Arizona Foreclosure Law

Arizona foreclosures apply to mortgages and deeds of trust, and may follow a judicial or non-judicial process. This means that a lender can foreclose whether or not there is a Power of Sale clause in the contract, which authorizes them to sell the home to pay off the balance if the borrower defaults. The foreclosure process lasts an average of 90 days.

Judicial foreclosure
The judicial foreclosure process is used when the contract does not include a Power of Sale clause. In a judicial foreclosure, the lender files a lawsuit and obtains a court order allowing them to foreclose. The court must be in the same county as the property in question. Once the foreclosure is declared, an auction will be announced and the home will be sold to the highest bidder.

Non-judicial foreclosures
If the mortgage contains a Power of Sale, the lender can foreclose without going to court. The right to sell may be practiced by a trustee, or a representative of the lender. Typically, the process will follow the date, place, and procedure specified in the clause. If these details aren’t mentioned in the clause, the foreclosure will proceed as follows:

First, the lender or trustee records a Notice of Sale in the county office where the borrower’s home is located. The company is then given five days to send a copy of the notice by certified mail to the borrower and any other parties involved. The notice is also published in a county newspaper at least once a week for four successive weeks. The last notice should be published at least ten days before the sale date.

Provided it doesn’t disturb the peace, lenders can also post the notice on the property and the courthouse where the sale date is scheduled. This has to be done at least 20 days ahead of the specified auction date.

The lender can then sell the home for cash to the highest bidder, or set a “credit bid” wherein part or all of the money owed is canceled. Once the sale is confirmed, the buyer must make the payment by 5pm of the same day, except on Saturdays and legal holidays. Otherwise, the lender can extend the deadline or postpone the sale. If they choose the latter, they have to post a notice specifying the new date at the venue of the last auction. The proceeds of the sale will be used to pay off the obligations of the loan, and distributed among the junior lien holders.

Right of Redemption and Deficiency Suits

Arizona foreclosure law does not give borrowers a Right of Redemption. This means they cannot regain possession of their homes once the foreclosure is declared, even if they obtain the funds to bring the loan current.

The state also allows deficiency suits, a personal claim made against the borrower if the foreclosure is not enough to pay off the amount owed. The lender can sue the borrower within 90 days of the foreclosure, claiming the difference between the balance and the home’s current fair market value. However, deficiency suits are not allowed on single one- or two-family homes less than 2.5 acres, even if the winning bid is lower than the balance on the loan.

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