Some Details About Home
Foreclosure under Deeds of Trust in Arizona
Most homes and other real property in Arizona are financed under
"Deeds of Trust" or "Trust Deeds," which provide
a quick and inexpensive method for lenders to take possession of the
financed property when a borrower defaults on loan payments.
The foreclosure process under those deeds is governed by Chapter 6.1
of Title G of the Arizona Revised Statutes (ARS), ARS
33-801 et seq.
Noticing the sale. When a loan secured by Deed of
Trust is in default, the lender may have the Trustee under a Deed of
Trust sell that property. ARS
33-807 The Trustee will pick a date for the sale and give
notice of the sale by:
- Filing a notice of sale with the County Recorder at least 90
days before the sale date. ARS
33-808.A.1.
- Within 30 days of the filing of the notice of sale, mailing a
copy of the notice by certified or registered mail to each
person having an interest in the property, and to each person
who has recorded a request for notice. ARS
33-809.B.
- Posting a notice of sale on the property at least 20 days
before the date of sale. This notice is not required if it
would result in a breach of peace or if access to the property
is denied. ARS
33-808.A.3.
- Publishing a notice of sale in a newspaper in the county where
the property is located once a week for 4 consecutive weeks,
with the last publication at least 10 days prior to the date of
sale. ARS
33-808.A.4.
Stopping the sale. The borrower, or a subordinate
lien holder, may stop the foreclosure sale by paying the full amount
in default and all expenses relating to the foreclosure before 5:00
p.m. on the day before the sale. If the day before the sale is
a weekend or a legal holiday, the payment must be made before the
weekend or holiday. ARS
33-813.
Bankruptcy stops the sale. If the sale is contrary
to or in violation of any federal statute in effect because of an
unknown or undisclosed bankruptcy, the sale will be continued for 28
days, or if that day is a weekend or holiday, to the day after that
weekend or holiday. ARS
33-810.C.
Deficiency after sale. If the amount recovered in
the sale is not sufficient to pay the full balance of the loan, the
lender may file suit against the borrower for the deficiency within
90 days of the date of sale. ARS
33-814.
Limit on deficiency for homes. If the property sold
under the Deed of Trust is one or two family dwelling on two and
one-half acres or less, the lender may not sue for the deficiency.
ARS 33-814.G
This limitation does not apply to a subordinate lender who did not
sell the property.
Removal of persons from the property. If the borrower
fails to surrender possession of the property to the lender after
the completion of the Trustee's Sale, the lender may remove whomever
is on the property in a total of about 3 weeks by filing a
"forcible detainer." The steps required to remove
someone from property under a forcible detainer are:
- The lender must make a written demand for possession at least
five days prior to filing the forcible detainer. ARS
12-1173.01.A.1, 12-1173.
- The forcible detainer summons will be issued by the court
within a day after it is requested, and it must be served on the
person in possession two days before the trial. ARS
12-1175.
- At trial, the court will issue a "writ of
restitution" five calendar days after the judgment. ARS
12-1178. It is this writ which gives the lender the
ability to physically remove the party in possession of the
property.
- The borrower may request a jury trial of the forcible detainer
action which is likely to delay the court in ordering the
surrender of the property. ARS
12-1176.
Tax effect. If the lender does not recover the full
balance of the loan from the foreclosure sale, and the deficiency is
forgiven, the amount forgiven is taxable as income to the borrower.
If the deficiency is instead discharged in bankruptcy, it is not
taxable as income.
Links to Arizona Revised Statutes (ARS) are to the web site of
Arizona Legislative Computer Service of the Arizona State
Legislature, ALIS Online.
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