Arizona (AZ) Foreclosure Process

How many times have you heard that word? I hear it too many times. Arizona State Attorney General Terry Goddard (I’m leaving politics out of this don’t worry) mentioned that there will be over an estimated 295,000 foreclosures entering the Arizona real estate market in 2011. So I guess I better get used to hearing it more.

Yes, foreclosures can be swift and easy. Yes, the lender takes over the property. Yes, you no longer own nor do you have the right to live in your ex-home. Technically, a foreclosure can begin as soon as you are late with the mortgage payment, but they don’t usually do that because they are in the lending business not real estate business.

Alternatives are usually mentioned and followed through before trying to repossess a home. On average, if you’re in contact/negotiation with the lender, you can add an additional three month window before foreclosure is initiated.  Now if it doesn’t work out and an alternative cannot be found foreclosure proceedings may begin. Now most of you have a trust deed so that means the lender doesn’t have to go to court to foreclose on your home. Again this makes it more simple and quick.

The lender has begun foreclosure proceedings:

• They appoint their trustee (the person or entity that has the legal right to sell the home in a trustee sale) to handle the appropriate paperwork. The trustee records in the county recorder’s office a “Notice of Trustee’s Sale” as stated by law.

Notice of Trustee’s Sale:

• Legal notice that the home is to be sold no sooner than 90 days from the recording date of the notice.
• Published a minimum of once a week for four consecutive weeks in a “newspaper of general circulation” in that county.
• Mail a notice within five days of the recorded notice of trustee sale to you and other parties affected by the foreclosure.

Now comes the bidding process (this is assuming that you have not reinstated the loan):

• Sale conducted at a previously disclosed location.
• $1,000 deposit required to bid on the home.
• Home is sold to the highest bidder
• Bidder has until 5:00 p.m. of the following day (assuming that it is not Saturday or a legal holiday) to pay the remaining balance in cash or other acceptable forms of payment as determined by the trustee.
• Failure to pay the amount bid, the bidder is liable to any person who suffers loss or expenses as a result, including attorney fees and also forfeits the deposit.
• As a result, the second highest bidder is given until 5:00 p.m. of the next day.
• Proceeds from the sale are used to pay off the primary lien (trust deed) against the home (as noted on the trust deed).  Any proceeds that are left go to the junior lien holders in order of priority and finally in the event that any remaining balance is left over from the sale, the trustee will remit the balance to you. (That usually doesn’t happen).

And finally the transfer of title:

• Title is conveyed to the winning bidder by a trustee’s deed.
• This transfer of title relinquishes any right you have from reinstating the mortgage or redeeming the property after foreclosure.
• The trustee’s deed clears the title of any liens and encumbrances that are junior to the trust deed.

In certain situations, junior lien holders may pursue a deficiency judgment against you to recover the balances owed.  However, you may be protected by such lawsuits under the law.  I discuss this on a previous blog.