Is Arizona a Deficiency Judgement State?
Welcome back for one of the most informative articles that you are about to read and one of the absolutely most commonly asked questions that I get from my clients when we find them in foreclosure as they have now contacted Cash Now Homes as we buy houses cash in Phoenix and beyond and are true creative real estate experts. So let’s get rolling and get you the answers that you came looking for.
YES, Arizona is a deficiency judgement state but what exactly does that mean for the homeowner who has lost their home to foreclosure and is left owing money to their lender even after the sale is complete? Talk about being in a bad place which you don’t have to find yourself in this frightening scenario if you contact Cash Now Homes because we have all the needed experience to find a solution for you.
Moving on, the left over debt (after the final sale of your foreclosed home is complete) is what is normally referred to as the “deficiency” and this is what lenders can sue you to recover what is owed to them. So let’s do the math so you have a better understanding of how the deficiency judgement works.
As an example: You owe $400,000 on your mortgage and you have an unexpected event happen (we see it all the time) and can no longer afford your mortgage payment so what happens next is that your lender begins the foreclosure process against you and eventually your beloved home sells at a public auction and if your home sells for $300,000, you will be on the proverbial “hook” to your lender for $100,000 once they have gotten the deficiency judgement in place against you and that $100,000 is a debt that you will need to repay the lender. Talk about further pain versus everything you have gone through already but never fear because Cash Now Homes is here to provide the assistance that you are looking for to prevent this from happening in the first place but you are in luck that you found our blog so please keep reading.
Well guess what good people of Arizona? Our wonderful state government has decided that YOU are not liable for a deficiency judgement against you if your home has the following criteria:
- Your home is a single one-family or single two-family home on a plot that is absolutely less than 2.5 acres.
- You also must have lived in your home for at least 6 months.
- Since I am not a lawyer and I don’t play one on TV (I always wanted to put that in an article and here we are good people of Arizona) you can look at Arizona’s anti-deficiency statute which is codified in the Arizona Revised Statutes Sections (33-814.G and 33-729.A)
- Section 33 explicitly states that a lender is prevented from seeking a “deficiency judgement” after foreclosure when and only when the mortgage loan was made to help buy the home (your foreclosed property) and that the actual property that has been foreclosed on (your home) is less than 2.5 acres is size and less than 2 dwelling units in size.
Geez!! That was quite an explanation but absolutely needed and there is more legalese that you need to know so here goes and to be absolutely true to the Arizona Anti-Statute I will quote directly from Section 33-729. As so please see below for details:
“If a mortgage is given to secure the payment of the balance of the purchase price, or to secure a loan to pay all or part of the purchase price, of a parcel of real property of two and one-half acres or less which is limited to and utilized for either a single one-family or single two-family dwelling, the lien of judgment in an action to foreclose such mortgage shall not extend to any other property of the judgment debtor, nor may general execution be issued against the judgment debtor to enforce such judgment, and if the proceeds of the mortgaged real property sold under special execution are insufficient to satisfy the judgment, the judgment may not otherwise be satisfied out of other property of the judgment debtor, notwithstanding any agreement to the contrary.”
So what does this mumbo jumbo of legalese words mean George and how this apply to me? Good question and I have a clear answer for you in very simple English so here goes. When you qualify and get a mortgage that secures the balance of the actual purchase price of your home, you are taking out a mortgage to finance the property that you want to own. You have basically relied on mortgage financing to buy your home because how many of us can actually afford to buy a house in cash in Phoenix and beyond? So what’s next George? Glad you asked and I’m quite pleased to report that our wonderful Arizona legislature believes that your lender should NOT be permitted to come after you through a lawsuit aka deficiency and try to get your personal assets after they have foreclosed on your beloved home. How cruel would that be but thank goodness it’s not happening in Arizona!
Well that was definitely a lot of information but I have just one more statue to go and it is section 33-814.G which prevents the financial institution from trying to obtain a deficiency judgement where they have foreclosed by “power of sale” but it is always best to offer the actual details from the statue itself so please see below once again:
“If trust property of two and one-half acres or less which is limited to and utilized for either a single one-family or a single two-family dwelling is sold pursuant to the trustee’s power of sale, no action may be maintained to recover any difference between the amount obtained by sale and the amount of the indebtedness and any interest, costs and expenses.”
This is actually a two layered approach or provision if you will for the Arizona anti-deficiency laws that will protect you if you fall into this unforeseen scenario. Well I hope that you now have a better understanding of Arizona’s anti-deficiency laws and if you find yourself in foreclosure or about to go into foreclosure please contact me at Cash Now Homes as we are here to provide the expert assistance you are looking for.
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