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 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.
