That amount is not what the bank bases deficiency on, the bank then has to sell it, they will clear the deed, clean the property, have to maintain it and pay for utilities. If they end up selling it 140,000 the deficiency will be the 200k the owner owed, less the 140k they sold it for plus the costs of foreclosure
the bank will quickly assess if you own anything else they can attach or if you have the ability to pay. if so they will try and collect, if not they can write it off or sell it to a collector at 10cents to 50 cents on teh dollar and teh collector will haunt you for 3 years or what the law allows.
Short answer: Even if they did, the previous owner would still be responsible for the charge off balance, court costs, attorney fees, interest, city citations (if applicable) and any other leins or judgments that there may be against the property. The foreclosure wipes out the collateral but not the actual debt.
Kentucky is not a Deed of Trust State so banks must purchase the property at the commissionerâ€™s sale if they are trying to protect their lien interest, however I have never seen one pay more than the amount they are owed plus accrued interest and costs. It may be possible, but what a PR nightmare for a bank in the current housing market!!!
Each lender has their own policy, I know one that let the property go at the commissionerâ€™s sale regardless of price. There is nothing that requires a lender to bid at all.
The question back to you Jaalic, how would there be a deficiency if the price paid for the home exceeds the amount to be raised? Are there additional liens that did not join in the foreclosure process? That is the only circumstance I can come up with that would create such a problem. A foreclosure does not necessarily eliminate the liabilities. Only payment, forgiveness, bankruptcy or death without leaving an estate can do that.
Keep in mind however that Kentucky is a recourse state. This means that the bank can come after you for any deficiency at a later date. You could be responsible for any fees or costs the bank needs to recoupe as well as any unpaid real estate taxes that may be due.