Foreclosures

Short Sales & Foreclosures

It is no surprise to everyone in the Phoenix, Arizona area that the real estate market is not what it once was. No longer are homes appreciating at record setting paces nor are they selling in days. In this economy, many people are left in a situation where they can not sell their home for what they owe on the home. This leaves a home owner with a few options: 1) wait out the market, 2) let the lender foreclose, or 3) negotiate a short sale. If you can not wait out the market, you may be forced to look only at the later two options and while neither is an ideal solution, both may not be as bad as they seem.

What is a Short Sale?

A short sale is a sale where the lender agrees to accept less than the amount owed on the property as part of an agreed sale, rather than having the property foreclosed. The short sale must involve a sale at a fair price based upon an arms length transaction. There is also no requirement that the lender agree to a short sale. This is truly voluntary agreement that the lender can choose to enter into with the homeowner or not.

Why would a Lender Agree to a Short Sale?

The most common reason a lender would agree to a short sale is an economic decision based upon the amount owed and the value of the property. If the home has little or no equity the chances of the lender receiving any funds at a foreclosure sale are slim. Foreclosure sales often result in below market sales and are costly to the lender. As such the lender can often net more by agreeing to the short sale.

What about Anti-Deficiency Laws?

Another reason a lender may consider a short sale is whether a state has anti-deficiency laws. An anti-deficiency law is a law that prevents a lender from recovering any loss over the price received at a foreclosure sale from the borrower/home owner. In essence, anti-deficiency laws limit a lender ability to recover from home owners.

Does Arizona Have an Anti-Deficiency Law?

Arizona has a relatively broad anti-deficiency that protects home owners. If your home is secured with a deed of trust and your home is sold at a trustee’s sale the lender may not recovery any deficiency if:

• The property is 2.5 acres or less;
• Used for single family or two family dwelling; and
• Sold pursuant to the Trustee’s power of sale.

If the home is secured by a purchase money mortgage, that is a mortgage used to pay all or part of the purchase price of the property, the lender may not recovery any deficiency if:

• The property is 2.5 acres or less
• Used for single family or two family dwelling; and
• The home owner did not reduce the value of the home by waste.

What if the Property is Not My Primary Residence?

The Arizona Anti-Deficiency Law protects all real estate under 2.5 acres used as a single family or two family residence. There is no requirement that the property is your Homestead.

What if it is a second Deed of Trust or Mortgage?

The Arizona statute does not differentiate between first and second lien holders. If the requirements are met whether the lien is a first or second, or even third position, the law does not change.

Are there other Requirements to the Law?

Of course, this article contains a basic overview of Short Sales and Anti-Deficiency Laws. It should not be relied upon for legal advice. Please contact us for more information.

If Served With A Foreclosure Summons, How Long Do I Have As A Homeowner To Respond?

In Arizona, we don’t do foreclosure summons. It’s a trustee sale, which entails a different process. It’s not judicial, and it’s a non-judicial trustee sale. If you haven’t paid for a certain amount of time, your lienholder will, at some point, file the trustee sale proceedings, for which they’re required to give you a 90-day notice. So they will file a document that says, “If you don’t pay us, they’ll catch up your payment, and we’re going to sell your home at auction on this date at this place.” And you typically will have 90 days to work with your lender to get caught up or get your loan modified so they don’t hold the trustee sale. Read More