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Arizona Anti-Deficiency Law

Real Estate Foreclosures in Scottsdale, AZ

In the state of Arizona, lenders have the discretion of choosing between one of two ways to execute the process of foreclosing on a home. Which method is selected will inevitably affect the rights of the borrower whose home is being foreclosed on, but how it will affect the borrower will depend on the state's Anti-deficiency Law. Given the fact that this law can reflect different conditions according to the circumstances at hand, it is very important to consult with a Scottsdale real estate attorney during the process.

When a home is foreclosed on, the lender will set out to seek compensation for the money that was originally invested into the home. This is often accomplished by turning around and selling the foreclosed home for a price that covers the costs that would otherwise have been owed by the previous homeowner. Accordingly, late payments, administrative costs, lawyer fees, and the original mortgage amount will all be included in the listing price of the home. Problems arise when the lender is unable to sell the home for the listing price that has been asked, thus further increasing their losses.

Deficiency judgments are court-ordered payments which must be paid to the lender by the original homeowner / borrower. Essentially, these payments are intended to accommodate the lender's losses that were incurred upon foreclosure of the home. Although deficiency judgments are protective to the lender, they can end up costing the borrower tens of thousands of dollars, which is often money that the borrower does not have. In Arizona, however, the state's Anti-deficiency Law limits the deficiency that can be incurred during the foreclosure process.

Understanding the Basics of Anti-Deficiency Statutes

Arizona state law has carefully stipulated the conditions upon which a deficiency judgment will be permitted, thus limiting the circumstances under which an indebted borrower can be sued. In the Arizona Revised Statutes, Title 33, Chapter 6.1, it is specifically stated that no borrower can be sued by their lender if the property under foreclosure is positioned on 2.5 acres or less and is a single-family or duplex home. The exception to this law, however, is a homeowner's neglect, in which case the deficiency prevention does not apply.

To further regulate the process of deficiency judgments, Arizona state law denotes that lenders have no more than 90 days post-sale of the property in which they can legally seek a deficiency judgment in court. This 90-day time limit applies to the point at which a pursuit of a deficiency judgment begins, not the point at which it is completed. Therefore, as long as the judgment was sought prior to the 90-day time limit, it can legally extend beyond three months from the time that the property was sold.

Good News for Borrowers

Previous homeowners who've found themselves in the predicament of a home foreclosure are understandably under a lot of stress. Adding to this stress may be the fear that your situation does not qualify you for an exception to the terms and conditions of the Anti-deficiency Law. If this is true, there are still options available to you. For example, some borrowers can prevent the foreclosure process from beginning, thus preventing them from the potential deficiency judgments sought by a lender as well.

Deeding the property back to the lender is referred to as a deed in lieu of foreclosure. Lenders who accept back their deeds are simultaneously agreeing to accept the value of the property as it is. Essentially, the lender is agreeing to reclaim the property for the amount that is owed on it, thus effectively negating the opportunity to seek a deficiency judgment in court. Homeowners who opt for this route could still be held responsible for covering the taxes of a forgiven deficiency amount; however, this is still a far better alternative for borrowers who are looking to avoid the total responsibility of a deficiency judgment.

Contact a Scottsdale Real Estate Lawyer for Effective Representation

Both borrowers and lenders need to intimately understand the ins and outs of the Anti-deficiency Law before moving forward with a foreclosure in the state of Arizona. The complicated nature of these legal proceedings naturally suggests that issues could arise as the process is carried out; however, unforeseen issues can be much more effectively avoided or quickly resolved when a skillful real estate attorney is involved in the process early on. For this reason, it is advised that the law office of Grant N. McKeehan, PLC be contacted at once for legal support and professional wisdom regarding the matter.

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Grant N. McKeehan, PLC - Scottsdale Estate Planning Attorney
Located at 4300 North Miller Road, Suite 220 Scottsdale, AZ 85251. View Map
Phone: (888) 913-8943 | Local Phone: (602) 791-6174.