- 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 the 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:
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 are parties 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 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. 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,
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 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 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.
More information on Arizona foreclosure laws.
