If it’s a great deal, some other flipper will buy it at the auction.BYW, the borrower being in jail doesn’t stop you from buying it from him....his advantage would be the lender can’t come after him for any deficiency.

How are deficiencies handled?

I think another thing to be understood here is that deficiency judgments are probably only going to be in play if the property is "foreclosed" upon and there is not enough equity to pay it off.

Once a landlord/tenant relationship degrades to the point that when a landlords asks tenants to comply with lease (pick up poop) and the tenant deflects the conversation back to landlord deficiencies the relationship is over and is not salvageable. 

Some states do not allow the lender to pursue the borrower for deficiency or even ask for a borrower contribution as a condition of approving a short sale.

A "Deficiency Judgment" is granted to the Plaintiff (Lien holder) against the Defendant (Homeowner) if enough money is not generated at the sale.

Sign the property over to us and we'll waive that deficiency balance for you."

Since he was up front the entire time (he told me each time he was short) and moved out without hassle etc I kept his deposit and did not pursue a deficiency for the remaining ~$1,200.

It essentially helps to cover any come back work required from the contractor or to hire another to fix the deficiencies if necessary.

@Don Konipol and the reality is the Seller is the one at risk not the buyer.. the seller risks their creditor worse in a state like Texas that is dual action they could end up with trashed credit and a deficiency judgement and nothing they can do about it B/C they no longer own it and don't have the ability to refi and generally they are not going to payoff a property they no longer own.Most sellers that contemplate these transactions if they run it by an attorney the attorney will advise against.