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Arizona Anti-Deficiency Statue: What does it Really Mean?

by Charlie Allred

There is a lot of misinformation in the real estate world about the Arizona Anti-Deficiency Statute.  Many Realtors out there are telling their clients that if they short sell their properties that the deficiency between the loan amount and the short-payoff will be forgiven due to the “anti-deficiency” statute.  THIS IS WRONG.  The statute does not cover short sales at this time, only foreclosure sales.  A full transcript of the statute can be read here: (ARS 33-729)

http://www.azleg.state.az.us/FormatDocument.asp?inDoc=/ars/33/00729.htm&Title=33&DocType=ARS

Don’t panic! This does not mean that the bank WILL come after you with a judgment to collect the deficiency if you short-sold your home.  It just means they CAN, but honestly why would they?  They haven’t done it yet in Arizona and there are so many properties out there, they don’t have the manpower or desire to do it.

Keep in mind that if you have received a 1099-C for your short sale payoff, don’t worry, the bank has taken your deficiency off of their books and you now just have tax issues to deal with.  (Discussed in another post)

You have to be well-informed consumers, and make sure that your Realtor is well-informed BEFORE initiating the short-sale process.  Discuss your plans with a qualified attorney and/or CPA so that you know all of your options.  That is my advice to all of my potential short sale clients, and it should be your Realtors also.

Read more about the Arizona short sale process here.

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Charlie Allred October 5, 2010 at 1:37 pm

Good info Angelica. As you well know- I speak to several Realtors per day, many of these Realtors are telling clients that the anti-deficiency covers them for a short sale.

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