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Arizona Foreclosure: The Process Outlined

Obviously, Arizona foreclosure has been on the rise in light of the recent bust in the national real estate market… And with many Arizona home owners upside down on their properties still, foreclosure remains a looming possibility.

What I would like to do is to outline the foreclosure process as it is defined here in Arizona and perhaps dispel much of the fear and confusion found in the marketplace.

an arizona foreclosure sign on lawn

You may be able to avoid an Arizona foreclosure with a short sale

In Arizona, foreclosure may be initiated and performed by most lenders holding the debt on a property. And, foreclosure itself is a legal process which can allow a lender to take ownership of a property through application of state law once a mortgage goes into delinquency or default. The home owner in a foreclosure position will lose any and all right or claim to the property and is evicted.

So, once a mortgagor (the person or entity who has the mortgage) falls behind on any payments, the mortgagee (the person or entity providing the mortgage) has the legal right to begin the Arizona foreclosure process. This normally occurs after multiple payments are missed; however, and this is very rare, it can occur after missing only one payment!

In this market, most of your institutional lenders will be willing to work with you on some level to avoid sending the property into foreclosure. By communicating with the lender and working with your lender to identify possible repayment plans or in some cases deferrals, you can buy yourself some valuable time and either work toward catching your payments up based on your agreement or looking at other avenues to get out of your burdensome debt using tools like short sales. Short sales in Arizona have become a very popular way of avoiding foreclosure. The point is that any extra time you can get from your lender will be a benefit to you if you choose to be proactive.

In Arizona foreclosure, because most homeowners have a trust deed on their home, the time required to initiate the foreclosure proceeding is quite short. This is because the lender can begin the process against you without having to go through the court system.

The lender then will appoint a trustee to act on it’s behalf… This trustee will have the legal authority to sell the property in question. According to Arizona foreclosure law, the trustee must record a “Notice of  Trustee’s Sale” at the county recorder’s office. This is just a document that states that the home in question or going into foreclosure can be sold 90 days from the date of  recording. In addition, the trustee will also have to run an ad in a newspaper which states that this property is going into foreclosure at least once per week for four consecutive weeks. The home owner facing foreclosure will receive a notice as well. The trustee will mail the home owner this notice within five days of filing with the county recorder’s office.

Provided that the payments on the property in question remains in delinquency and the loan is not reinstated, the trustee will conduct a sale of the property at a previously determined location. It could be the courthouse steps or a law office or some other spot where it is easy to sell multiple foreclosures at one time.

The home is then sold to the highest bidder in an auction. The bidder then has until 5:00 pm the following day to come up with cash or another agreed upon form of payment for the balance of the sale amount. The bidder is required to put 1000.00 dollars on deposit and if that bidder fails to come through with the remainder of the money by the deadline, he forfeits his deposit and the second highest bidder is then give the same opportunity to buy the property under the same terms and conditions.

The money collected for the home is used to pay the lender the balance on the loan. Should there be any money left over the lenders who may be holding second or junior positions on the property are then paid. The former home owner would receive anything left over after that.

The title on the property is then given to the winning bidder. Title is transferred by trustee’s deed and removes any and all right or claim to the foreclosed property by the home owner.

The winning bidder now owns the property clear of any former loan obligations, as these are eliminated by the foreclosure process. Sometimes unpaid junior lien holders will come after the former home owner with a Arizona deficiency judgment in an effort to recoup lost monies. But, in many cases the former home owner is protected under the legal system from this type of activity.

Foreclosures do not really offer a home owner a great deal of options, but for the best current option you will want to read more about Arizona short sales.

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