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Understanding the foreclosure process in AZ is an important part of navigating your own home foreclosure.
Before we dive in…
Understanding the Foreclosure Process in AZ
What is foreclosure anyway?
Foreclosure is the legal process that lenders use to take back property securing a loan, generally after the borrower stops making payments.
Foreclosure is no fun. But just know that it’s not the end of the world.
When you know how foreclosure in AZ works… it arms you with the knowledge to make sure you navigate it well and come out the other end as well as possible.
The Basic Stages of A Foreclosure
There are a few stages that are important to any foreclosure process.
Foreclosure works differently in different states around the country.
The two ways different states use to foreclose upon a property are: judicial sale or power of sale.
Connect with us by calling (480) 389-6484 or through our contact page to have us walk you through the specific foreclosure process here locally in Tucson.
In either scenario, foreclosure typically doesn’t go to court until 3-6 months of missed payments have elapsed. Usually (but not always), a lender will send out many notices that you are in arrears – overdue or behind in your payment.
Under Judicial Foreclosure:
- Your mortgage lender must file suit in the court system.
- You’ll get a letter from the court demanding payment.
- Assuming the loan is valid, you’ll have 30 days to bring payment to court to avoid foreclosure (and sometimes that can be extended).
- If you don’t pay during the payment period, a judgment will be entered and the lender can request the sale of your property – usually through an auction.
- Once the property is sold, the sheriff serves an eviction notice and forces you to immediately vacate the property.
Under Power of Sale (or Non-Judicial Foreclosure):
- The mortgage lender serves you with papers demanding payment, and the courts are not required – although the process may be subject to judicial review.
- After the established waiting period has elapsed, a deed of trust is drawn up and control of your property is transferred to a trustee.
- The trustee can then sell your property to the lender at a public auction (notice must be given).
Anyone who has an interest in the property must be notified during either type of foreclosure.
For example, any contractors or banks with liens against a foreclosed property are entitled to collect from the proceedings of an auction.
What Happens After A Foreclosure Auction?
After a foreclosure is complete, the property is typically sold at auction, and the proceeds from the sale are used to pay off the remaining balance of the loan. However, in some cases, the sale of the property might not generate enough funds to cover the entire loan amount. When this happens, a deficiency judgment may be issued against the borrower.
A deficiency judgment is a court order that allows the lender (usually a bank) to seek repayment from the borrower for the remaining amount owed on the loan after the foreclosure sale. In other words, it’s the difference between the outstanding loan balance and the proceeds from the property sale. This deficiency amount becomes a debt that the borrower is still obligated to pay.
The rules regarding deficiency judgments vary from state to state. Some states have laws that limit the amount a lender can pursue in a deficiency judgment. These limitations may be tied to the fair market value of the property at the time of the sale. In such states, the lender can only seek the shortfall between the outstanding loan balance and the property’s fair value, which is determined based on market conditions.
On the other hand, there are states where lenders have the right to pursue the full remaining loan amount, regardless of the property’s fair value. In these states, borrowers may be held responsible for the entire debt even if the property’s sale does not cover the outstanding loan balance.
It’s essential for borrowers to be aware of the deficiency judgment laws in their specific state, as this can significantly impact their financial obligations after foreclosure. In some cases, borrowers may have legal options to contest or negotiate the deficiency judgment, and seeking legal advice can be crucial in understanding and navigating the complexities of foreclosure laws.
Here’s a great resource that lists the state by state deficiency judgment laws, since every state is different.
Generally, it’s best to avoid a foreclosure auction. Instead, call up the bank, or work with a reputable real estate firm like us at Red Rock Properties to help you negotiate discounts off the amount owed to avoid having to carry out a foreclosure.
Experienced investors can help you by negotiating directly with banks to lower the amount you owe in a sale – or even eliminate it, even if your home is worth less than you owe.
If you need to sell a property near Tucson, we can help you.
We buy houses in Tucson AZ like yours from people who need to sell fast.
Give us a call anytime (480) 389-6484 or
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Another Foreclosure Resource For Tucson AZ HomeOwners: