Arizona Foreclosure Laws

Foreclosure laws are the legal procedures by which a lender repossesses collateral for a loan which is in default. These laws are normally applied when one is in default on mortgage repayments. The leader obtains a court order terminating the borrower’s equitable right of redemption for the property in question.

Arizona is a title theory state where the property is held in trust until full payment is made. A trust deed document is used to secure title to a property.

Non judicial foreclosure

The primary method used for foreclosure in this state is known as non-judicial foreclosure. The trust deed document contains a power of sale clause which allows a trustee, on behalf of the lender, to foreclose a property in order to meet the underlying mortgage repayments that are in default. A notice called foreclosure by advertisement is required before an auction of the property is carried out.

When dealing with a non judicial foreclosure, very strict notice requirements and legal documents that contain the power of sale language are required.

Notice requirements

l The notice of sale date must be published in a newspaper that circulates the county where the property is located for at least 4 weeks. The auction notice must be posted at the property to be foreclosed within 20 days of auction and proposed auction must also be recorded with the recorder where property in located.

l The above notices must contain a description and location of the property to be auctioned as well as the date, venue and time of the auction. Other details include the property parcel number, mortgage balance, the name, contacts and qualifications of the trustee and the name of the lender.

l The foreclosure auction takes place between 9am and 5pm on any day except Saturday or a public holiday. The trustee auctions the property to the highest bidder including the lender. The lender is the only bidding party allowed to make a credit bid.

Judicial foreclosure

This state also allows for a judicial foreclosure where a ruling of foreclosure must be obtained from a judge if the deed trust does not contain the power of sale language. The trustee files a complaint and a lis pendens document with the court. This is a public notice document that indicates that a property has a suit pending on it.

Notice of Sale

A sale is conducted 45 days after directive for sale is received from the court clerk in a public auction where anyone is allowed to bid.

Process period

A non judicial foreclosure that is uncontested takes approximately 120 days to effect. This process may take longer if the borrower contests the action in court seeking adjournment of auction or files for bankruptcy.

Redemption

The state of Arizona does not provide for a post sale statutory right of redemption. The borrower cannot reclaim property that has been foreclosed.

Deficiency judgment

The state allows the court to issue a deficiency judgment when property has been auctioned for less than the amount secured by a trust deed. A deficiency judgment can however not be obtained on foreclosures where land is 2.5 acres or less or property is a single one-family or two-family dwelling. Deficiency claims must be brought within 90 days after foreclosure is concluded and is usually the difference between the balance owing and the current and fair market value of the property.

Foreclosure laws may change from time to time. It is therefore important to seek advice from a qualified attorney so us to obtain up to date details on the laws of foreclosure in any state.