: what the property was worth on a past date, using the information available for that date.
- Changes after the auction, such as repairs or new leases signed by the buyer, are not part of the value the court must find.
The auction date itself comes from the court file. How auctions are scheduled and run in each borough is covered in where and when foreclosure auctions are held in New York City.
How do you challenge it, step by step?
- Get the motion papers and the lender's appraisal. The motion is served personally or as the court directs, on you or on the attorney who appeared for you (RPAPL 1371(2)). Note the return date.
- Check the timing first. The motion must be made within 90 days after the referee's deed was delivered to the buyer. If it was not, the sale proceeds are full satisfaction of the debt and the value question never arises (RPAPL 1371(2), (3)).
- Read the appraisal against the statute. Confirm the valuation date is the auction date, then work through the property description, the comparable sales or rental data and the adjustments (see the table below).
- Commission your own appraisal. Ask for a retrospective valuation as of the auction date, with the appraiser's reasoning set out in a form that can be sworn to in an affidavit.
- Serve and file opposition. Your papers should include the appraiser's affidavit and the report, plus any facts you know first-hand about the property's condition and income on the auction date.
- Ask for a hearing if the numbers are far apart. The statute lets the court decide "upon affidavit or otherwise as it shall direct," which includes taking testimony from the appraisers.
- Check the rest of the formula too. The judgment amount, the interest, any prior liens and the referee's fees all feed into the result, not just the value.
What should you check in the lender's appraisal?
| Item | Question to ask | Why it matters |
|---|---|---|
| Effective date | Is the value stated as of the date the property was bid in at auction? | That is the date RPAPL 1371(2) requires |
| Property described | Are the size, unit count, zoning and use correct? | A wrong description distorts every comparison that follows |
| Condition assumed | Did the appraiser inspect the inside, or assume condition from the outside? | Assumptions about condition can move value a long way |
| Comparable sales | Are the sales close in time to the auction date, nearby and truly similar? | Stale or distant comparables may not reflect value on the auction date |
| Income data (rental buildings) | Were the actual rent roll, vacancy and expenses used? | For income property, the income approach often drives the conclusion |
| Distressed-sale treatment | Does the appraisal treat the auction price itself as evidence of value? | The statute asks for fair and reasonable market value, separate from the sale price |
| Who prepared it and for whom | Was it prepared for the lender for this motion? | The court weighs competing opinions; the basis for each matters |
What if the deficiency judgment has already been entered?
The best time to fight the value is on the original motion. After an order is made, the options are narrower and each has a clock:
- Reargument asks the same judge to correct facts or law the court overlooked or misapprehended. It cannot add new facts, and it must be made within 30 days after service of the order with written notice of its entry (CPLR 2221(d)).
- Renewal is based on new facts that were not offered on the motion and would change the result, and it requires a reasonable justification for not presenting them the first time (CPLR 2221(e)). A new appraisal produced after the fact must clear that bar.
- Vacatur is available on the grounds listed in CPLR 5015(a), including an excusable default if the motion is made within one year after service of the order with notice of entry, and lack of jurisdiction. The rules are explained in whether you can undo a default judgment in New York.
- Appeal to the Appellate Division, with strict filing deadlines; see whether you can appeal or reargue a foreclosure judgment in New York.
The firm's own July 2026 press coverage concerned this kind of dispute: a deficiency judgment sought personally against a Brooklyn developer after a building foreclosure, where the firm came in as successor counsel and challenged the appraisal behind the judgment. The coverage, and why the firm will not argue that case on its website, is described in KOR Law in Crain's New York and The Real Deal.
What changes the answer?
- Whether the motion was timely. No motion within 90 days after delivery of the deed means no deficiency, whatever the appraisal says (RPAPL 1371(3)).
- Whether you were served or appeared. A deficiency can be entered only against a liable person who was personally served with the summons or appeared (RPAPL 1371(1)).
- The sale price. If the price paid at auction was higher than any appraisal, the sale price is subtracted instead (RPAPL 1371(2)).
- The type of property. A vacant lot, a one-family home and a rent-regulated apartment building are valued in very different ways, and the evidence each needs is different.
- Prior liens. Amounts owing on earlier liens are added to the debt side of the formula (RPAPL 1371(2)), so their amounts deserve the same scrutiny as the value.
- The county's procedure. In Kings County, the court's foreclosure rules require use of its form Deficiency Judgment; the rest of that court's practice is in what to expect at Kings County Supreme Court in a foreclosure case.
For example: two appraisals of one rental building
For example, imagine a 12-unit rental building in Brooklyn with a foreclosure judgment of $3,100,000, no prior liens and $40,000 in costs and referee's fees. (This is a made-up illustration, not a real client or result.) The lender bids the building in for $2,000,000 and, 60 days after the deed is delivered, moves for a deficiency. Its appraisal values the building at $2,300,000, which would leave a deficiency of $840,000.
The guarantor's appraiser points out that the lender's report used comparable sales from more than a year before the auction and assumed vacancies that the rent roll did not show, and values the building at $2,900,000 as of the auction date. If the court accepted that figure after a hearing, the deficiency would be $240,000. The court could also land somewhere in between; the statute leaves the finding to it.
Common mistakes
- Waiting to see what the court does. The court will determine value even if you do not appear (RPAPL 1371(2)).
- Using the wrong date. A value as of today or as of the loan date does not answer the statute's question.
- Relying on a broker's opinion or an online estimate. CourtHelp says the proof must come from an appraiser.
- Attacking only the value. The judgment amount, interest, prior liens and fees are part of the same formula.
- Holding back evidence for later. A renewal motion requires a reasonable justification for not offering the facts the first time (CPLR 2221(e)).
- Missing the 30-day reargument window. It runs from service of the order with written notice of entry (CPLR 2221(d)).
What to do this week
- Write down the auction date, the deed delivery date and the motion's return date.
- Confirm whether the motion was made within 90 days of the deed delivery.
- Get a complete copy of the lender's appraisal, including its addenda and comparable data.
- Pull your own records for the auction date: rent roll, leases, photos, repair invoices and any offers you received.
- Contact a licensed appraiser about a retrospective valuation as of the auction date.
- Bring the guaranty, the judgment and the motion papers to a lawyer well before the return date, using what to bring to a first meeting about a loan dispute. The guarantor's other defenses are in what defenses a personal guarantor has when a New York lender sues.
Frequently asked questions
Can the court pick a value between the two appraisals?
Yes. The statute directs the court to determine the fair and reasonable market value itself, on affidavits or otherwise (RPAPL 1371(2)). It is not limited to choosing one side's number.
Does the court have to hold a hearing?
Not always. The court may decide on affidavits or in another way it directs (RPAPL 1371(2)). A request for a hearing is strongest when the appraisals are far apart and the reasons for the gap are specific.
Is the auction price evidence of value?
It is the sale price, which the statute treats separately: the court subtracts whichever is higher, the market value it finds or the sale price (RPAPL 1371(2)). A low auction bid does not by itself set the market value.
Can I challenge the appraisal if the lender never moved within 90 days?
There is nothing to challenge. Without a timely motion, the sale proceeds are deemed full satisfaction of the mortgage debt and no deficiency can be recovered in any action (RPAPL 1371(3)).
What happens once the deficiency judgment is entered?
It becomes a money judgment that can be enforced against bank accounts, wages and other property. The collection tools are explained in what happens after a money judgment is entered against you in New York.
Does this apply to a commercial building?
Yes. Section 1371 applies to mortgage foreclosures of commercial and residential property alike. Other foreclosure protections do differ by property type; see commercial or residential foreclosure: which protections apply to you.