- Judicial Foreclosure Available: Yes
- Non-Judicial Foreclosure Available: Yes
- Primary Security Instruments: Deed of Trust,
Mortgage
- Timeline: Typically 90 days
- Right of Redemption: None
- Deficiency Judgments Allowed: Varies
In Arizona, lenders may foreclose on deeds of
trusts or mortgages in default using either a judicial or
non-judicial foreclosure process.
Judicial Foreclosure
The judicial process of foreclosure, which
involves filing a lawsuit to obtain a court order to foreclose, is
used when no power of sale is present in the mortgage or deed of
trust. Generally, after the court declares a foreclosure, your home
will be auctioned off to the highest bidder.
Non-Judicial Foreclosure
The non-judicial process of foreclosure is used
when a power of sale clause exists in a mortgage or deed of trust. A
"power of sale" clause is the clause in a deed of trust or mortgage,
in which the borrower pre-authorizes the sale of property to pay off
the balance on a loan in the event of the their default. In deeds of
trust or mortgages where a power of sale exists, the power given to
the lender to sell the property may be executed by the lender or
their representative, typically referred to as the trustee.
Regulations for this type of foreclosure process are outlined below
in the "Power of Sale Foreclosure Guidelines".
Power of Sale Foreclosure Guidelines
If the deed of trust or mortgage contains a power
of sale clause and specifies the time, place and terms of sale, then
the specified procedure must be followed. Otherwise, the
non-judicial power of sale foreclosure is carried out as follows:
The trustee must record a notice of sale in the
office of the recorder of the county where the property is located.
Within five (5) days after the notice is recorded, the trustee must
mail, by certified mail, a copy of the notice of sale to each of the
people who are parties to the trust deed, except for himself.
Additionally, the notice must appear in a newspaper in the county
where the property is located once a week for four (4) consecutive
weeks, with the last notice being published not less than ten (10)
days prior to the date of the sale.
Optionally, if it can be done without a breach of
the peace, the trustee can post the notice at least twenty (20) days
prior to the date of the sale, in some conspicuous place on the
property to be sold and/or he or she can post the notice at the
courthouse or at a specified place at the place of business of the
trustee in the county in which the property is located.
The trustee or the trustee’s agent must conduct
the sale. The sale is for cash to the highest bidder, except that
the lender can make a "credit bid," which means to cancel out some
part (or all) of the money the borrower owed the lender on the lean,
instead of paying cash. A successful high bidder must pay the bid
price by 5 pm of the day after the bid, other than a Saturday or
legal holiday. Every bid is an irrevocable offer until the sale is
completed, which happens when the bidder pays the bid price to the
trustee’s satisfaction. If the high bidder fails to make the payment
by 5:00 pm, the day after being notified of the option to buy, then
the trustee may postpone the sale.
The trustee may postpone the sale to another time,
or another place, by giving notice of the new date, time and place
by public declaration at the last place and time the property was
offered for sale. No other notice is required. A trustee may also,
by written agreement, extend the time for a buyer to come up with
the payment.
Once the sale is complete, the proceeds will go to
the payment of the obligations secured by the deed of trust that was
foreclosed, then to junior lien holders in order of their priority.
The successful bidder gets a trustee’s deed, which provides
conclusive evidence that the trustee conducted the foreclosure sale
property.
A note regarding Deficiency Suits: A lender may
not bring a deficiency suit against a person who lost a property
that is 2.5 acres or less at a foreclosure, provided the property
was a single one-family or a single two-family dwelling. This is so
even if the high bid at foreclosure was less that the balance due on
the loan. However, in foreclosures against other types of property,
a deficiency suit is allowed, but is limited to the difference
between the balance owed and the fair market value of the property,
and then only if the suit is brought within ninety (90) days of the
power of sale foreclosure.
More
information on Arizona foreclosure laws.
