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 the property to pay off the balance on loan in the event of 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:
Trustee Must Record Notice
The trustee must record a notice of sale in the county’s recorder’s office, 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.
Notice Must Appear In Newspaper
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 before the date of the sale.
Optionally, suppose it can be done without a breach of the peace. In that case, the trustee can post the notice at least twenty (20) days before the date of the sale, in some conspicuous place on the property to be sold, or they can post the notice at the courthouse or at the trustee’s place of business in the county in which the property is located.
Trustee Or Agent Must Conduct The Auction
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.
All Bids Irrevocable
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, 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 information is required. By a written agreement, a trustee may also 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.
When Deficiency Law Suit Is Allowed
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 more petite than the balance due on the loan. However, in foreclosures against other types of property, a deficiency suit is allowed. Still, it is limited to the difference between the balance owed and the property’s fair market value, and then only if the claim is brought within ninety (90) days of the power of sale foreclosure.
