Quick Facts
- 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 a 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 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 is a party 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
lien, 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 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, 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.
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